Slides
Page 1
Investor Presentation CareTrust Recommended Cash Acquisition of Care REIT March 202 5
Page 2
Disclaimers 2 This investor presentation contains certain statements which are, or may be deemed to be, forward-looking statements (including for the purposes of the US Private Securities Litigation Reform Act of 1995), beliefs or opinions. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "envisage", "estimate", "intend", "plan", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", or other words of similar meaning. Such forward looking statements include, but are not limited to, statements regarding the following: industry and demographic conditions, the care home investment and financing environment, Care REIT’s future growth prospects, the benefits of the acquisition, and the ability of CareTrust to effectively combine the operations of Care REIT with its own operations. These statements are based on assumptions and assessments made by CareTrust in light of its experience and perception of historical trends, current conditions, future developments and other factors they believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this presentation could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given by CareTrust that such expectations will prove to have been correct and you are therefore cautioned not to place undue reliance on these forward- looking statements which speak only as at the date of this presentation. CareTrust expressly disclaims any obligation to update or correct the information contained in this press release (whether as a result of new information, future events or otherwise), except as required by applicable law or regulation. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements is the satisfaction of the conditions and the risks discussed in CareTrust’s filings with the US Securities and Exchange Commission, which can be accessed at https://www.sec.gov/edgar/browse/?cik=1590717, (including in CareTrust’s Annual Report on Form 10-K for the year ended December 31, 2024, including in the section entitled “Risk Factors” in Item 1A of such reports, as such risk factors may be amended, supplemented or superseded from time to time by other reports CareTrust files with the SEC), as well as additional factors such as (i) changes in global, political, economic, business, competitive, market and regulatory forces, (ii) future currency exchange and interest rates, (iii) the ability of CareTrust to integrate Care REIT’s operations and to achieve the benefits expected to result from the acquisition, (iv) future business combinations or dispositions, (v) the ability and willingness of tenants to meet and/or perform their obligations under leases, including without limitation, their respective obligations to indemnify, defend and hold CareTrust or Care REIT harmless from and against various claims, litigation and liabilities; (vi) the ability of tenantsto comply with applicable laws, rules and regulations in the operation of the properties leased to them, (vii) the ability of CareTrust and its affiliates (including, after the acquisition, Care REIT) to generate sufficient cash flows to service outstanding indebtedness, CareTrust's and, after the acquisition, Care REIT's access to debt and equity capital markets, (viii) CareTrust’s ability to retain key management personnel, (ix) the risk that CareTrust may have to incur impairment charges related to its assets held for sale if it is unable to sell such assets at theprices it expects, (x) changes in tax laws and tax rates, (xi) the impact of healthcare reform legislation, and (xii) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments. Such forward-looking statements should therefore be construed in the light of such factors. Neither CareTrust nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. This investor presentation contains certain forward-looking non-GAAP financial information relating to CareTrust REIT including Normalized FFO per share, Normalized FAD per share and Net Debt / EBITDA. Explanatory footnotes explaining this non-GAAP information are included in this investor presentation. Reconciliations of these non-GAAP measures to the comparable GAAP financial measures is available on our website. See the Q4-24 Financial Supplement under “Financials and Filings – Quarterly Results” on the Investors section of our website at investor.caretrustreit.com. In this presentation, the timing and amount of the adjustments to certain forward-looking non-GAAP financial measures, including the pro forma non-GAAP measures, presented herein cannot be allocated or quantified with certainty and, accordingly, a reconciliation to the comparable GAAP financial measures is not available without unreasonable effort. Non-GAAP financial information does not represent financial performance under GAAP and should not be considered in isolation, as a measure of liquidity, as an alternative to net income, or as an indicator of any other performance measure determined in accordance with GAAP. You should not rely on non-GAAP financial information as a substitute for GAAP financial information and should recognize that non-GAAP information presented herein may not compare to similarly-termed non-GAAP information of other companies (i.e., because they do not use the same definitions for determining any such non-GAAP information). As used in this investor presentation, unless the context requires otherwise, references to "CTRE," "CareTrust," "CareTrust REIT" or the "Company" refer to CareTrust REIT, Inc. and its consolidated subsidiaries. GAAP refers to generally accepted accounting principles in the United States of America.
Page 3
I. Transaction Overview
Page 4
* Note: FYE-Dec; FX: 0.7754 USD / GBP (10-Mar-25) (1) Includes three care homes to be disposed in 2025 4 Transaction Overview Transaction Overview ● The Boards of CareTrust and Care REIT have reached agreement on the terms of a recommended cash acquisition of Care REIT plc (LSE:CRT), a UK-listed REIT with 137 care homes(1) across England, Scotland and Northern Ireland ● The transaction is subject to Care REIT shareholder approval Purchase Price ● Offer price of $1.39 / £1.08 per Care REIT share, paid in cash, represents: ○ An equity value of $577m / £448m ○ An enterprise value of approximately $817m / £634m based on Care REIT’s Q2-24 net debt of $240m / £186m ○ An estimated accretion in Year 1 of ~6% and ~3% on a normalized FFO and normalized FAD basis, respectively Next Steps ● An offer document ("Scheme Document") will be circulated to Care REIT shareholders within 28 days following the announcement of a firm intention to make an offer (referred to as a "Rule 2.7 announcement") ● No later than 3 weeks following circulation of the Scheme Document, a shareholder meeting will be called to allow shareholders to vote to approve the transaction ● Closing expected in the second quarter of 2025
Page 5
22% 20% 14% 13% 5% 5% 5% 16% * Source: Company information Note: FYE-Dec; Data as of Q3-24; FX: 0.7754 USD / GBP (10-Mar-25); Includes completed homes only (1) Represents Care REIT’s tenants' EBITDARM for a twelve month period ended September 30, 2024 divided by total annual rent during such period; See “Glossary” for additional information (2) Minster and Croftwood are part of Minster Care Group (3) Maria Mallaband Care Group 5 Care REIT Represents a Strong and Diversified Entry Point Into the UK Market Contracted Rent ~$66m Homes 137 Operating Beds ~7,500 Avg. # of Beds per Home ~56 Average Occupancy 89% Operators 15 EBITDARM Coverage(1) 2.2x Geographic Presence by Number of Homes <5 5-9 10-14 15-19 20+ Northern Ireland 5 Scotland 32 North East 12 Yorkshire & The Humber 11 East Midlands 8 East of England 8 North West 33 % Contracted Rent to Care REIT Holmes Minster(2) Welford Croftwood(2) Careport Others MMCG(3) Prestige
Page 6
II. Rationale and Key Benefits of the Transaction
Page 7
7 Rationale and Key Benefits of the Transaction 1 Attractive underlying UK care home market supported by structural tailwinds Platform with a strong track record of growth, with potential for future development through both deployment into the portfolio as well as further acquisitions2 High quality portfolio of triple net leases featuring long remaining lease terms and inflation-based escalators 3 Robust operational metrics, including outstanding rent coverage and strong occupancy4 Enhanced portfolio diversification of asset class, geography, and operators 5 Accretive acquisition increases shareholders’ returns6
Page 8
* Source: OECD, LaingBuisson, Connell Consulting 8 Care REIT Is Well-Positioned to Benefit From Key UK Elderly Care Home Market Trends (1/2) Demand Supply ● Stagnant growth in bed capacity has historically resulted from closures prompted by the removal of older/unfit-for-purpose stock and fewer new care homes opened due to significant construction cost barriers ● The market is undersupplied and a net increase of 40,000+ additional care home beds would be required by 2030 to meet projected demand ● Rising demand for care homes driven by an aging population and an increasing prevalence of dementia and other care needs Total UK Population(m) 52.9 54.7 54.2 9.4 11.3 12.9 1.4 1.8 2.1 2012 2023 2030 85 and aboveBelow 65 65 to 84 UK Care Home Capacity –Beds 300 400 500 600 700 800 900 1000 400 420 440 460 480 500 520 540 Beds per 100k # of beds (‘000s) Beds per 100kBeds 1
Page 9
* Source: LaingBuisson 9 Care REIT Is Well-Positioned to Benefit From Key UK Elderly Care Home Market Trends (2/2) Market Segment Funding ● Care home revenue is funded by a mix of public and private sources. Both private and public rates have consistently trended upward, with private funding outpacing public ● The UK care home market remains largely fragmented with a high number of small and mid-sized operators where the top 10 operators hold less than 20% of the market UK Care Home Market Fragmentation(%) UK Care Home Funding by Payer Source (£bn) 0% 20% 40% 60% 80% 100% Top 10 Small (1-2 homes)Mid-market (3-80 homes) Public funding Private funding 1 0 5 10 15 20 25
Page 10
The UK Elderly Care Home Market Presents Ample Opportunities for Future Growth Source: LaingBuisson, Cushman & Wakefield (1) Other includes WholeCo, sale and leaseback, and JV transactions 1 10 UK Elderly Care Home Market (£bn) Transaction Volume by Funding Source (£bn)Transaction Volume by Deal Type (£bn) 2.6 2.5 2.6 2.6 2.4 2.4 2.1 2.1 1.9 1.7 1.7 1.7 1.8 1.8 1.7 2.0 2.2 2.4 1.5 1.5 1.6 1.6 1.7 1.8 1.9 1.9 1.9 2.0 2.1 2.2 2.2 2.3 2.1 2.2 2.6 2.8 8.3 8.8 9.1 9.5 9.8 10.5 11.2 11.6 12.3 12.6 13.1 13.5 14.0 14.6 13.8 14.8 17.3 19.212.4 12.8 13.2 13.7 13.9 14.7 15.2 15.7 16.1 16.3 16.9 17.4 18.1 18.7 17.6 19.0 22.2 24.3 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Public sector Private sector (not-for-profit) Private sector (for-profit) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2019 2020 2021 2022 2023 2024 UK US Other 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2019 2020 2021 2022 2023 2024 PropCo OpCo Other(1)
Page 11
Source: Company information Note: FYE-Dec; FX: 0.7754 USD / GBP (10-Mar-25) (1) ‘Latest’ available data corresponds to Q3-24 (2) ‘Latest’ available data corresponds to Q2-24 (3) ‘Latest’ available data corresponds to Q3-24; Property value independently valued by Cushman & Wakefield in accordance with the RICS Valuation - Professional Standard (the "Red Book") 11 Care REIT Has Consistently Grown its Portfolio and Rental Income Since Inception # of Homes(1) Rent(2) (£m) Property Value(3) (£m) # of Beds(1) Rent(2) ($m) Property Value(3) ($m)156 224 319 419 497 569 651 672 57 72 86 108 124 135 140 137 FY17 FY18 FY19 FY20 FY21 FY22 FY23 LatestCAGR 9 14 19 26 30 36 43 46 9 17 24 31 36 42 50 53 Cash Rent Gross Rent 13.9% FY17 FY18 FY19 FY20 FY21 FY22 FY23 LatestCAGR 2,527 3,533 4,274 5,924 6,720 6,842 7,721 7,618 27.5% 30.7% 24.1% 17.8% 27.5% 30.7% 24.1% 2 12 18 25 33 39 46 55 59 12 22 31 40 47 54 64 69 Cash Rent Gross Rent 201 289 411 540 641 734 840 867
Page 12
New Property Investments Have Been the Key Driver for Growth, Coupled With Accretive Capital Improvement Projects Source: Company information Note: FYE-Dec; FX: 0.7754 USD / GBP (10-Mar-25) (1) Purchase of investment properties refer to acquisition of new assets; Capital improvements refer to development on existi ng assets Property Investment(1) ($m) FY17 FY18 FY19 FY20 FY21 FY22 FY23 ● Acquired 12 homes in Scotland from Kingdom Homes ○ The home operations were transferred to Holmes, an existing tenant ○ Investment of ~$48.4m with a potential deferred payment of up to ~$3.2m subject to future performance of the care homes 2021 ● Acquired 3 homes in Scotland with Welford, an existing tenant ○ Investment of ~$32.2m including transaction costs ● Acquired 2 homes in England from a new tenant, Belmont, via sale and leaseback ○ Investment of ~$18.1m including transaction costs 2022 ● Acquired 6 homes in England from Morris Care ○ The home operations were transferred to Welford, an existing tenant ○ Investment of ~$72.2m, paid in cash (80%) and new issued shares (20%) 2023 Select Investments 2 12 196.2 68.8 90.2 110.9 34.7 89.3 118.2 0.7 6.0 9.3 2.1 1.2 15.3 6.1 196.9 74.8 99.5 113.0 35.9 104.5 124.3 New property investments Capital improvements
Page 13
All Care REIT’s Leases Are Triple Net With Annual Inflation-Based Escalators and Long Remaining Terms Source: Company information Note: FYE-Dec (1) As of Dec-24; RPI ("Retail Price Index") is an alternative measure of inflation to the traditional CPI (“Consumer Price Inde x”). It tends to track higher than the CPI as it includes costs associated with home ownership (2) Rental growth on the portfolio of properties that have been owned and operational for two full reporting cycles, including increases in rent from annual escalators and rentalized capital expenditure Attractive Inflation-Based Escalators(1) Weighted Average Remaining Lease Term (years) 99% 1% Floor 2% / cap 4% Floor 1% / cap 5% Floor 0% / No cap RPI-Based Escalator CPI-Based Escalator 83% 15% 1% Same Store Annual Rental Growth(2) 19.5 20.0 19.5 19.2 19.9 19.7 21.2 20.8 20.5 20.1 Q2-20 Q4-20 Q2-21 Q4-21 Q2-22 Q4-22 Q2-23 Q4-23 Q2-24 Q4-24 5.7% 5.1% 4.7% 2021 2022 2023 3 13
Page 14
High Quality Portfolio With Outstanding Rent Coverage and Strong Occupancy Source: Company information Note: FYE-Dec (1) Represents Care REIT’s tenants' EBITDARM for a twelve month period ended as of the end of the specified period divided by total annual rent during such period; See “Glossary” for additional information (2) Q3-24 EBITDARM Coverage(1) Occupancy 1.9x 1.8x 1.8x 2.0x 2.2x 2.2x Q2-22 Q4-22 Q2-23 Q4-23 Q2-24 Q4-24 85.4% 86.6% 88.3% 88.2% 88.9% 89.2% Q2-22 Q4-22 Q2-23 Q4-23 Q2-24 Q4-24 Average Weekly Fee Growth (yoy) Funding Breakdown by Payer Source(2) 9.5% 12.6% 15.0% 13.0% 8.0% 6.5% Q2-22 Q4-22 Q2-23 Q4-23 Q2-24 Q4-24 69% 31% Public Private 4 14
Page 15
Source: Company information Note: FYE-Dec; Analysis based on Q4-24 result for CareTrust, Q3-24 result for Care REIT converted based on the FX rate of 0.7754 USD / GBP (10-Mar-25) (1) Amounts exclude 10 CareTrust properties classified as held for sale as of 31-Dec-24 and one facility which is non-operational for CareTrust (2) Amounts include properties securing CareTrust’s financing receivable and real estate related investments and exclude 10 properties classified as held for sale as of 31 -Dec-24 and one facility which is non-operational for CareTrust Current Portfolio Pro Forma Portfolio The Ensign Group PACS Group Priority Management GroupLinks Healthcare Group Cascadia Covenant Care Eduro Healthcare Champion Care Others California UK Texas Tennessee North Carolina Illinois Louisiana Idaho Oregon Washington OthersCalifornia Texas Tennessee North Carolina Illinois Louisiana Idaho Oregon Washington Arizona Others Rental / Interest Income by Location(2) Rental Income by Operator(1) 17% 28% 14% 12%7% 5% 5% 4% 3% 3% 3% 22% 13% 12% 6%5% 5% 5% 4% 4% 4% 21% The Ensign Group PACS Group Links Healthcare GroupMinster Cascadia Welford Covenant Care Holmes Others 22% 11% 9% 5% 4%4%4% 4% 4% 3% 29% 18% 16% 11% 10%5% 4% 4% 4% 3% 3% 21% Enhanced Asset and Operator Diversification With Expanded Footprint in the Attractive UK Market (1/2) 5 15 Bayshire Senior Communities The Pennant Group Priority Management Group Bayshire Senior Communities
Page 16
Skilled Nursing Seniors Housing Multi-Service Campus Skilled Nursing Seniors Housing Multi-Service Campus Source: Company information Note: FYE-Dec; Analysis based on Q4-24 result for CareTrust, Q3-24 result for Care REIT converted based on the FX rate of 0.7754 USD / GBP (10-Mar-25) (1) Amounts exclude 10 CareTrust properties classified as held for sale as of 31-Dec-24 and one facility which is non-operational for CareTrust Current Portfolio Pro Forma Portfolio By Rental Income(1) By # of Facilities(1) 12% 77% 78% Enhanced Asset and Operator Diversification With Expanded Footprint in the Attractive UK Market (2/2) 5 16 11% 16% 6% Skilled Nursing Seniors Housing Multi-Service Campus UK Care Homes 49% 36% 8% 7% Skilled Nursing Seniors Housing Multi-Service Campus UK Care Homes 63%19% 13% 5%
Page 17
Normalized FAD / Share ($) – FY25(1) Net Debt / EBITDA – FY24(1) Accretive Acquisition Increases Shareholders’ Return 17 Source: Company information Note: FYE-Dec (1) Analysis reflects a range of scenarios with varying mixes of debt and equity utilized to satisfy CareTrust's funding requirements. CareTrust's standalone ranges correspond to the guidance ranges provided in its Q4-24 Financial Supplement; Pro forma metrics are based on CareTrust's estimates (2) Normalized FFO and Normalized FFO guidance reflect forward-looking non-GAAP financial measures. See Q4-24 Financial Supplement under "Financials and Filings -- Quarterly Results" for reconciliations of CareTrust's 2025 Guidance for Normalized FFO and Normalized FAD to the GAAP net income attributable to CareTrust REIT, Inc. (3) Net Debt / EBITDA compares net debt as of the last day of the specified period to Annualized Normalized Run Rate EBITDA f or such period which assumes investments closed during the quarter occurred on the first day of the quarter (4) The timing and amount of the adjustments to these measures cannot be allocated or quantified with certainty and, accordin gly, a reconciliation to the comparable GAAP financial measures is not available without unreasonable effort See “Glossary” for additional information 6 Normalized FFO / Share ($) – FY25(1) ~3% accretion at midpoint (2) (2)(4) (4) (4)(3)(4) 1.68 1.73 1.72 1.87 CareTrust Pro Forma 0.5x 1.0x 2.4x CareTrust Pro Forma ~1.2x increase at midpoint ~6% accretion at midpoint 1.72 1.71 1.76 1.86 CareTrust Pro Forma
Page 18
Glossary 18 EBITDA Net income attributable to CareTrust REIT, Inc. before interest expense, income tax, depreciation and amortization and amortization of stock-based compensation.(1) EBITDARM EBITDARM refers to earnings before interest, income taxes, depreciation, amortization, rent, and management fees, and is a useful approximation for Care REIT‘’s tenants' cash earnings, which they can use to pay their rent to Care REIT. EBITDARM Coverage Care REIT calculates its portfolio EBITDARM rent coverage ratio based on the tenants' EBITDARM for a twelve month period divided by total annual rent during such period. EBITDARM and EBITDARM coverage ratio as prepared by Care REIT include adjustments determined by Care REIT, including to exclude turnaround homes and to exclude new homes in build-up. Care REIT's EBITDARM rent coverage information included herein has been provided by Care REIT, and Care REIT's methodologies for calculating this measure may not be comparable to those used by other companies, including CareTrust. Additionally, CareTrust expects that most financial statements of Care REIT's tenants are unaudited, and Care REIT has not independently verified all financial information it received from such tenants. CareTrust has not independently verified this information, but has no reason to believe such information is inaccurate in any material respect. Accordingly, although CareTrust believes that Care REIT's EBITDARM rent coverage ratio is a useful way to analyze the cash potential of its assets, readers should not place undue reliance on the accuracy of this metric. Enterprise Value Share price multiplied by the number of outstanding shares plus total outstanding debt minus cash, each as of a specified date. Normalized FAD FAD attributable to CareTrust REIT, Inc, adjusted for certain income and expense items the Company does not believe are indicative of its ongoing results, such as provision for loan losses, provision for doubtful accounts and lease restructuring, effect of the senior unsecured notes payable redemption, recovery of previously reversed rent, lease termination revenue, non-routine transaction costs, loss on extinguishment of debt, unrealized gains or losses on other real estate related investments and property operating expenses.(2) Normalized FFO FFO attributable to CareTrust REIT, Inc, adjusted for certain income and expense items the Company does not believe are indicative of its ongoing results, such as provision for loan losses, provision for doubtful accounts and lease restructuring, effect of the senior unsecured notes payable redemption, recovery of previously reversed rent, lease termination revenue, accelerated amortization of stock-based compensation, non-routine transaction costs, loss on extinguishment of debt, unrealized gains or losses on other real estate related investments and property operating expenses.(2) Notes: (1) EBITDA attributable to CareTrust REIT, Inc do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance. EBITDA attributable to CareTrust REIT, Inc do not purport to be indicative of cash available to fund future cash requirements, including the Company’s ability to fund capital expenditures or make payments on its indebtedness. Further, the Company’s computation of EBITDA attributable to CareTrust REIT, Inc may not be comparable to EBITDA reported by other REITs. (2) CareTrust REIT believes Normalized FAD attributable to CareTrust REIT, Inc, and Normalized FFO attributable to CareTrust REIT, Inc (and their related per- share amounts) are important non-GAAP supplemental measures of its operating performance. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time, even though real estate values have historically risen or fallen with market and other conditions. Moreover, by excluding items not indicative of ongoing results, Normalized FAD attributable to CareTrust REIT, Inc and Normalized FFO attributable to CareTrust REIT, Inc can facilitate meaningful comparisons of operating performance between periods and between other companies. However, Normalized FAD attributable to CareTrust REIT, Inc, and Normalized FFO attributable to CareTrust REIT, Inc (and their related per share amounts) do not represent cash flows from operations or net income attributable to shareholders as defined by GAAP and should not be considered an alternative to those measures in evaluating the Company’s liquidity or operating performance.