CareTrust REIT Inc Stock

Hello, everyone. Thank you for joining us, and welcome to the CareTrust Second Quarter Earnings Call. [Operator Instructions] I will now hand the conference over to Lauren Beale, Chief Accounting Officer. Lauren, please go ahead.

Thank you, and welcome to CareTrust REIT's Second Quarter 2026 Earnings Call. Today, we will make forward-looking statements 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. 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 Q2 2026 financial supplement, which are available on the Investor Relations section of CareTrust's website at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period. On the call this morning are David Sedgwick, President and Chief Executive Officer; Derek Bunker, Chief Financial Officer; and James Callister, Chief Investment Officer.

I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?

Thank you, Lauren, and good morning, everybody. Thank you for joining us. The CareTrust flywheel cranked up a few years ago when we hit around 7x our lifetime annual average of investments in 2024 and again in 2025. The team shows no signs of slowing. In fact, the opposite is true. After 2 back-to-back record-setting years, we are again on pace to deliver in a big way for our operators and shareholders. Last quarter was the single largest investment quarter in our company's history, excluding M&A activity, with approximately $900 million of investments at a blended yield of 8.9%.

James, Kyle, Joe, Tri, Josh, JP, Nick, Martin, and Killian, that's the dream team right there responsible for a year's worth of investments in 1 quarter. I'm so proud of them and proud of the entire CareTrust team across the board: accounting, asset management, finance, tax, legal, data, operations. Everyone is rowing hard together to make this year a three-peat of record performance. Q2 results achieved record investments in the quarter, record revenues, record FFO per share and a healthy raise to guidance, built on a foundation of record operator lease coverage and operator quality care measures.

Let me expand on that foundation just a little bit. We are stoked to see our operator quality care measures exceed the industry averages for overall star ratings, health inspections, quality measures, successful discharges and readmission rates. Let me repeat that. Our operators outperform industry averages for overall star ratings, health inspections, quality measures, successful discharges and readmission rates after they've had a chance to manage these buildings for at least 4 years.

In my 2025 annual report letter, I discussed how mission-critical it is for us to lease our properties to high-quality operators and how we view the relationship between them and the value of our real estate investments. A quality operator is one who is driven by a mission, focuses their resources first on becoming the employer of choice and through that, becomes the quality care provider of choice in their market. Only after achieving sustained quality care outcomes can a provider and the real estate they operate achieve sustainable financial stability. We have seen this formula for success prove out over the last 25 years.

A CareTrust operator is one who harmonizes mission-driven culture with the clinical and financial sophistication to adapt to an ever-changing environment. We apply those first principles to skilled nursing and senior housing alike. We invest for the long term. The price we pay and the operator we choose are intended to result in long-term quality care and, as a result, compounding value creation. That solid operator foundation and orientation allows us to grow in a sustainable and accelerated way across our 3 growth engines.

Year-to-date, we have already closed on approximately $1.5 billion. And looking forward, the pipeline continues to reload and deal flow continues to be active and interesting across skilled nursing, care homes and SHOP, both in the U.S. and the U.K. With the balance sheet as strong as it is, the team is stronger than ever before and the opportunity set expanded and great relationships with partners and new and existing high-quality operators, there has simply never been a more exciting time for CareTrust.

With that, I'll hand it off to James for a report on investment activity and the acquisition landscape. James?

Thanks, Dave. Good morning, everyone. During the second quarter, we closed on investments totaling approximately $900 million at a blended stabilized yield of 8.9%. That capital was deployed across the full breadth of the platform, U.S. skilled nursing sale leasebacks with quality operators in multiple geographies, the continued expansion of our U.K. Care Homes platform, sourced and executed by our London-based team, further growth in our SHOP portfolio and relationship-driven real estate loans, primarily as skilled nursing operators closed either alongside asset acquisitions or in anticipation of them.

And as Dave noted, we haven't slowed down since the quarter ended. Since June 30, we've closed on an additional approximately $308 million at a blended stabilized yield of approximately 7.8%. Headlining that activity was a 16-property U.K. Care Homes portfolio net leased to a new operator relationship for CareTrust, joined by a two-community $65 million addition to our SHOP platform. Taken together, our 2026 investments now stand at approximately $1.5 billion year-to-date. Breaking that down, roughly $735 million in U.S. triple net skilled nursing and seniors housing, approximately $397 million in U.K. Care Homes, approximately $240 million in loans, and approximately $81 million in SHOP.

Turning to what's ahead. The pipeline sits at approximately $540 million, roughly 2/3 skilled nursing and 1/3 loans to strategic partners plus U.K. Care Homes. It's a healthy mix, some singles and doubles alongside mid- to large portfolio opportunities. You'll note the immediate pipe doesn't include SHOP. That's really just a function of timing and discipline. The team continues to deepen relationships, including with high-performing operators, and we are confident these relationships will drive attractive on- and off-market opportunities that we expect to convert in future quarters and give us a long runway to scale that portfolio in both the U.S. and the U.K.

And, our usual reminder on methodology, the quoted pipe includes only deals we have a reasonable level of confidence we can lock up and close within the next 12 months, and it typically excludes larger portfolios still under review. Stepping back for a moment, what gives us real confidence is that all 3 of our growth engines are producing. In skilled nursing, deal flow remains deep and steady with proprietary opportunities generated through long-standing relationships. In SHOP, even amid stiff competition and compressing cap rates, we're pursuing the right assets with the right operators and see a long runway to scale that portfolio in the quarters and years ahead. And in the U.K., our London-based team has widened our aperture considerably, new operators, new sources of deal flow and a pipeline that keeps building.

Across all 3, the team continues to surface attractive opportunities to deploy capital, and we like our position in each of these markets. That growth will stay grounded in the same fundamentals that have served us well, disciplined underwriting, durable operator partnerships, and a creative collaborative approach to structuring.

With that, I'll hand it to Derek to walk through the quarter's financial results.

Thank you, James. For the quarter, normalized FFO increased 44% over the prior year quarter to $119.7 million, and normalized FAD increased 43% to $118.5 million. On a per share basis, normalized FFO was $0.51, an increase of approximately 19% over the prior year quarter. And normalized FAD was also $0.51, an increase of approximately 19% over the same period. In the second quarter, we raised approximately $364 million of gross proceeds from the settlement of outstanding equity forward contracts to fund investment activity in the quarter. Also in the quarter, we sold 14.4 million shares under forward equity contracts, raising $580.5 million of gross proceeds at a weighted average price of $40.23.

And since quarter end, we sold another 2.2 million shares on a forward basis for gross proceeds of $90.6 million at a weighted average price per share of $41.46. As of today, we have approximately 16.6 million shares remaining unsettled under forward sale agreements, representing approximately $671.4 million in gross proceeds available to fund future investment activity. In yesterday's earnings press release, we raised our full year 2026 guidance, reflecting our year-to-date investment activity, including the volume we've closed since quarter end. We're now projecting normalized FFO per share of $2.03 to $2.06 and normalized FAD per share of $2.01 to $2.04.

At the midpoint, that represents growth of 16.2% in normalized FFO per share and approximately 15.1% in normalized FAD per share compared to full year 2025 results. Our updated guidance is based on a weighted average diluted share count of 233 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; third, 2.5% inflation-based rent escalators under our long-term triple net leases; fourth, $147 million of loans to be repaid throughout the year, of which approximately $104 million has been received so far to date; and fifth, no material change in the GBP to USD spot exchange rate. Additional guidance measures are detailed in the press release yesterday.

Lastly, our liquidity continues to remain strong at approximately $1.4 billion as of today, including approximately $90 million of cash on hand, $605 million of availability under our $1.2 billion revolving credit facility and approximately $671 million of unsettled equity forward contracts. In addition, we have roughly $785.8 million of capacity available under our ATM program. Net debt to annualized normalized run rate EBITDA was 1.0x at quarter end, well below our long-term target range, and our fixed charge coverage ratio was 9.9x. We continue to have no scheduled debt maturities prior to 2028. With continued momentum and a reloaded investment pipeline, we have ample dry powder and multiple levers across our capital toolkit to keep funding our recent pace of investment activity.

And with that, I'll turn it back to Dave.

Thank you, Derek, and thank you, James, and thank you, everybody. We're really grateful for everybody's interest and support. As I hope you can tell, we are super bullish on the CareTrust story and not just what we've achieved, but where we are headed. And with that, I would be happy to answer any of the questions that you might have at this time.

[Operator Instructions] Your first question comes from John Kilichowski with Wells Fargo.

James, maybe if I could start with you. You gave some helpful color in the opening remarks, especially about building out the SHOP pipeline and it not being mentioned in the -- or SHOP not being mentioned in the current pipeline. Could you talk a little bit more about building those relationships with operators and how that will eventually translate into volumes and how we should think about the cadence of that?

Yes, sure. I mean, I think that it's hard to predict the cadence, John. You're never really sure what's going to hit the market or what off-market is going to come. But I think that building relationships with these operators and managers, finding the ones you can use in different regions of the country or have proven track records there that have maybe experiences with other publics and their reporting and back office just really allows you to more quickly pursue transactions that come up. It opens up the off-market pipeline as you develop relationships with them.

And really, as you really start to develop frameworks with them of what your deal with them would look like, the terms on which you do it. And you get really all that kind of prebaked so you can react quickly when the right deal in the right area comes up for you to work with that particular operator or manager. And I think the team has done a great job of developing a lot of those relationships and being ready really to continue and ramp up pursuing acquisitions in different parts of the country.

And then would you also mind talking about the portfolio deals outside of the quoted pipeline? Maybe you don't want to speak to specific deals, but can you talk about the composition of where you're seeing those opportunities? Or is it more SNF tilted? Are there SHOP portfolios out there that you're currently evaluating? I'm just kind of curious what the composition looks like more than anything.

Yes. I mean there's a few portfolios tinkering around out there. I would say there's 1 or 2 SHOP portfolios that are larger out there that we're reviewing to see how attractive they are and whether we want to pursue them. There's also, I'd say, the same for SNF and 1 or 2 in the U.K. as well. So there's always seemingly a couple of them floating around, but there are a couple of shops out there that we're looking at, but we'll see if they're really worth us pursuing or if we think that there's traction there.

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

With respect to the Care Home portfolio investment in August, I think this might be one of the largest purchases you've done in the U.K. since acquiring Care REIT. But what I'm wondering is how much of the scale impact pricing? And do you view this deal to open the door to potential future deals given the new relationship there with the operator?

Yes. I mean the scale did impact the pricing a little bit, Austin. I would say that 16 facilities, it doesn't -- deals that size in the U.K. don't come around all the time. So there's definitely a teeny bit of a premium there. We definitely see it as a launching point with this operator. We feel like they've demonstrated in the past their ability to operate at scale and to operate well at scale. And this is really their first jump back in after selling their portfolio last year. So we definitely see it as a launching pad to grow with them in the future.

And then, Dave, as you think about tenant and geographic concentration and kind of ensuring that you do have the right diversification balanced with partnering with the highest quality operators consistent with the above-average metrics that you highlighted in your opening remarks. I mean, how do you think about striking that right balance moving forward?

Well, I think one of our first principles as we started the company was that the underwriting always starts and ends with who is the operator going to be. And if we do not have what we think is a quality operator to match with a great opportunity, we're simply going to pass on that deal. We'd much rather take an A operator in a B market than settle for a mediocre operator in a great market. So that's just in our DNA. That's the discipline we have. And if we do have -- which we do have great operators, we don't mind concentration building with one or another because over time, the diversification and concentration sort of takes care of itself.

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

This is Robin Haneland sitting in for Juan. I was curious if there are any opportunities to convert existing senior housing tenants to either SHOP in the U.S. or U.K.?

We've certainly thought about that. The challenge that we have in doing that is that our senior housing portfolio here in the U.S. and in the U.K. covers rent really well. And so there's very little motivation for the operators to walk away from that type of lease coverage. I think a lot of those conversions that have happened in our space have been kind of from a defensive posture where maybe things haven't been performing super well or there hasn't been really strong coverage. And so it was more of a defensive play to convert to SHOP. So because ours covers so well, there's less opportunity to do that. And however, as we look forward, everything is on the table. But I think more likely for us, SHOP will be coming from being on offense and identifying great assets that we really want to own and have operations responsibility for with great partners.

And as a follow-up, I wanted to ask on where things stand with PACS today? What's the willingness to move forward? What have the discussions been sort of year-to-date?

Yes. So we're really pleased to see PACS' performance this year, happy to see them back to normal filing cadence. Really happy to see their investments in compliance and happy to see them back on the growth path. We haven't done anything with PACS for a while, but that's not for lack of trying. We have looked at some deals with them, and we'd be happy to grow with them again if the opportunity presents itself.

Your next question comes from Michael Goldsmith with UBS.

James, in your prepared remarks when talking about the U.K., I think you talked about widening the aperture. So maybe you can provide a little bit more color of what you meant specifically by that?

Sure. I think what I mean by that is that I think the team there has done a great job of going beyond just seeing marketed deals, but also using operator relationships and other relationships they have or that we've formed to bring more pipeline or sources of deals than just the traditionally marketed deals. I think also that as you start to look at maybe structures beyond just the triple net, they've done a great job starting to form relationships for us to start looking at deals like that, that might work in other structures like a SHOP if something presented itself. So I think, Michael, that's pretty much what I mean. Just opening the way in which deals come to us beyond just traditionally marketed deals and thus really increasing the chance as we get more opportunities.

Got it. And maybe just to follow up on John's question earlier about the SHOP in the pipeline. I think you cited timing and discipline. So like obviously, like how do you -- like you can only take advantage of the opportunities that you see. At the same time, you are trying to maintain a certain level of discipline around what you're seeing, but then also you know like the underlying strength of the business is so strong and it feels like everyone is outperforming their own underwriting. So how do you kind of manage that across the portfolio and your opportunities that you're seeing and making sure that you're in on the right deals and then also -- and making sure you're not missing out on things, but also not just acquiring just for the sake of acquiring?

Yes. I mean it's a tough balance, I would say. But I think what we try to do is we try to really look at deals and pick our spots, right? And we try to find those opportunities where we feel like there's real confidence that we have that this can get to an IRR that we really want to pursue, and we'll stretch to try to go get it. But on the other hand, we don't feel a huge compulsion to have to stretch to do a deal that doesn't make sense for us. We're finding opportunities to put money to work in really good deals on the SNF side and in the U.K. Care Home side. And so when it comes to SHOP, we're going to continue developing relationships, continue to look at and underwrite a lot of deals. We're going to continue to pick our spots with the right partners, operators and stretch to try to go get those opportunities, but not go beyond what we feel is wise or prudent just in the name of growth. So I think we work really hard to try to pick those spots knowing that we don't have to do a deal to grow when we've got opportunities with SNFs and care homes.

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

James, just with the increased private market interest in the health care real estate space in general, I mean, how has that impacted acquisition cap rates? I mean have you seen cap rates just broadly drift lower? And is there any one property type where you've seen that more apparent? I know I think in the past, you highlighted there's probably the most competition in the SHOP space. But what have you seen on the SNF space and maybe the U.K. Care Home space?

I mean, yes, SHOP is pretty well out there. There's a lot more private market entrants right now. Cap rates are compressing as a result. You've got more competitive processes. I think in the SNF world, we don't see too much of that really at all. I think you see the same players that there's been over the past several years, same buyer pool, I think, really competing for the deals. And so portfolio deals in SNFs, larger deals, you maybe see a little teeny bit of compression in cap rates. But overall, you still see the same where they've been. It's just really having relationships that help you source more off-market because there is more off-market than listed in the SNF world. And in the U.K., I think you do see a slow influx of additional players on the private entrant side for sure. I don't think we've seen it impact dramatically the competitive process. But I would say you see an uptick in buyer entrants, but I haven't seen it really have that much of an impact at all on cap rates or bidding up processes.

Okay. Great. And then, I guess, Derek or Dave, could you talk about the purchase options? I know that you have a few meaning your tenants can potentially acquire one of your current assets. I know there was a window that opened up for one specific smaller purchase option, and there's a few that's coming up here over the next few quarters or so. I mean how should we think about that? Or do you think that those could potentially be executed on? Or is that just an option out there that will just kind of expire eventually?

Mike, we do expect and kind of bake in that there's a high likelihood that those will be exercised. Of course, until we get the notices of exercise, it's always uncertain and people's capital needs and plans change all the time. But I think we're constantly in discussion with those tenants that have options. It's a good relationship. It's collaborative. And it's not the end of the world that they exercise. We always look to do deals down the road with them in the future. But as of right now, we put a high likelihood that those would be exercised.

Your next question comes from Farrell Granath with Bank of America.

My first one is on the composition of your financing receivables. I know that, that can also refer to your sales leaseback. So curious if -- what percentage of that is potentially SNFs, given that SNFs has been a smaller proportion of your acquisition pipeline as outright purchases?

Yes. Farrell, it's Derek. It's almost 100% SNFs. These are really exciting, compelling sale-leaseback opportunities. The bulk of the financing receivables have purchase options that are 8, 9 years out. And there's a lot of uncertainty in the meantime about those exercise. We view them more in substance as owned triple net. But for accounting purposes, it falls within the financing receivable bucket. But these are really quality -- high-quality assets in the skilled nursing space.

Okay. And then also just given the growing debate around the path of Fed policy, I'm curious how you're thinking about your cost of capital and especially being able to leverage either your balance sheet or also continue to lean into your equity, if there's any updated thoughts.

Yes. We prepare for all uncertainties, and I think it's a benefit of having relatively low leverage. It gives us the optionality depending upon Fed policy and other macro factors. So we really like carrying a little balance on the revolver. It's competitive for us. We really like the price of our equity right now. We've got the optionality to do something longer term or a term loan. All those are on the table. We're looking at the full toolkit. And for right now, looking at the pipeline, we've got earmarked probably the settlement of our equity forwards and then some. And so I think we've given ourselves some runway to maneuver and be flexible depending upon how those macro conditions continue to unfold. But right now, we're really just pricing it out and watching those rates daily and trying to be opportunistic about it.

Your next question comes from Rich Anderson with Cantor Fitzgerald.

So there's one pretty clear disconnect going on in your world, and that is you guys are not finding many in the way of SHOP transactions, and I know you're working hard at it, but some of your peers are -- it's raining SHOP. And so you're not going to talk about their process, but -- and you're the one with the best cost of capital in the group. So I guess it all doesn't sort of ring clear to me, except for the fact that you're going to be very disciplined in all of that. But when you're on the ground looking at deals that you're competing with, I mean, how far off are you missing from the ultimate winner? Is it coming down to pricing? What is it that's causing yours to be such a slow out-of-the-gate process in SHOP, whereas others are really moving quite fast?

Maybe James can give a little bit of more vibrant color to the specific question on how far off are we versus the competition. But I would say one of the main differences between us and some of our peers is we have not -- we view SHOP as a long-term complementary growth engine to the CareTrust story. I think some of our peers have really pivoted and gone all in on SHOP. And with that type of publicized strategic change, there's quite a bit of motivation on their side to put money to work and show that that's -- that they're executing on that new strategy.

Whereas we have, I think, the luxury of being opportunistic across all 3. And if we have the ability to put double-digit FFO per share growth by maintaining that discipline and being opportunistic across all 3, we really prefer that approach than kind of putting ourselves in a corner per se to have to do a ton of SHOP to show that we're executing on a particular strategy. I think that's high level why it appears that we've been more measured in our deployment of SHOP capital. But I wouldn't be surprised either, Rich, if we did do a large SHOP portfolio deal in the future. For us, that can happen because there are portfolios out there that I think will eventually check all the boxes for us.

Okay. And James, any comment on the -- where you're missing?

Yes. I mean, look, it's no -- if you're missing, you're almost always missing on price, right, Rich? And so when we look at it and we look at a deal and we say, look, what do we feel like the projections are here? What's the IRR going to be? What's the return? What's the risk-adjusted return? And you start getting facilities that are portfolios that are in the mid-90s occupancy that are stable, where the pricing is going to a mid- to low 5 cap, and you start looking at that versus a plethora of SNF and other opportunities that are going to be in the 9s or high 8s and you start looking at the risk-adjusted return and you think maybe it's wiser to put some allocated capital to where we have the most opportunities with a better risk-adjusted return for us if the pricing is just going to be too risky for us and not get the returns that we're looking for. So that's really what the process that you go through.

Yes. Okay. And then last quickly for me. Dave, maybe for you, like what do you like about the skilled nursing business? And I asked that question a little tongue in cheek, but you're obviously making a spread on your investments. But if for some reason, the acquisition environment suddenly screeched to a halt, you'd be stuck with a 2% growth platform in skilled -- U.S. skilled nursing. So assuming I'm right about that, like what is the draw to skilled nursing as an industry for you? And I'm not suggesting it's right or wrong. I'm just asking the question, your perspective on it.

We've got a long -- as you know me, I personally and we as a company, have a long relationship and history in skilled nursing. That's where we come from back in the Ensign days in 1999 when Ensign started. So we know and love this business. We view it as a vital part of the health care continuum in the country. We see it as too important to fail. We saw that during the pandemic. And we see as the demographics continue to blow up over the next 25 years that it will continue to be a really important part of the health care continuum. Not only that, because our history is so deep with skilled nursing, I think we do -- as our lease coverage track record demonstrates, I think we do a really good job of identifying the best operators out there who can do it the right way, providing high-quality care. And to James' earlier point, what it does is it produces really high risk-adjusted returns for us compared to just about any other asset class.

I do like that too important to fail comment.

Your next question comes from Alec Feygin with Baird.

Are there any portfolio initiatives that you're working on with SNF operators, large or small?

What do you -- I'm not sure what you're asking. What do you mean portfolio initiatives?

So there's been some other of your peers working on some pretty large portfolio initiatives, either replacing operators, doing changes to leases, extending leases. Is there any of that going on in your portfolio?

No. I mean there's always some -- there's always scrutiny, right, on the portfolio. But as you look in the SHOP, you see just really, really healthy lease coverage. But even with that, there's -- the asset management, portfolio management team here is always looking to improve and take assets from maybe weakening hands to stronger hands. But there's nothing that's currently underway that would impact guidance or our results at all, nothing of significance.

Your next question comes from [ Eddie ] Rodgers with Raymond James.

It's Dave. I know, Dave, that there's always headlines and risk from a regulatory standpoint out there. But I'm wondering maybe to ask that question in a different way. Are you seeing anything in the acquisition pipeline that either the operators are bringing you or you're increasingly turning down where there's more risk and vice versa, are there asset types or areas where you're now feeling there's less risk that are opening up opportunities? And I don't know if that's more rehab, less skilled, whatever the case might be. Are you seeing any shift within the mix in kind of the skilled nursing business that's given you this opportunity to continue to acquire so well?

No. Dave, I'd characterize the skilled nursing environment right now as stable. I think from a regulatory standpoint, from a reimbursement standpoint, there have definitely been previous periods of time that have been more choppy. But right now, I'd say it's really stable. I think the operators and we feel comfortable with it. And there's quite an appetite to grow in today's environment.

And then maybe one follow-up. It's pretty small, but the loan to own that closed in the third quarter. One, any details about that small asset? And then maybe a bigger question around that, is that instructive or could that be instructive of any way where you might get more assets back that you'd want to own more quickly?

David, are you talking about Q3?

Yes.

Yes. I mean that's really a function of, I think, what you're talking about is the -- in the U.K., sometimes some of the parts of the transactions have to be structured a little differently as kind of a loan to own to facilitate closing while licensure is being received. So we anticipate that would turn into real estate in the next 6 to 12 months. For instance, we closed a transaction last fall that was under this loan to own. And just recently, they got the licensure and converted into the real estate. So that's really what that is. It's just a function to help facilitate closing earlier while you're waiting for licensure.

Your next question comes from Michael Stroyeck with Green Street.

It sounds like loans are a decent chunk of the pipeline. Can you just talk about the strategic rationale of these particular loans and if we should expect loans to continue to be a meaningful part of external growth moving forward?

Yes. I mean there's always a purpose behind the loans, Michael, really. It's that they're either going to be done alongside asset acquisitions or in contemplation of. So whether it's a purchase option or an agreement that real estate deals will follow. It's really a way for us to unlock the door to future real estate acquisitions with that particular borrower or operator. And so those relationships, that cycle has been a very virtuous one for us. It's been very successful for us in the past and been a driver of a lot of the growth that's happened over the last couple of years in a cycle that with the right operators and the right properties that will continue to feed. It's never going to become anywhere close to the primary business, but it will be fluctuate quarter-to-quarter. But when those opportunities arise and we see real estate in the future, it's a cycle we'll feed.

Understood. And maybe one on the most recent SHOP deal. I guess where do you ultimately see that mid-6% yield stabilizing at? And what's the time frame that you guys are assuming there?

Yes. I mean I think it's -- those 2 are pretty stable assets. I think that we see a lot of opportunity for -- they're well positioned for rate growth. They're well positioned for some OpEx savings. One of the facilities has some expansion potential that we're actively looking at. So we definitely see a low double-digit IRR return there. And I think really, we would look at margin expansion from the low 30s to the high 30s in the next 2 to 3 years.

Your next question comes from Jyoti Yadav with Mizuho.

This is Jyoti on for Vikram. So you guys mentioned record coverage. Can you talk about perhaps like potential for rent resets like over time or at expirations?

Yes. I think in the supplemental, we show the maturity of our rents starting, I think, in 2031. So that's when the conversation kind of begins. The lease coverage is so strong overall that as we get there in 2031 and beyond, there will certainly be opportunities to reset those rents to more market rates, but it's a few years off.

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

Well, thank you, everybody, for your time and interest. Really just want to take a second to again acknowledge the amazing team here at CareTrust and thank them for their hard work. Thank you for our operators as well as setting the high standard of quality care out there that allows us to continue to expand our and their missions. Hope everybody has a great weekend.

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

Hello, everyone. Thank you for joining us, and welcome to the CareTrust First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Lauren Beale, CareTrust's Chief Accounting Officer. Lauren, please go ahead.

Thank you, and welcome to CareTrust REIT's First Quarter 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. 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's website at www.caretrustreit.com. 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.

Thank you, Lauren, and good morning, everybody. Thanks for joining us. The first quarter 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 first quarter and the pace only accelerated from there. Since the start of April, we have closed a dozen separate transactions for approximately $865 million. Just last Friday, on May 1, 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? 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 acknowledgment to some of our unsung heroes here. Our accounting team proves every day to be the best pound-for-pound accounting team around. They have shoulder 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 derisking it as we go. And 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. 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 recovery nursing home administrator. Several of us here have many years of experience inside the buildings. 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. 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 and section star rates. And 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 EBITDA 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. We collected 100% of contractual rent and interest in the first quarter 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 care trust portfolio. As we continue to position ourselves with urgency to keep the flywheel going, we see steady deal flow across our three 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?

Thanks, Dave. Good morning, everyone. During the first quarter, 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 6 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 nurse facility operated by one of our existing operators. 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 towards U.S. skilled nursing with a meaningful portion of that volume from an opportunistic transaction with a new operating relationship.

The deal came together on a very compressed time line 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: one, 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; three, our second SHOP investment to bring our total portfolio to four communities; and 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. 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, approximately $160 million has been U.K. care homes and the remainder is SHOP.

Our investment pipeline today sits at approximately $360 million. 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 large portfolios that we are reviewing.

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. And 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.

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. 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.

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

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% of the prior year quarter and normalized FAD was also $0.48, an increase of 12% over the same period.

Turning to the balance sheet and capital markets activity. During the first quarter, 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 31, 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 7, 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.

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.

In yesterday's press release, we raised our 2026 full year guidance. Projecting full year normalized FFO per share of $2 to $2.04 and normalized FAD per share of $1.98 to $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.

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; 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; and fifth, no material change in the sterling to dollar spot exchange rate. Additional guidance measures are detailed in our press release yesterday.

Lastly, our liquidity continues to remain strong. 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%, 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.

And with that, I'll turn it back to Dave.

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

[Operator Instructions] Your first question comes from Farrell Granath with Bank of America.

I want to dig in a little bit deeper on your comments about what 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?

Well, when we look at -- when we put 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 fishnet expeditions by the sellers. They may not be real. It's a lower probability of landing those. And so a prime example is what just happened with this large deal in California, that was something that actually materialize very quickly. that couldn't have been included in our previously quid pipe. So that's just our practice to not get too ahead of things. Sometimes the deals either we decide to pass on them or they decide to go in a different direction.

Okay. And also, I will tell you that in some of the previous earnings calls of peers, we've heard added commentary of increasing competition also in the SNF market that has 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.

Sure, Farrell, this is James. I mean I would say that this market is at this point, a predominantly off-market, if you will. And 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 constant flow of broker deals like you are maybe shop. But I think that it has been like that for a while. And I think that the track record we have shows that relationships are just super important. And I don't think you're going to typically find bread and butter sale leaseback at a 9.5% with no creativity needed like you may have 5 years ago, but that's been the case for a while now.

So I think it just takes increased creativity. It takes relationship-based deals and you really have to rely on the off-market relationships to the SNF market today. And I think our track record shows that we've been doing that successfully.

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

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 utilizing that for maybe some strategic opportunities or even the flexibility it gives for your ability to source even some of the larger portfolios from time to time.

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. And 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, I think, deeper if we do decide to do an inaugural issuance in the high-grade market, and that's certainly on our radar there, especially as we grow and we start to pad out the balance sheet a little bit. So 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. And so having that option, we're really excited about it.

And maybe, Dave or James, within SHOP, 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 deals that you've been on? And I'm just curious if off-market opportunities as you continue to develop even more relationships similar to what you referenced and skilled as being sort of the best way to grow that portfolio? What's kind of the current process and strategy to continue to build that out within just that segment within the overall portfolio.

Yes. 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 our unique relationship on a deal that comes through, we're going to prioritize that you're going to look at that works and make a more heavy run at it. So I think that's definitely the case given the amount of competition right now.

And I mean as far as hit rate, I mean, it's a small percentage of deals that we see come across the desk that we decided to be on. It's a smaller percentage that we decide to really push and start to stretch a little bit 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, if we really decide we want a deal that it fits for us and we're going to stretch. It's a pretty good chance we're going to be in the last 1 or 2 and hopefully get it. But overall, it's a pretty low hit rate just given the number of deals that are coming across right now. But much of that low hit rate is based on the fact that we don't elect to pursue most of what comes across the desk.

And then just lastly, how much would you say cap rates have compressed since you really started to evaluate transactions.

In SHOP if we're talking about great compression. I mean, it's hard to put an exact nose on it. There's a range in SHOP often as you know, between where our primary market, if you're a Class A or where you fit in range from the best building or two in a primary market to the best few buildings in a secondary or tertiary. I would say right now, it feels like Class A in the primary market is going to have a 5 handle on it, and you're going to go up the range from there. So I would say in the last -- it's hard to say in there, but I would say in the last months, cap probably compressed 50 bps or more.

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

Just hoping you could talk a little bit about the loan book its grown as a preponderance of the transactions that you did in the first quarter when companies but including the financing receivables. So 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.

Well, I'll start with that, Juan, this is Dave. I think our strategy with respect to lending was really established a few years ago and has been a key determent for the explosive growth that we've had. And 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. And the activity that you've seen recently fits -- checks those boxes.

The real estate that we've acquired came with some loans that were necessary to get the deals done. And even on the financing and receivables 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. But because those purchase options are so far out 9, 10 years. We view that much more as a sale leaseback. But technically, it will look like the loan book has grown more than it really will feel like it for the next 10 years.

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

And I think that we would -- this is James, we're still pretty agnostic in the market. I mean, we want primary, secondary, some tertiary, but we're really going to look at it on a deal-by-deal basis. So we're going to pursue it opportunistically. We view that we want to underwrite to an IRR of low double digits, and we see a lot of paths to get there and every deal is going to get the same path to get there. So we don't have one box that has to fit. We're going to look at each deal, we're going to be opportunistic, and we're going to say, what's this deal's path to a low double-digit IRR. Do we have confidence in that path? And if we do, we're going to make a run at it. If we don't, we're going to pass.

So that path is really different if you're in a primary market and if you're in secondary tertiary, I think typically, we want to be in one of the 1 or 2, 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, and that's kind of the parameters around it will pursue deals in SHOP right now.

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

I kind of wanted to talk a little bit more about the valuations just across portfolio? I know historic the shock cap rates have kind of come in. What about like 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 landscape in those property types?

Yes. I mean skilled -- I still feel like it's really changed that much in the past year. You've had a lot of family office. You have a lot of fierce competition. There's just fewer buyers in the U.S. SNF side, but it's the same groups. We see really on every deal. So there's still a lot of competition, Mike, but it's the same players, if you will. So I haven't seen cap rates change much, maybe a little bit. We've had to get bigger deals. We're going to go below a 9% yield on the lease to get a deal if it's big enough and the right operator.

In the U.K., can be a little bit of increased competition, but we're still seeing for the product we're looking at yields are still going to be in the mid-8s for us. So that's pretty typical. It's more like a senior selling asset over there. So that's pretty difficult for -- if you were to do seniors housing triple net deals here. So we like that kind of yield and basis. So it's maybe a little bit uptick in competition in the U.K., but nothing comparable to the uptick in SHOP competition you see here.

And then can you provide us some details on the recent SHOP deal? Is that with a relationship operator that you could grow with? I mean, was it in a primary, secondary market? I mean, how should we think about that specific transaction?

Yes. In -- Arizona was done with the relationship operator. We known for a long time. This is the first deal with them, but we've known them for a very long time, sought to do deals with them for a long time. They're the current operator in the billing. We had a great relationship with the seller. We've been buying buildings from them for the last few years and hope to continue to buy buildings from them in the future. It's about 110 units of assisted living. They're going in estimated year 1 yield is going to be in the 8. And we like the market. We like this operator. We'd like to grow with them and think that we will -- and we like the path to get us to that low double-digit IRR. It's a pretty stable asset. So it's not in lease-up or other turnaround situation. It's really just making some tweaks to optimize the performance a bit to get us to that low double-digit IRR.

Okay. Great. And then lastly, Derek, can you talk a little bit about, I guess, CareTrust's desire to enter the debt markets? And should we think about another bond being pound-denominated, just kind of naturally hedged some of your U.K. exposure? Is that tenor process? Or should we think about that as U.S. dollar-denominated debt?

Yes. Thanks, Mike. I think if we do something this year, and we're exploring that option pretty deeply, heavily you'll see it denominated in USD. We're conscious and aware of our exposure to the pound sterling and we really like our current program and is doing very well and paired with the pipeline, which has been growing very consistently and I think, exceeding our expectations a bit 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.

Your next question comes from Michael Goldsmith with UBS.

This is [ Justin ] on for Michael Goldsmith. I noticed that occupancy in your skilled nursing portfolio was up in 4Q '25. Is that primarily due to recently acquired properties? And maybe can you talk about how you feel occupancy will trend this year if pre-COVID SNP occupancy was 80% roughly, does the demographic tailwind push that number up significantly over the coming years?

Yes. So skilled nursing has been kind of on a steady, modest in climb really since it bottomed out in '21. It's difficult to say one quarter versus the other, what exactly happened across the portfolio of our size. But the direction of travel, we believe, will continue to be what it has been. But we -- the difference being, I think, in the coming years, it's going to start ramping up significantly. 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.

So yes, I think while we're in the low 80s as an industry and around 80% in our portfolio, 5 to 7 years from now, I think it's going to be dramatically different.

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

Yes. 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. So 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, really just sort of rounding out the team at the moment, coming off a couple of years of growth there.

Interest income and expense is really just moving around in part because of a strong downward revolver this quarter to date to fund the acquisitions and not anticipating or not incorporating the pipeline or future acquisitions into guidance. We're just sort of taking a snapshot there and running out the interest income and interest expense.

Your next question comes from Rich Anderson with Cantor Fitzgerald.

So my first question is, are you finding that building and buying -- 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've made your first SHOP deal and everyone is like, okay, it comes CareTrust, but it's been a little bit slow. And perhaps to your credit, you're not growing for the sake of growth. But 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 certainly pacing themselves at a faster clip than you at this point? Just curious your thoughts there.

Yes. On some level, it's been a little bit surprising, not so much that it's been competitive because we know and knew as we were entering in that it's a very competitive seen. 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, it'll be stretched for, we sometimes get beat by folks that don't nearly have the cost of capital that we do.

And I think it may speak a little bit rich to us really being agnostic across three growth engines. And the reality is we haven't in essence, painted ourselves in a corner with respect to having to do SHOP or feeling compelled to put money to work there. So I think that really is our advantage because we have the freedom to maintain the discipline that we've built the CareTrust portfolio on. And so yes, I think we're pleased with what we've done so far. I think we'll continue to grow it. And over time, it will become meaningful. And I think our confidence in the deals that we do get is very high.

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?

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

Okay. And then quickly for 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?

Yes. I think there will be a time when that opportunity presents itself for us. So we should be ready to do that.

Your next question comes from Michael Stroyeck with Green Street.

Now that there's been some time since the original Care REIT acquisition, how has that portfolio performing relative to expectations? And where does EBITDA coverage on that initial deal sit today?

Well, it's an appropriate question for today because today marks the 1-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 trust arm in the U.K. And 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. And that's what's produced the results.

I thought if we could do in 2026, a couple of hundred million dollars 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. And so to see the amount of acquisitions that we've done and the pipeline continue to build, as it is really good.

With respect to lease coverage, continues to be phenomenally high, particularly when you think about what these assets are, these are really senior housing assets that in the United States, 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. And we're much higher than that. I don't have it actually right in front of me, but it's closer to 1.75, 1.8x north of 2x on an EBITDARM basis. So to have that type of security on senior housing properties is a really strong foundation from which to grow.

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

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

Your next question comes from Wes Golladay with Baird.

I want to go back to that comment about the better CMS outcomes. And I imagine that's driven partly by the background helps you work with the operators there's also probably a component of you know who a good operator is out the gate. And so how transferable is that skill set to the U.K. and to U.S. SHOP?

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 have 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 selected there before we got there. And we feel like we're definitely in sync as we evaluate new operators for the U.K.

Your next question comes from Vikram Malhotra with Mizuho.

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

I'll take the first part of that, Jody. The Genesis bankruptcy doesn't have much of any real estate in it really. So I don't know if it's probably yet to be determined if we grow with that operator at all based on those assets. I mean, there's certainly nothing in discussion with the current time. So 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.

But could you repeat the second half of your question? You cut out a little.

Yes. Sorry about that. I was just wondering, what's your view on the sustained double-digit FAD growth here on.

I'll take that one, it's Derek. Look, I think we're really, really pleased and excited about both the progress we've made on investments in our integration as well as the outlook. And I think that 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 as we -- it's really just up to us to execute on that.

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

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

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

Hello, everyone. Thank you for joining us, and welcome to the CareTrust Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now hand the call over to Lauren Beale, CareTrust's Chief Accounting Officer. Please go ahead.

Thank you, and welcome to CareTrust REIT's Fourth Quarter and Full Year 2025 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-K filing with the SEC. 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 Q4 and full year 2025 non-GAAP reconciliation that are available on the Investor Relations section of CareTrust's website at www.caretrustreit.com.

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 Sedgwick, CareTrust's President and CEO. Dave?

Thanks, Lauren. Good morning. I want to first acknowledge our dear friend, Dollar Bill Wagner, who officially retired a few weeks ago. CareTrust would not be what it is without Bill. He helped establish a strong foundation on which we are poised for success and our future achievements will be a tribute to his many contributions. We wish him well in his much-deserved retirement and caution him to take it easy on the Oreo cookies and the pizza. It's a marathon, Bill, not a sprint. All right.

Thank you for joining us as we reflect on the incredible year that was 2025 and our plans to keep the flywheel ripping for years to come. Simply put, 2025 was a transformational year for CareTrust. Starting the year, we were a team of 21 coming off the most active investment year of our history by a factor of 5 punctuated by our largest single transaction to that point, which we closed at the end of 2024. Our portfolio consisted predominantly of triple net leased skilled nursing facilities with a handful of net lease senior housing assets and a loan book.

In 2024, we had grown the equity market cap 74% to $5.1 billion, but we are never satisfied. So even though the company was running at a record pace, we believe 2 things: One, we had another gear in us; and two, we needed to do some strategic heavy lifting to position the company to scale for the long term. So we got to work. Doubling our team of professionals, adding firepower throughout the organization and bringing in-house other areas like tax and data science, and we executed, acquiring Care REIT, including their team, to enter the U.K. care home market and closing on our first SHOP deal after methodically evaluating many opportunities, large and small along the way.

Our collective efforts led to total investments of $1.8 billion, surpassing our record 2024 and supporting our 17.3% year-over-year normalized FFO per share growth. Beyond FFO, we've increased the diversification of our portfolio across geography, asset type, operator, borrower, manager and payer source as well as achieving continual improvement in our already strong EBITDA rent coverage. We ended the year having again grown our market cap by 61% to $8.2 billion. I cannot help but take a moment to thank our shareholders, our Board, our operators, our capital and strategic partners and our entire team for their dedication and hard work.

We simply could not have produced the 10-year total shareholder return through year-end of approximately 439% without your commitment, professionalism and sacrifices. I could go on and on about 2025, but really, our focus is on '26. The accelerating momentum from '24 to '25 and the resulting growth has only stoked the hunger and motivation everyone at CareTrust feels to make '26 another great year. Today, the skilled nursing operating environment is stable and largely supportive across most states and the senior housing environment in both the U.S. and U.K. is also stable and gaining strength in many markets. As we hit the ground running in 2026, we do it with a CareTrust team that is deeper and more capable than any time in our history and we are now running with the 2 additional growth engines of U.K. care homes and SHOP.

And yet, the start of this year feels very much like Deja vu all over again. What do I mean? What I mean is like 12 months ago, we're coming off another record year. Our operators continue to set the standard for portfolio lease coverage. We continue to have access to capital and a fortress balance sheet. And we again have high hopes for a substantial year of external growth. And we still feel the same urgency in hunger to grow long-term shareholder value, and our mission remains the same to be a unique health care REIT that is by operators, for operators, making disciplined investments in assets and operators who can change the world of senior housing and care in a big way. With that, I'll turn it over to James. No pressure, my friend.

Thanks, Dave. Good morning, everyone. During the fourth quarter, we completed approximately $562 million of investments, including our first SHOP deal which involves 3 communities in Texas, totaling 270 assisted living and memory care units. We're excited to partner with Sinceri Senior Living, who will help manage those communities for us. Fourth quarter investments included about $84 million of loans with the majority towards the skilled nursing sector, approximately $27 million to acquire 2 senior housing communities, triple net lease to an established operator.

And the remainder comprising the acquisition of 14 skilled nursing facilities across 3 transactions. Overall, the blended stabilized yield on fourth quarter investments was 8.8%. Since year-end, we've closed on another approximately $215 million of investments including the acquisition of 6 skilled nursing facilities in the Mid-Atlantic at a strong going in rent coverage leased to a quality operator in a new relationship for CareTrust and 2 care homes in the U.K. net leased to an existing operator. As we look forward, our investment pipeline remains strong, sitting at approximately $500 million. The quoted pipeline is approximately half U.K. care homes, 1/3 skilled nursing, one small SHOP deal and the remainder a combination of loans and senior housing triple-net.

It includes some singles and doubles as well as some mid to large-sized portfolio transactions. Please remember that when we quote our pipe, we only include deals that we have a reasonable level of confidence that we can lock up and close within the next 12 months. And it does not always include larger portfolios that we are reviewing. Our investment pipeline remains robust, supported by a balanced mix of broker transactions and proprietary opportunities generated through established operator relationships and other strategic channels. We continue to see consistent deal flow across all sectors encompassing triple net and SHOP structures alongside a steady and meaningful increase in overall transaction activity particularly within seniors housing and the care home market.

We're seeing the most competition in SHOP where cap rates continue to compress as investors seek more exposure to the sector to benefit from operating trends. Having said that, we're still finding SHOP opportunities that excite us, and we're benefiting from our strategic push in the U.K. and through our solid pipeline of skilled nursing deals. Our disciplined underwriting framework, combined with a strong focus on long-term operator partnerships 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. With that, I'll turn it over to Derek to review our quarterly financial results.

Thanks, James. For the fourth quarter, normalized FFO increased 42.7% over the prior year quarter to $104.1 million and normalized FAD increased 38.7% to $103 million. On a per share basis, normalized FFO increased $0.07 or 17.5% to $0.47 per share and normalized FAD increased $0.05 or 12.2% to $0.46 per share. For the full year, normalized FFO per share increased $0.26 or 17.3% to $1.76 per share and normalized FAD increased $0.22 or 14.3% to $1.76 per share. During the fourth quarter, we sold 6.5 million shares on a forward basis at an average price of $37.30 for gross proceeds of approximately $242.5 million. After year-end, we sold another 3.5 million shares on a forward basis for gross proceeds of $129.5 million for a current total of $372 million of gross proceeds pending from unsettled equity forward contracts outstanding under the ATM program.

We anticipate using proceeds from these sales to fund our acquisition pipeline. In yesterday's press release, we provided initial guidance for fiscal year 2026 of normalized FFO per share of $1.90 to $1.95, and normalized FAD per share of $1.90 to $1.95. The midpoints of which each represent a year-over-year increase of 9.4%. In addition to the assumptions detailed in our release yesterday, I will note that our guidance does not assume any new investments, dispositions, debt repayments, and debtor equity issuances beyond those announced to date. Since we do not assume additional investments in our guidance, we assume the equity forward contracts will settle at year-end.

Lastly, our liquidity continues to remain strong. In addition to approximately $100 million of cash on hand as of February 11, 2026, we have full capacity available on our $1.2 billion revolver. And despite a record pace of investments, we continue to maintain low leverage with net debt-to-EBITDA of 0.7x. Net debt to enterprise value of 3.7% and a fixed charge coverage ratio of 10.5x, each as of year-end. With that, I'll turn it back to Dave.

Thanks, Derek. We hope our report has been helpful to you, and thank you for your continued support. We'll be happy to answer your questions at this time.

[Operator Instructions] Your first question comes from Farrell Granath with Bank of America.

I guess I'll just start it off with your guidance and expectations for the pipeline going forward. I know you've added that there has been some additional competition, at least in the SHOP area. But I'm curious if you can elaborate on the opportunity set on these larger portfolios, specifically in SHOP now that you've entered into smaller deals with your recent acquisition? Is it seemingly easier to have these conversations? Are you having more inbound, especially on these larger portfolios?

Yes, Farrell, this is James. I mean, I think that the inbounds, I think, are pretty consistent. Shop deals are typically pretty heavily marketed. So I think you see a pretty wide range of large and small deals that come through. I think our view is we want to look at all of it, right? I think that we want to be able to look at large and small and see the best, most risk-adjusted path to get us to a low double-digit IRR so I think we look at both. Like I said, they're pretty heavily marketed even the larger ones. So I think we see just about everything that comes in, and I think the brokers have definitely gotten word of our interest in SHOP and I'd be pretty surprised, shocked if a meaningful deal was out there that hadn't come across our desk.

And also on your commentary around specifically SNFs reaching record levels of coverage. And now looking forward to '26, I'm curious how sustainable do you think these coverage levels are as well as just framing the current market environment, headlines when it comes to Medicare advantage and how you're just viewing SNFs in the market?

Yes. Thanks, Farrell. The skilled nursing environment right now, I think, is in a really good place. Speaking with our operators very recently, that's the sentiment that we get from them. Labor is in a much better place than it has been in recent history. The states, regulatory reimbursement wise, things feel really good. And our operators are really anxious to seize the moment and get back into growth mode so we feel like if you look at our portfolio and you look at the coverage, our occupancy is right around 79%, 80%. So there's still room, quite a bit of upside for our operators as that number increases to offset the inevitable headwinds. There's always going to be headwinds in skilled nursing every year. There's always something. But with great operators and beefy coverage, you can -- at least we can, we believe, manage through any of that.

Your next question comes from the line of Wes Golladay with Baird.

You did make some data analytic hires earlier in the year. Can you talk about what they're focused on at the beginning? Are they mainly targeting senior housing operations? Or is it more so for the acquisitions of all segments?

Yes. So the investment in the data science team right now is prioritized on building out our SHOP capabilities, building out that platform. But ultimately, that team is going to have an impact across the whole organization, making us more efficient, making us smarter. We're already seeing it, and we really like what we see. We'll continue to invest in that department.

Your next question comes from the line of Michael Carroll with RBC Capital Markets. Please proceed.

James, can you provide us some details on the pipeline right now? Of that $500 million, like what's the breakout between care homes, SHOP and skilled nursing facility deals?

Yes, Mike, I would say of that $500 million right now, I think, like I kind of put in the prepared remarks, it's about a half U.K. care homes right now, about 1/3, I would say, U.S. skilled nursing and the rest is the combination of a SHOP deal, triple-net seniors and a couple of small loans in there.

I'm sorry, I forgot that you said that. Can you -- I know you kind of highlighted this earlier, but just on the competitive landscape that you're seeing within this space, I mean is it any more competitive in specific property types? Like are you seeing it being more competitive in SHOP, SNFs, U.K. care homes? Or is it kind of similar across the board?

I would say of the 3 segments, I think that SHOP is definitely the most competitive. I think you have the most capital pursuing deals. So I think you see definitely the most interest based on groups wanting to get in on the operating trends. But I think that we still feel like there's shop deals out there that really excite us. I feel like with our cost of capital, we can be really competitive. And as we really pour through just about everything that comes in and wanting to look at deals that we think can get us through different paths to that low double-digit IRR, we feel like when we find those deals that really intrigue us despite the competition that we can pounce and go get the deals we really want.

And then if you look at the cap rates for each individual property type, how much do they typically vary? I know that you did about high 8s, I guess, in the fourth quarter and to date like if you're looking at more U.K. care homes and SHOP deals, I mean, should we expect that yield to dip a little bit lower? And just kind of off of that, when you're quoting those cap rates, do you include the tax leakage on the U.K. care homes? Or do we need to make sure that we think about that when we are putting our numbers out there?

I'll defer to Derek. I think we do quote post tax. But I mean the SNF yields are going to be the same that they've been historically. I mean, if it's a really large portfolio deal or with incredible coverage, we might dip a teeny below what we normally do, but SNF yields are still going to be in the 9s. SHOP cap rates, Mike, are definitely compressing. So every deal is a little different. There's just a wider band range of cap rates in seniors depending on how old the vintage is, the CapEx needs, the location, the age, all those kinds of things. In the U.K., I mean, it's typically going to be pretax mid-8s to higher post-tax, mid-7s to higher.

On the blended yield, we typically do not exclude the impact of the withholding tax in the U.K. when giving the blended stabilized yield.

Okay. Your next question comes from the line of Michael Goldsmith with UBS.

You've already done $215 million to start the year. You've got $500 million in the pipeline. So over $700 million. At this point last year, you were at $350 million. You started the call talking about how '25 was a bit of deja vu of '24 with the growth. But I guess just given where you're set up, like how confident are you that we'll be talking about next year, we'll be talking about deja vu all over again given the strong growth and investment opportunities.

I love a crystal ball question, Mike. I'll answer it this way. I think we felt really, really good going into 2025. We felt like the table was set to have another big year. And the difference going into this year is I just feel better about it because now the difference is our team is deeper and more capable, and we have the U.K. and the SHOP TAMs to play in as well. So as long as there's some meaningful chunky type opportunities out there, we should be really competitive. And we certainly have the potential if those deals materialize to have another really substantial year.

And as a follow-up, being a SNF REIT and seeing the operational intensity that comes with skilled nursing and dealing with SNF operators. Does that give you an advantage as you enter SHOP. And how much difference is there in identifying skilled nursing operators versus SHOP operators?

Thanks for that question. We do think that our operating DNA and deep experience is helpful. It certainly informs how we underwrite. It certainly informs how we vet operators and how we asset manage. I think it provides a deeper level across the board and I think you see that manifested in our lease coverage. That really is a symbol of choosing the right operators, underwriting the deals properly. And there's a lot that we carry over from vetting skilled operators with choosing seniors as well.

Your next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just curious as you've expanded your opportunity set with the U.K. care homes and SHOP. If you look at one U.K. shopper RIDEA transactions and two, if you consider doing development at some point in seniors housing, recognizing you are larger and can maybe where the initial dilution. I would imagine some of the growing operators are looking to development as a source of opportunities. So just curious on your stance on those two.

Great question. I think on the first -- as we look at the U.K., the operator relationships that we have right now are eager to grow with us. And they've expressed a desire to continue to do deals with us in a triple net basis. I think that there will be -- as you look in the future, there's going to be opportunities probably to apply our SHOP platform to the U.K. So I would never say never on that, and I'd say it's probably more likely than not in years to come. So the second part of your question was development and I think, yes, there's going to be -- I think what we would like to do there is be the risk to the market instead of being at risk. So right now, generally, it still doesn't pencil to do anything in a significant way here in the United States with respect to development. But there could be certain circumstances, certain opportunities that do. And on a limited basis, for the right operator for the right location, I think we would take a hard look at that.

Great. Then you kind of noted you had a new operating partner in the Mid-Atlantic with a recent transaction. I'm not sure if you feel comfortable maybe in that operator? Or if you could just give us a little color on that group and if it was related in any way to the Integra transaction that one of your peers announced.

Yes. I mean I don't think we have a problem announcing that they've released their own press releases, Juan. So the group known as Larry H. Miller Group, but I don't think they're affiliated with anything else anybody has announced if you're referencing Saber, it's not Saber.

Your next question comes from the line of Michael Stroyeck with Green Street.

Can you maybe just talk about your underwriting criteria within SHOP and whether that's changed at all due to the increased competition, either at the property level or just in terms of IRR requirements? Or are you just passing on more deals than maybe you would have, call it, 3 to 6 months ago?

I mean we definitely noticed the compression in cap rates. I think that we still look to get an unlevered IRR in the low double digits, and we look at every deal to see what that deal's path is to get us there and what we think the pricing will be. So I mean, I don't think we just look at it in 1 box and say, we have to have a 7 going in and it has to look exactly like this to get us there. I think we're going to look at it given the compression in the market in the cap rates, and we're going to look at what's this deal's path to get us to that low double digit and how realistic is it, right? If it's in lease up, if it does or does it need CapEx, what its position is in the market what's the revenue versus expense growth look like.

So I think if you look at all of that in the same way we always have. I think that we take expected pricing into account for sure, and it impacts how we see us getting to that double-digit IRR but maybe some deals trade a little too expensive to get us there, but that's always been the case a little bit. So I don't think it's changed much of the underwriting. I think it's just changed the path we see us getting to the low double-digit IRR we're looking for.

Got it. Makes sense. Maybe one additional question. Just given pretty minimal leverage today, how are you thinking about funding future external growth? And at what point do you think it would make sense to use some balance sheet capacity instead of equity issuances?

Thanks, Mike. I think more of the same as we've approached over the past year or 2, really just piggybacking off Dave's comments, it feels like we're positioned really well. Capital markets have been favorable. I think as rates have come down, using the balance sheet is the balance between looking at where our equity is trading and a little bit more on the revolver side. And I think there will be a point where we start to carry a little bit there. And maybe then look towards kind of the bond market, especially as we fully realize the IG savings that we think we can get. But we just feel like we're in a multiyear sort of inflection of getting bigger deals and bigger opportunities. And so we want to make sure we've got really full capacity and full availability, whether that's debt or equity. All right.

Your next question comes with the line of Austin Wurschmidt with KeyBanc Capital Markets.

Yes. Dave, you referenced some of the hiring that you've done this past year, and I'm just wondering for any potential larger transactions, do you feel like you have the platform and people in place to digest that? Or do you think it would come with adding additional folks to kind of help oversee that effort, maybe particularly within SHOP, which is a little bit of a newer segment for you?

Yes. I think the answer to that is really going to be relative to the circumstances of the deal, the size of it, the complexity of it, whether or not there's a team or a part of a team that would come with it. Those are all things that we throw into the mix to figure out how to get a big deal done. The team here is pound for pound, in my opinion, the best and the most capable to do all sorts of things, but there still are going to be some deals like the U.K. care home acquisition last year, Care REIT where it came with some really talented people, and we decided to keep. So it's all going to be relative to the circumstances of the particular deal.

Helpful. And then just one on the loan book. I mean it seems like kind of the competition in the lending markets these days has picked up a little bit. I mean, any risk of loan prepayments that you foresee or any conversations you're having on that front?

Well, the loan strategy that we put in place a few years ago has wildly exceeded our expectations and helped fuel real growth, real acquisition of real estate that either came with or because of those loans and relationships that we developed. I think as things get more competitive on as banks kind of jump back into the space, those relationships are still very active with us and still looking at off-market opportunities with those relationships. And so I think that's still going to be going forward a really unique and powerful mode of growth for us. Maybe a little bit less than it has been in the past, if things continue to get really aggressive. But we are looking still not included in that pipeline number at some larger deals with -- that are off market or some of these strategic partners of ours. And if we get some loans paid back that will just fuel additional growth because that pipeline continues to reload.

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

Well, we're really grateful for everybody's interest and support. If you have follow-ups, you know where to find us. Have a great day.

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

Ladies and gentlemen, thank you for joining us, and welcome to the CareTrust REIT's Third Quarter 2025 Operating Results Webcast and Conference Call. [Operator Instructions]

I will now hand the conference over to Lauren Beale, CareTrust's Chief Accounting Officer. Lauren, please go ahead.

Thank you, and welcome to CareTrust REIT's Third Quarter 2025 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-K and 10-Q filings with the SEC. 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 Q3 2025 non-GAAP reconciliations that are available on the Investor Relations section of CareTrust's website at www.curetrustreit.com. 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; Bill Wagner, Chief Financial Officer; and Derek Bunker, SVP of Strategy and Investor Relations.

I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?

Well, thank you, Lauren, and good morning, everybody. Thank you for joining us. This feels a little like deja Around this time last year, we were in the middle of closing on a significant volume of new investments that were to be giving us a running head start coming into 2025. I -- at the time, I said, if you like our 2024, you're going to love 2025. Well, this time around, I'll say it again. If you like our 2025, I think you're going to love our 2026 -- and with only 2 months remaining, we sure hope you've liked 2025 so far with a third quarter normalized FFO per share of $0.45, representing approximately 18% growth over the prior year quarter. and the midpoint of our updated full year guide, also representing approximately 18% year-over-year growth.

To start, I'd like to make a few observations. First, I'm extremely proud of the CareTrust team, an exceptional year like this is the direct result of their talent, commitment and our culture. Our investments team led by James are truly rock stars in growing our portfolio, sourcing and sifting through hundreds and hundreds of off-market and brokered opportunities. and navigating complex structuring and closing processes to help us deploy record amounts of capital in back-to-back years.

Our asset management team notched several wins this quarter in helping identify and mitigate risk including a seamless transition of a portfolio of skilled nursing facilities to a new regional operator with a stronger credit and reputation, all without any disruption in operations or rent collection. And our accounting team led by Lauren, have undertaken a heavy lift, consolidating CareTrust REITS's books with ours and preparing for some added complexity as we look to build a shop growth engine, and that's just to name a few.

Second, I want to express my appreciation and admiration to our operators for their unwavering pursuit of quality care and operational excellence. A few weeks ago, we hosted our annual operator conference in Southern California, welcoming representatives from almost all of our operators for a few days to swap ideas, learn from business leaders within and outside the health care space and recharge a bit. I'm continually reminded that we're privileged to work alongside some of the top operators in the U.S. and U.K. whose superior lease coverage, quality indicators and ratings continue to set a high standard across the industry.

Turning now to an update on the quarter. In the third quarter and since we closed on $495 million of new investments, bringing our year-to-date total investments to over $1.6 billion. This is a historic amount for us, eclipsing last year's massive year of $1.5 billion. And now with a pipeline of $600 million as seems to reload it about as fast as we can close on deals, the momentum continues to accelerate, and we're here for it and ready to execute. While we're pleased with the nominal amount of investments, we're also thrilled at the quality of those deals and their transformative impact on CareTrust. I've previously shared about how the first decade of CareTrust has been a success story built primarily around 1 single engine of growth, U.S. skilled nursing.

While we've done triple-net deals in seniors housing and have deep familiarity with the space, skilled nursing facilities have been our bread and butter and to be clear, will remain so. In order to position CareTrust to grow in the next decade like we did in our first, we need another growth engine, and we decided to add 2 for good measure. The second 1 was officially bolted on to CareTrust with our U.K. acquisition in the second quarter. Since then, we've integrated a London-based team of professionals and closed on our first follow-on transaction there in September. And we're pleased to see the deal pipeline in the U.K. expand and now account for roughly 1/3 of our $600 million total pipeline.

The third engine of growth is shop. While we don't typically speak of deals in our pipeline until they close, we do have an extra dose of confidence in closing our first shop deal before year-end, placing all 3 engines of growth online and hungry going into 2026. As I've said a few times on past calls, if we were only trying to make consensus or focused on our results for this year or next, we may not have extended the significant resources and brand power on the U.K. or to prepare for shop. Instead, our sites are set on where we will be in 10-plus years and how we can get there at a similar pace that drove the second highest total shareholder return amongst all REITs over the past decade.

It's with that vision that we undertake the transformative investments in the U.K. and in shop. In that vein, while we will always maintain fiscal discipline and are still a very lean organization, we have invested this year across our team of professionals to absorb our massive recent growth and help position us for success as we continue to expand. We've taken the same approach with our balance sheet. Keeping MAX optionality to pair a unique window of opportunity to capitalize like few others can, on the generational demand for post-acute services and housing. So with that in mind, if I compare CareTrust this time last year to where CareTrust is today, I think you're going to love 2026, just as I thought you have '25.

We are stronger and better across the board. We're a larger REIT with a fortress balance sheet and great liquidity with no near-term debt maturities until 2028. And we have a growing portfolio with best-in-class coverage and better diversification across asset mix, operators, geography and payer mix. We've added talent throughout the organization to support investments, asset management, tax, finance and data science, and we're about to bolt on the third engine of growth for the next decade with our first shop deal closing before the end of the year.

Going into 2026 with a stronger team, better portfolio and greater liquidity, we're poised to keep the flywheel ripping as we aggressively pursue deals across the 3 large opportunity sets of U.S. skilled nursing, U.K. care homes and SHOP. We are not managing the business for the next quarter or year. We have reengineered CareTrust for a multiyear era of accelerated growth.

With that, I'll hand it off to James for a report on investment activity and the acquisition landscape.

James?

Thanks, Dave. Good morning, everyone. During the third quarter, we completed approximately $59 million of investments, including the transition of several buildings previously leased to Covenant Care to existing and new tenants and a transaction that we feel secures the clinical and financial performance of those facilities for years to come. We also closed on our first U.K. transaction following the Care REIT deal, a 2-pack of homes leased to an existing quality operator. In the period since we closed on another $437 million of investments, the bulk of which occurred across 2 large portfolio deals comprising 12 skilled nursing facilities and 1 majority SNF campus across the Southeast and Mid-Atlantic.

The first of these transactions located in the South is our first with a large regional operator known for quality care that we've admired for some time, and we could not be more excited to add them to the portfolio. The Mid-Atlantic transaction was structured as a sale leaseback and add several facilities to our portfolio with an existing quality operator. Our relationship with that operator originated as part of our commitment a few years ago to lend with a purpose, and we are thrilled to see our lending program continue to bear fruit in the form of additional real estate acquisition opportunities.

We're thrilled to get these transactions across the finish line. Since quarter end, we also closed on a California skilled nursing facility with an existing operator and on a 2-building portfolio of assisted living communities triple net lease to a new operator. Overall, the blended stabilized yield on the post quarter end tranche of investments is approximately 8.8%. As we look forward, our investment pipeline remains strong, sitting at approximately $600 million. The quoted pipeline is approximately half U.S. field nursing, 1/3 U.K. care homes and the remainder shop and a few strategic loans. It includes some singles and doubles as well as the mid- to large-sized portfolio transactions. Please remember that when we quote our pipe, we only the deals that we have a reasonable level of confidence that we can lock up and close within the next 12 months.

Our investment pipeline remains active with a mix of broker transactions and proprietary opportunities generated through our operator relationships and other channels. We are seeing sustained deal flow across skilled nursing and seniors housing sectors, including both triple-net and shop formats. and a measured but meaningful rise in overall transaction activity, particularly in seniors housing and the Care home market. Our disciplined underwriting approach, combined with a primary emphasis on operator relationships, and a commitment to creative collaborative deal structuring will continue to help fuel growth across the skilled nursing, seniors housing and U.K. care home market sectors.

And with that, I'll turn it over to Bill.

Thank you, James. It's been a privilege for me to serve our colleagues, Board and shareholders since CareTrust inception through such an exciting time in our growth story. As previously announced, I will be retiring as CFO at the end of the year and transitioning the role to Derek Bunker, our current SVP of Strategy and Investor Relations. While Derek joined us only this year to help lead the U.K. acquisition, we've known him for many years as he's been active in the post-acute health care space. This year, we worked closely together on a thoughtful succession plan and I have every confidence that he is well prepared to lead the finance organization into its next chapter.

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

S Thank you, Bill. For the quarter, normalized FFO increased 55.5% over the prior year quarter to $94.7 million and normalized FAD increased 50.6% to $93.1 million. On a per share basis, normalized FFO increased $0.07 or 18.4% to $0.45 per share and normalized FAD increased $0.05 or 12.8% to $0.44 per share. During the third quarter, we paid off the secured notes and revolvers assumed in the Care REIT transaction, and we entered into interest rate swaps to fix the rate on our $500 million term loan for a period of 3 years as a go-forward all-in rate of 4.6%.

Also during the quarter, we raised $736 million of gross proceeds from an equity issuance. These proceeds allowed us to fund third quarter investments and the transactions announced yesterday as well as completely pay down our revolver as of September 30. As of today, we have approximately $380 million available for future issuance under our ATM program. In yesterday's press release, we adjusted guidance for this year to a range of $1.76 to $1.77 for both normalized FFO and normalized FAD per share.

Our equity follow-on in August gave us incredible flexibility to close our near-term pipe while maintaining agility going into 2026 and beyond. But the timing gap between funding and closings that somewhat lagged represented a short-term headwind. As we've now deployed most of that capital and replenish the pipe, all while maintaining net debt to EBITDA around 1.1x. We are excited about our ability to continue growing as we prepare to enter 2026.

With that said, we'll give full year 2016 guidance with our Q4 and full year 2025 update. In addition to the assumptions set forth in our press release yesterday, -- the updated 2025 guidance assumes the following: total cash rental revenues of approximately $344 million to $345 million and straight-line rent of approximately $9 million. Interest income from financing receivables of $12 million; interest income of approximately $96 million, interest expense of approximately $44 million which includes roughly $5 million of amortization of deferred financing fees, income tax expense of approximately $5 million and G&A expense of approximately $52 million to $53 million, including roughly $12 million of stock compensation.

Lastly, our liquidity continues to remain strong. In addition to approximately $334 million of cash on hand as of November 5, we have full capacity available on our $1.2 billion revolver. And despite our record pace of investments, we continue to maintain low leverage with net debt to EBITDA of 0.43x net debt to enterprise value of 2.4% and a fixed charge coverage ratio of 11x each as of quarter end.

And with that, I will turn it back to Dave.

Great. Thanks, Derek.

Well, we hope you found this report helpful and happy to take your questions now. .

[Operator Instructions] Your first question comes from the line of Jonathan Hughes with Raymond James.

Out there on the West Coast. Thanks for the prepared remarks and commentary. Just a question for James. It's great to see the investment activity in the replenished pipeline. I was hoping you could maybe share expected yields across the 3 buckets of SNFs, U.K. care homes and senior housing? And are you seeing those compressed as the outlook of us to improve and won...

Jonathan, sure. I think across the 3 spectrums, I mean I don't think there's going to be 2 mega a surprise. I think across SNFs, you're going to see typically in -- with a 9 handle on it for the yield, I think that now and again, we find deals where we'll trade a little bit of yield for coverage. We like that trade-off in some deals to sleep better at night. In the U.K., it's going to be pretax leakage somewhere around 8.5% or higher? And then I think in seniors, is really a range, John, depending on the age, the CapEx needs, the market -- you do see a little bit of compression in rates in seniors housing for sure. I think that depending on the market and the need for CapEx, we're still going to look for something that gives us the year 1 yield of 7% or higher.

And are there any loans or preferred investments in the pipeline or do all be simple...

There's a couple of strategic loans or preferred but not anything meaningful really, Jonathan.

Okay. And then just 1 more from me for Bill or Derek, I'm not sure who wants to answer. But just given the duration gap or timing mismatch mentioned in the guidance update, I believe you have a for component for equity raises. Are there any plans to utilize that in the future and try and minimize that duration gap? .

Yes. Jonathan, it's Derek. We look at everything case by case and try to match up the duration of funding with the pipeline. So I wouldn't say never, but the pipeline seems to have be closing at a pretty brisk pace and replenished at an equally brisk pace. And so it hasn't made done a sense to kind of go down that route yet. But we'll keep that option open for the future.

Thank you, Bill. -- trying to say I've enjoyed the time spent together in the past 10 years. Congrats on a great beer and enjoy your free time and Derek got. .

Your next question comes from the line of Michael Carroll with RBC.

Can you guys provide some color on the type of investments that CareTrust has made to kind of build out its seniors housing operating portfolio when did those investments start? And should we expect like this kind of flow into 2026 with higher G&A as you kind of build out that platform?

Yes. I'd say we started in earnest at the very, very end of last year with bringing on a senior investment professional added to that in the middle of the year, some more bandwidth on the investment team and then data science. And asset management as we near the end of this year. So not to mention tax and accounting as well. So it's been a process that's kind of gone throughout the year. I think as we go into the new year, and we'll have that first deal online, We'll probably look to add I don't know, 2 or 3 more people potentially throughout next year related to SHOP. .

6 Okay. And then can you kind of talk a little bit about the shop deals that you're looking at right now? And I know there's a few larger portfolios might come with platforms? I mean, is that interesting to you? Or is it not needed anymore just given these investments you've highlighted that you already made in the SHOP platform so you really need to bring on a new platform right now.

Yes. I think what we've done is decided to not just wait on the sidelines for a perfect large portfolio deal to fall in our lap and we wanted to get after it, and that's what we've done. And so we've tied up this smaller shop deal, built the the infrastructure to suit that pipeline. And I think that can now grow and scale pretty well. And like always, we'll look at anything that hits the market of any size. And if it makes sense, we'll pursue it. .

Okay. Great. Appreciate it. And thanks congrats on your time.

your next question comes from the line of Farrell Gena with Bank of America.

This is Farrell Granath. I first just wanted to ask about what you're seeing in the markets compared to the U.K. and the U.S. I know you had added some commentary about the U.S. skilled nursing was your bread and butter. But it seemed like there had been some greater opportunities picking up in the U.K., which didn't I guess, fully get incorporated into what we saw close a few -- only a few U.K. care homes. So I was curious if you could add in, is it greater competition, opportunistic pricing for what you're seeing?

Yes, it's James. I think that I think you have to look back a little bit in terms of when we acquired Care REIT, they had really been a standstill for a number of years. So it takes time to build that pipeline up and get those deals under contract and going and ultimately closed. So I think that you see when we talk about nearly 1/3 of our pipe right now being U.K. that you see that pipeline swelling and getting more productive and busier, and we definitely see the trend going that way. I think that -- there are some real announced very large transactions in the U.K. I think there is definitely significant activity there, and we'll continue to -- we think we remain competitive in the market we're looking at over there, and we continue to see the pipeline grow like we have, really, since closing the CARE REIT deal, there's been a continual but consistent slow growth in the size of the pipe there.

Okay. And I just wanted to touch on how you had mentioned the investment into a data science platform. I'm just curious what kind of application you would expect to use that for? And maybe where we could see that show up in the portfolio going forward?

Well, our investment in data science is going to really have a global reach throughout the company across all departments making us smarter and faster across the board. There's an obvious application to the shop business and wanting to be a real value-add capital partner for the folks managing those properties for us. But we really do expect to see a positive impact both to productivity decision-making and efficiency throughout the whole organization as we continue to scale. .

Congratulations to both Bill and Derek.

Your next question comes from the line of Juan Sanabria with BMO Capital Markets.

Thanks for the time. I guess just for the team as a whole, just curious on how we should think about G&A. I recognize it's early to give any sort of 26 official guidance, but any sort of parameters and how big the G&A cost side could grow next year. would be appreciated.

Sure. Juan, Yes. We mentioned part of the pickup this year has been tied to STIs. We've hit some pretty high targets both in growth and performance, and that will obviously reset going into next year. So there's a little bit of a little bit of a pickup there countered to kind of piggybacking off of Dave's answer, just a few questions ago about some investments in our team throughout the organization to both prepare for shop as well as just the continued growth that we've seen last year and this year.

So I think looking out of Q4, it will look probably similar to Q3. But going into next year, you're going to kind of see some puts and takes there. We'll have more color, obviously, next quarter. But I think you'll see hopefully, some of those productivity gains and then offsetting the reset from the SCI and then in our favor, just probably looking kind of on track to what Q3 and Q4 are looking like?

Great. And then just curious, we've seen some of your peers kind of look at different opportunities to grow in skilled nursing via RIDEA or OpCo investments? Curious on the appetite or later of to do something similar and pursue skilled nursing opco or a investments?

Yes, it is interesting. I think that I would -- I would never say never. And I would say that for the right operator right deal, we could consider something, nothing in our pipeline or anything that we're actively working on contemplates that, but also found some of those plays recently, really interesting. .

And congratulations.

Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Great. Just going back to the shop deals in the pipeline, Dave, I know you've been focused on finding the right operator. And just wondering if when we see the initial shop deals cross close. Should we assume that those have been struck with kind of a future pipeline in mind and that's going to be sort of an expensive relationship? And then at this point in time, is there any specific number of operators that you're initially targeting?

No, I think we'll approach shop as we have with skilled nursing. We'll take it case by case. And some deals will come with a pipeline of growth attached and others won't. But I think with anybody that we will do a deal with, we're going to -- we'll likely want to expand that relationship, whether there's a predefined path or not. So that's how we'll approach it.

And then I don't recall if you've discussed this or not, but is the SHOP engine growth, is that strictly a domestic strategy or something that could also expand in the U.K.

Yes. Right now, we're focused on the U.S., but again, like I said on the previous question, I would never say never. I think there would be conceivably application to that in the U.K. in the future as well.

Then just 1 last 1 for me. Just going to the lease transitions in the third quarter. Can you specifically kind of discuss how you were able to achieve the rent increase on those transitions, how that coverage level compares to where it stood previously and just overall kind of why that made sense.

Well, we had a couple. I think you are talking probably covenant care. So Covenant Care was -- you may remember a couple of years ago, their coverage was awfully tight and was a source of watch list type of conversation on calls and with investors they had been for sale for a number of years. And we decided to be more proactive about it and got involved in the acquisition of Covenant Care and then transitioning those assets to stable strong hands that were not backed by a group that wanted to sell. And to bring in proven quality operators like we did into that portfolio, put any concerns that we had there to rest. .

Your next question comes from the line of John Pawlowski with Green Street.

My first question is on the U.K. care home portfolio. I know coverage levels were stable quarter-over-quarter, but they are down a touch from the coverage levels you disclosed in May. Can you remind me what specifically has driven potentially soft revenue or outsized expenses since you see close in the portfolio to drive that take down in coverage.

I wouldn't call out anything thematic or general there. I think that's just idiosyncratic across the board and not a cause for any concern for us.

Okay. Second question is a follow-up to Juan's Derek, I didn't quite follow the response. I interpreted it right that the absolute dollars of G&A is going to start settling out at is Q3 and Q4 levels? Or is there another year of outsized growth ahead?

Yes. I mean, look, there's a lot of puts and takes. We've grown a tremendous amount. We're building up shop. And so each quarter, as we assess their needs, we'll probably continue to invest in both our team and platform to make sure we're meeting both the acquisitions that we've closed over the past 2 years as well as the pipeline and really what's kind of funneling into the pipeline. The 1 that is resetting is the STI, and that's been kind of a big pickup from this year over the prior year, that will reset. But obviously, we've made further investments. So without trying to kind of steal the thunder from next quarter because I know that's everyone's anxiously awaiting it. I think that's just sort of the puts and takes there. It's going to be elevated because of those investments in team. But there's a little bit of a pickup when we reset that STI.

Your next question comes from the line of John Killick with Wells Fargo.

Dave, in the press release, you made the comment of the pipeline as well. And I'm just kind of curious, this time last year versus right now, would you say that the opportunity set looks even bigger for you, kind of implying the potential for a larger 26 than 25%. And then on top of that, I'd love to know how much of this pipeline is sort of being populated by that the off-market deals that you were able to source from those loans that you've made previously and maybe what you think that runway is for you.

John, from your lips you know what I mean, we certainly believe that the opportunity set today versus 12 months ago is expanded. -- right? 12 months ago, we had 1 sandbox to play in, and now we've got really 3. And so we do see a big potential for another significant year of growth next year. We only have really visibility into our pipeline though. So it's hard to predict exactly how it will all shake out. But we -- I would say, are more bullish than ever based on the fact that the team is bigger and stronger.

We've got more engines of growth to the fuel and there's plenty of activity in the funnel deal flow above that of our stated pipe.

Got it. And then maybe on the SHOP deals, just a little bit on underwriting. Could you remind us where these assets will land on the risk curve? What IRRs are you targeting? And what are your expectations for stabilize occupancy and margins on these assets?

Yes. I mean we're looking generally speaking, double digit -- low double-digit IRRs on all of these. And that there's different ways to start and end there, but that's generally where we're at. And in terms of occupancy, again, it's going to be case by case. Ultimately, I think that there's going to -- we're hoping to get to stabilization in the low 90%. But I think that if you look over the course of a decade, that realistically, the demographics are going to be really pushing that out. .

Got it. Well -- and Bill, congrats again on a great career, and congrats, Derek, on the new role.

Your next question comes from the line of Richard Anderson with Cantor Fitzgerald.

I get this right eventually. And congrats to you, Dave, for the CFO upgrade. So -- so I want to -- of course, a joke, Bill. Good luck to you. The decision to move on the shop, not the worst kept secret not even a secret, but all looking forward to that. But when you think about what you guys have accomplished over the past several years, it's been impressive, obviously, in terms of the external growth. But in year you're sort of left with the same organic growth profile, at least in the current portfolio, kind of low single-digit type of growth rate. What has been the -- what's the motivation for shop?

Is it to expand your external growth sort of net? Or is it your acknowledgment from you that you want to really kind of deliver a better organic growth story to investors going forward? What's the motivation in your mind?

That's a great question. And it's really is 1a/1b there. They're both compelling reasons for us to bring this SHOP engine online. We -- like I said in my prepared remarks, look, if we're really managing to hit a quarter or 2 or a year -- it's just not worth the brain damage. The U.K. were worth the brain damage for that matter because we have so much opportunity in the near term on the U.S. skilled nursing, but we're really trying to think long term. And if I'm thinking about 10, 15, 20 years of CareTrust, to be able to maintain a high rate of growth in areas that we feel like would be sticking to our knitting and Benshopas a natural addition and it's worth the investment. .

Okay. Fair enough. In terms of SHOP, you kind of talked about this in a sort of a tertiary way, but do you see you're sort of targeting more stabilized assets out of the gate? Are you comfortable going all-in value add? Or what's sort of the mentality around your SHOP execution kind of out of the gate?

Yes, I'd say that we're going to bring a very similar attitude to it that we do to skilled nursing. And that's really reflective of the priority of who that operator is and playing to their skill set. -- not every operator in skilled nursing land or seniors housing land, our turnaround artists. And not everybody is a good match for every geography. So really, what we get paid to do, I think, is to match the right operator with the right opportunity. And that means that we have a fairly wide Banfield there. We can do stabilize, we can do turn around. I think it would probably -- but having said all that.

I think a real tough turnaround and tough market that requires a ton of CapEx is probably not going to be high on our list.

Fair enough. And then just quickly, the obligatory packs question. They got their forbearance extension to November 30. And -- what are your thoughts around a possible delisting there, if that's an outcome? Any perspective that you could provide at all on PACsassuming 30th comes and goes, and we still have nothing. I'm just curious where you stand on that.

Yes. We really don't have any update or comment on PAC until they report. SP1 Your.

Your next question comes from the line of Wes Golladay with Bayer.

Yes, I just want to follow up on Rich's question, maybe refine the buy box a little bit more. Do you have a preference for higher acuity assets? Would you do I? Do you have a preference for campuses? What are you looking for there?

Where I'm NIBR.

Okay. So what about from a price point, do you have a preference for would you do all markets? Would you have a preference for middle markets or anything along those lines?

I think we're probably going to be most competitive in, call it, strong secondary markets. I think if we found some really nice #1, #2 in the market of a secondary market -- that seems like a really natural fit for us. .

Okay. Congratulations, Bill and Derek.

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

All right. Well, thank you. Thank you, everybody, for your interest and questions. We're super bullish on going into 26 in the next several years as you can tell, if you got any other questions you know where to reach us. Have a great rest of the day. .

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

Thank you, everyone, for joining. We're at the top of the hour. We are now in the CareTrust REIT meeting. My name is Farrell Granath, and I'm co-lead with Jeff Spector for healthcare REITs and the BofA REIT team. I'm joined today by David Sedgwick, who is the CEO and President of CareTrust. And I will pass it over to you, Dave, for opening remarks and if you want to introduce any of your team members who I see are sitting on sides.

Great. Well, hello, everybody. Thanks for your interest. Bill Wagner, our CFO, is right over there; and Derek Bunker, SVP of Strategy and Finance is over there. And my name is Dave. Happy to be with you and CareTrust. So if you're new to the story, I'll just give you 45 seconds on us. We -- the story really started back in 1999 when a little nursing home company got started in California called the Ensign Group. We started leasing properties from REITs and the engine got started and got moving faster and faster. And then next thing you know, we are starting to acquire real estate of our own and went public in 2007. By about '13, '14, we realized that all this real estate that we owned -- we were not getting credit for it by the Street. And we saw a window of opportunity to spin off that real estate and form CareTrust REIT, which is what we did in June of 2014.

For some reason, the Street didn't like the fact that we had one tenant. And so we decided to grow that concentration down, which we have over the years. We averaged about $225 million of investment activity per year for the first 9 years or so, adding operators, primarily all triple net skilled nursing, some triple net seniors housing along the way. I became CEO in 2022, although I've been with the company since our days -- early days at the Ensign Group. I'm a recovering nursing home administrator, so I come to this seat in a little bit of a different way than other REIT CEOs. But that kind of makes sense because the skilled nursing asset class is hypersensitive to the quality of the operator, much more so than your traditional real estate metrics.

Last year was bananas. That's a technical term for what happened. After going $225 million a year, last year, we did $1.5 billion of acquisitions. And in the midst of that, we were faced with an opportunity to consider an acquisition in the U.K., which would be our first M&A deal, not to mention our first international deal. After some internal debate, we decided to -- even though it didn't broke, why fix it? Because it didn't broke, let's add another engine of growth to the ship from a position of strength, which is what we did. We closed on that in May and internalized that team in July and are working on integrating that company into ours now.

We were in London all of last week, and I haven't seen my kids now for too long, so can we wrap this up? Now in the midst of this year, another year of explosive growth, we're on pace to exceed last year. We had an overnight -- a very successful overnight offering that maybe some of you participated in a few weeks ago as we announced a $600 million pipeline of deals that we think we're going to be able to execute on here in short order. And in the midst -- just like last year, in the midst of a very big year, this year, we're also thinking about next year and how we can build now a third engine of growth as we are looking at going into the shop space in earnest. About 18 months ago, we were about a $2.5 billion market cap company. Today, we're around $7.5 billion. And it seems like quite by accident, but it's been a lot of fun.

Thank you for that. And as a reminder, this is an open dialogue. Please jump in if you have any questions while we kick things off. But I think maybe the biggest highlight acquisitions. So I think can we break into a little bit more about why you made that decision to enter into the U.K.? How long did that take you to maybe make that decision in closing? And what has that done now to your portfolio more meeting the asset classes that you're touching?

Yes, a little inside baseball on it. The deal came to us last summer. We had looked at the U.K. a few times over the previous 3 or 4 years, always deal related. And each time we get to know the market a little bit better, get a little bit more comfortable with it. We really did struggle with the decision of whether or not to do it because it didn't broke, and we didn't want to distract from the momentum that was building on our core business. What we liked about it was a lot of the same things that we love about the business here, the seniors and skilled nursing business here are prevalent there. You've got a supply-demand imbalance. You've got the Silver Tsunami wave coming. You've got a mix of private and public funding that we're very familiar with. You have a fragmented market that is ripe for roll-up like here.

And you have the ability finally for a very concentrated SNF REIT like us, skilled nursing facility REIT like us to diversify a little bit. And if there's a little bit of an elevation to the floor of our multiple because of that diversification, we'll take that, too. But ultimately, all of those boxes get checked, the biggest box that we really wanted to check was having another engine of growth because, as you all know, real estate is cyclical. And if for whatever reason, things chilled on the skilled nursing front from an external growth perspective, we wanted another avenue to continue that to go.

We killed that deal once because of other big opportunities that we were pursuing and then we decided to reengage. And as we were entering into it in earnest, we brought on Derek Bunker because -- and he joined us, he quarterback the deal and now we just can't get rid of him. He just sticks around -- he stays around. And he led that whole deal, and that enabled us to do it while not slowing down elsewhere.

And what potential synergies could you see with this acquisition? And as you've closed it in '25 and now looking into '26 as you're just saying the internalization of the team back in July, what could we expect?

Well, there was about a $10 million G&A at Care REIT, and we think that we can capture about $5 million of savings. That will probably fully get realized going into next year. The internalization of the team has been great. There are some cultural differences for sure. There's some stereotypical differences between the pace of play and risk appetite between the U.K. and the United States, and that's certainly been on display, since we've taken over, but they are traveling up the culture curve pretty quickly. We got them some running shoes to not so subtly say it's time to run. They're custom kicks, coral color. They're very -- they're hot. I'll show you a picture later if you want to see them.

And then we also discontinued PowerPoint because they haven't had a lot of access to capital to do much. So they've gotten exceptionally talented with PowerPoint. So we don't use that much. And so just a couple of little anecdotes of how we are getting them on our pace of play. What's fun is, like I said, we were just there last week, and we spent a lot of time looking at the pipe. The pipe in the U.K. is growing exponentially, like there wasn't really anything there when we took over because they -- while they didn't have any capital, they tried to stay relevant, the best they could with PowerPoint. And now there's actual deal flow and excitement crossing their desk and they're pretty fired up. There's a couple of -- in the $600 million pipeline that we announced, about 60-ish percent of that is U.S. skilled nursing, about 20-ish percent is SHOP here in the States. And then the rest is a U.K. deal that we -- surprised that it's already in the [indiscernible] and should close this year. But I'm getting more excited about what that could mean for next year.

[indiscernible].

Yes. A couple of thoughts on that. One decision that we had to make out of the gate was are we going to keep the team in London? Or are we going to do this all on our own and capture $10 million of synergies, right, instead of $5 million. And our thought there was that we'll be better off long term if we keep the team intact. So we've got 2 seasoned investment professionals. We've got a handful of seasoned asset management professionals and a long time of relationships, not just with the existing operators, but with twice as many that are not already operators of ours. What we've seen so far is that there's been a dearth of capital in the U.K. for quite some time, and they are hungry for it, and they're bringing us deals on their own. It's all relative.

Our size is still relatively small compared to the big guys. And so if we did $100 million, $200 million, $300 million, $500 million a year of acquisitions there, that will move the needle for us. That will be fantastic. Right now, I think it represents about 16% of our revenue out of the gate. Can we hold on to that? Can we grow it? It depends on what we do with SHOP, depends on what we do here. But I think it's going to be meaningful, especially because we have the team on the ground with relationships that now we're going to throw some gasoline on to really grow that.

The other thing is how we compete for deals may be a little bit different in that historically, the lease coverage there has been very, very high and lower yields. But because of the lack of capital, there have been some entrants that have really pushed on yields and -- but the cost is the coverage might be a little bit tighter, right? So there might be a middle ground there for us to really capture quite a bit of interest from operators wanting to have a little bit better coverage with us. And because of our cost of capital advantage, we can still get a nice spread and do some damage.

And I think also when you were just mentioning this potential U.K. deal, back on the earnings call, it didn't seem as much of the U.K. was a part of the conversation. I've seen among peers, U.S. SNFs has been kind of dominating the conversation. I guess from the last time we spoke on your earnings call, have you seen an acceleration in their willingness or ability to have these transactions and deals over in the U.K.?

Yes, for sure. The -- like I said, when we took over, there really wasn't a pipeline at all that we acquired. We really acquired the assets, the relationships and the team. And the momentum is really snowballing right now as operators inside and outside of the portfolio are bringing us relationships and deals off market and some stuff that's hitting the market. And there's deals kind of all sizes percolating out there. So yes, we think there's some meaningful work to do there.

And then I guess if we then shift over to the SHOP opportunity that you had mentioned.

SHOP opportunity?

SHOP opportunity...

Don't get me started with the puns. You guys -- I don't do a lot really well. Metaphors I do. I do puns, SHOP opportunitSHOP opportunity, okay? SHOP operational...

So make sure to get you a shirt, but I'll have it all on there. Yes. So with the Shop opportunities?

You want to say SHOP opportunity, don't you?

With the conversations we've been having, I know that you've been doing things in the back end of potentially building out, there's the thoughts of building out a platform, if transitions were ever a possibility, if not, how is that -- how are those conversations going? Has that also picked up? Or has now this U.K. opportunity maybe be taking more of a forward step in the conversations?

Yes. So we're sort of experiencing a repeat of last year, right? Because last year, we had this crazy year of growth and yet we were -- we wanted to figure out how to add another engine of growth in the midst of that. And now we're doing that same thing again with SHOP. In December of last year, we hired a new SVP of Investments over SHOP. Basically, all he does spends all of his time curating operators and deals for the SHOP vertical. In June, we added -- we hired somebody as an associate for him. So we're definitely investing in that space.

Right now, we have 2 deals in our pipeline of $600 million pipeline that are SHOP. And so the shot clock is ticking, if you will, to be ready. And we are investing time and energy into getting ready for that -- those deals to close. We've hired a data engineer at a USC, who's brilliant, making us very efficient and fixing the IT kind of piping and plumbing problem with SHOP because the way you asset manage triple net assets is certainly different than how you do a SHOP asset. And so all of that plumbing is getting worked on right now so that by the time we do close that first and then second deal, we'll be ready. And we can do that without really adding much of G&A at all because it's built to suit. It's small enough.

Having said that, the opportunity set in front of us is massive with respect to SHOP is 40,000 properties compared to 15,000 SNFs and 15,000, give or take, care homes in the U.K. So there's a huge opportunity set there from onesie-twosies like we have right now to big portfolios. And the beauty of our situation is we don't have to do it. If we're managing this thing for the next few years, you don't do it, in fact, because there's too much brain damage for just the next few years. But we're really thinking about forever. And if you kind of think about the S-curve of a business, we're certainly on the upswing. I don't know how far that S-curve up we are. But what we're trying to do is adding new S-curves to it.

And the U.K. is one and then SHOP is another so that we can maintain this pace of growth as we go from 2.5% to 7.5% to 10.5% to whatever. So we're currently building the infrastructure to suit the pipeline while feeling really opportunistic about a larger deal if one presents. Now if there's a large portfolio that comes with the platform, we would need to rethink how we organize ourselves. But it's -- we have this cost of capital and balance sheet to continue on the gas.

I was hoping you could dive into that a little bit more. My next question about your balance sheet right now sits well below where peers are and has been consistently as well as you just raised overnight, you have a large amount of cash available to you. How do you think about your cost of capital and being able to execute now going forward on these growth objectives?

This hyper low leverage era of ours really started, I don't know, Bill, what would you say, end of '22, early '23, right? That's when the windows of opportunity really started because the interest rates spiked our portfolio -- we had just kind of re-shored up the portfolio coming out of COVID. And because we had done that so quickly, I think we got some credit for that from the Street and said, okay, maybe these guys can start growing again. And we started to see the pipe really take shape as we started executing that other strategy of lending and creating those strategic partnerships. And so we just started working at preparing the balance sheet to take advantage of what could be a 6-month window of opportunity, who really knows.

And having that balance sheet as low as it is, we wanted to just have all the optionality that we could to take advantage of whatever crossed our desk and not be restricted by moves in the market because I don't know if you've noticed, but it's a crazy equity market last few years. And so if we could derisk that, we would do that. And this rhythm that took place of quoting a pipe closing and/or issuing equity on the ATM generally to match fund, rents repeat, reload.

And because we had some view as to the funnel of deals coming into the pipe, we were over-equitizing that and just got it down to where it's become -- we kind of really love it. We love having that flexibility. And when the U.K. deal then crossed our desk, for example, you give us a $1 billion opportunity in front of us and put it all on the line and still be underneath our 4x net debt to EBITDA -- 4x to 5x net debt to EBITDA, are you kidding? And for a company of our size, that just -- it's a huge advantage that we have.

And I guess also then now turning back over to SNFs and we're thinking about -- I'm now also looking at the U.S. market and how those conversations and potentially if you're still seeing transactions pick up, are you seeing greater competition in those conversations? And are you seeing any differences in cap rates? And if you can put it relative to the U.K. cap rates for SNFs?

Yes. The competition for U.S. SNFs is pretty steady. There's always a bid. And if there's more than 2, there's -- it feels like there's good competition for it. The beauty of our situation today as opposed to 2022 is that we've developed these relationships that have essentially created an off-market pipe of deals where we get first crack at it. And it's not so much competition for it. These are deals that we would have never seen. The market hasn't seen them. These guys tie them up and bring it to us to help them close. And so that's just a really clear advantage that we never enjoyed before the last couple of years.

On the stuff that's marketed, yes, there's competition. There always is. And I think we have a cost of capital and relationship and reputation strengths there that help us get our fair share of the marketed stuff as well. You would expect to see skilled nursing acquisitions for us be in the 9s, somewhere in the 9s. Could we go below a 9 to get a big portfolio deal and maybe pay a premium there? We could do that. In the U.K., for the care homes, those are much more like assisted living memory care type facilities than skilled nursing. So keep that in mind when I say that the cap rates there are going to be probably for us in the 8s, maybe into the 9s, if we can, but it's just this push and pull with the yield and the coverage.

Back in the day here in the states when triple net seniors housing was a thing, you would see lease coverages in the [ 1.1, 1.2x]. Whereas there, it's always been about 2x on an EBITDARM basis, so maybe 175, 180 on a DAR basis. But because of the market there has been a little bit disrupted because of lack of capital, lack of competition. And so I think we'll probably be somewhere in the 8s, like I said, maybe a 9 if we're lucky. But there's the tax leakage component there where we're losing somewhere around 100 bps, maybe even more on it, which is real. So we've got to factor that in as we decide between different asset classes.

And I guess also on the coverage that you were just mentioning, we've seen your coverage continue to go up. And across your whole portfolio, now it's above 2.5x, about 2.68x for EBITDARM coverage. I'm curious your thoughts, have we reached a new normal? Are we always going to be sitting in a type of coverage where we're above the 2x? Or was this a result of the environment?

It's tough to say. I think the challenge with keeping it perpetually rising is that when -- so just to clarify, when we quote our pipe -- I'm sorry, when we quote our coverage, that's not 100% of the assets we own, right? Because when you're acquiring like we do, we want to give the new acquisitions and the new operator some time to season before we reflect that coverage. If you acquire something at, call it, a 1x coverage kind of aggressive investment, knowing that you believe this is going to go to a 1.75 in the course of the next 18 months. At what point do you start quoting that? Probably not right out of the gate because you don't -- the new operator doesn't even have his own -- his or her own financials to go off of, right? So you do give it some time to season.

And by the time you bring it in, you're not going to wait until it goes to 2x to bring it in. You're probably going to bring it in as soon as it's stabilized at a 1.4. So that should naturally kind of -- all the new investments kind of bring it down a little bit. But over time, if it continues to perform it, there's going to be that push-pull between it. So I wouldn't expect it to skyrocket as we layer in the newer investments as they've seasoned.

Yes. And then you're going to diversify by asset class or stratify it that way. And if you're talking just about skilled nursing, we're absolutely thrilled with anything north of 1.4, 1.5x. So whether it continues on from here or not remains to be seen. But just on that point, one thing about us that might be a little bit unique is that we happily and consistently as we underwrite, sacrifice a little bit of the yield in exchange for coverage for our operators. We want all of our energy to be on growth and not on recycling capital, which is a euphemism for a failed investment. So if we give up a little bit of yield there, just a tiny bit of accretion on that front out of the gate, then all of our energy can be on just growing the business.

And all of our energy can be on growing the business instead and being able to absorb the headlines because if you're going to invest in skilled nursing, you better have a strong stomach. For headlines, for Idaho saying you're going to cut Medicaid by 4%. You're ready for that. If not, don't buy CareTrust or buy CareTrust because you know that our coverage is such that we can absorb these shocks, especially when skilled nursing is a necessary required piece of the infrastructure of health care in the country. So if it is required and you've got the best operators with great coverage and don't hyperventilate when you see a headline, there's a reason why we get the highest cap rates of all asset classes. I'll get off my soapbox.

[indiscernible].

I've personally spent my entire career in skilled nursing and seniors housing. I was -- I'm a recovering nursing home administrator. For the last 25 years, we have seen it all. We've seen times where Republicans are better for skilled nursing and Democrats are better for skilled nursing. We've even seen a pandemic. We've seen economic crisis. We've seen state budgets and disarray. We've seen monumental changes to the way Medicare pays skilled nursing providers. We've seen a year with a 10% cut to the Medicare rate. And yet the best operators year in and year out, cycle after cycle, find a way to adapt and thrive.

And so as we look at this, there's a lot of handwringing around the big beautiful bill. And we got countless inquiries from investors and research analysts about, hey, we heard this is where -- what -- this is how they're going to cut Medicaid. And we went down all these rabbit holes with them while telling them, look, we really don't think that all Medicaid beneficiaries and providers are created equally and that there is a sacred cow here, and that is nursing homes with respect to Medicaid. And that proved out to be the case for the big beautiful bill. That doesn't mean that for the next few years, there won't be some changes, changes inevitable with respect to the regulations and reimbursement approaches. But like I said, if skilled nursing hasn't been killed by now, it never will, particularly with the demographic wave that is on its way.

And I'll bring you back to the headline. And I think maybe a few people who know about CareTrust know about -- have heard the tax exposure. So I was wondering if you could add any commentary around that. I know there was a forbearance agreement over OHI that came to the news. There's another operator that was gone after by the DOJ. Where you sit today? How are they performing? And how do you view them as an operator?

So -- man, I could -- I'm not going to, but I could go on for a long time that ...

You say, we have nice time limits...

We continue to receive information from PACs about the facilities that we own, and they're performing very well. So one comment I'll make on the Hindenburg piece that came out against PACs is that it's the first nursing home hit piece in the history of man that didn't have even one sentence about patient care. That was maybe the most shocking thing. The quality of care, the customer service, the quality measures, the star ratings, the fundamental business of caring for people in nursing homes. If that was suspected, that would certainly have been highlighted in that piece.

And the fact that they continued and continue to this day to have superior occupancy and skilled mix is a testament to that because every single day in every market that they're in, a vote is cast with every discharge from a hospital about where they want to send their patient to get care. So it seems to us that those fundamentals are still very much in place. There's been several announcements about PACs about their Part B revenue that they are reversing that. If you strip out all of the Part B revenue with PACs from our portfolio, they're still north of 2x coverage. So their CFO, you saw the news yesterday, was let go or resigned.

The silver lining, if any, on that news is that maybe that means that, that clears the path for an auditor to sign off on an audit. Pretty difficult, I think, to do that while a CFO is under investigation. So hopefully, they'll be able to give us some news and give you all news around their KPIs and their timing on filing. But from what we can see, they continue to deliver good care, take good care of these facilities, and they're performing very well.

Great. And to wrap it up, we have 3 rapid fire questions. So...

Okay. As you can tell, it's hard for me to be rapid fire.

When the Fed starts to cut, do you expect borrowing rates for long-term debt to decline, stay flat or potentially rise? This is in context of like the 10-year, obviously.

I don't know what do you think?

This is you -- on you.

I don't know.

Okay. No worries. Last year, the majority of companies stated that they are ramping up spending on AI initiatives. How would you characterize your plans over the next year, higher, flat or lower?

Higher.

And do you believe same-store NOI for your sector will be higher, lower or the same next year?

Higher.

Wonderful. Well, thank you so much for joining us.

Thank you.

Thank you.