CareTrust REIT, Inc. (NYSE:CTRE), a real estate investment trust specializing in healthcare facilities, announced today that it has entered into a significant equity distribution agreement potentially worth up to $750 million. The deal, dated Thursday, involves a consortium of financial institutions, including BMO Capital Markets Corp., BofA Securities, Inc., and Wells Fargo (NYSE:WFC) Securities, LLC, among others, acting as sales agents and forward purchasers.
Under the terms of the agreement, CareTrust REIT may issue and sell shares of its common stock through these agents at market prices or in negotiated transactions. The agreement also allows for forward sale agreements, where the agents will sell shares on behalf of forward purchasers.
These transactions are part of what is known as an "at-the-market" offering, which will be conducted on the New York Stock Exchange or other existing trading markets for the company's common stock.
The sales agents will receive a commission not exceeding 2.0% of the sale price of the common stock sold. In addition, CareTrust REIT has the option to sell shares directly to the sales agents as principals at a negotiated price through separate terms agreements.
The new equity distribution agreement follows the termination of a prior program from May 6, 2024, under which approximately $3 million of common stock remained unsold. The proceeds from the sales under this new program will be used by CareTrust REIT for general corporate purposes, including potential acquisitions, debt repayment, and working capital. The funds may also be temporarily placed in short-term interest-bearing investments.
CareTrust REIT will not immediately receive proceeds from sales made through forward sale agreements but expects to settle these agreements by delivering common stock shares, receiving proceeds on the settlement dates. The company has the discretion to settle these agreements either in cash, shares, or a combination thereof, depending on market conditions and other factors.
The shares will be issued pursuant to CareTrust REIT's shelf registration statement filed with the SEC on February 24, 2023, and the prospectus supplement filed on Thursday. Legal opinion regarding the validity of the shares sold under this program has been provided by DLA Piper LLP (US).
In other recent news, CareTrust REIT has been making notable strides in its financial performance. The company's second-quarter report for 2024 showed a significant increase in capital deployment, exceeding initial expectations.
This proactive approach led to a positive revision of estimates by RBC Capital Markets, which in turn, raised its price target for CareTrust REIT from $27.00 to $31.00, maintaining an Outperform rating.
CareTrust REIT's Q2 performance was marked by record investments totaling approximately $765 million, yielding an average of 9.5%. This resulted in an 84% surge in the company's market capitalization, reaching an enterprise value of $4 billion for the first time.
In response to these developments, the company increased its full-year guidance, projecting normalized funds from operations (FFO) per share to be between $1.46 and $1.48, and funds available for distribution (FAD) per share to be between $1.50 and $1.52.
Baird also revised its outlook on CareTrust REIT, raising its price target to $28.00 from $26.00 while maintaining an Outperform rating. This decision followed a detailed evaluation of the company's financial projections and acquisition funding strategies.
Baird projects that CareTrust REIT's Normalized Funds Available for Distribution (FAD) per share will reach $1.52 for 2024, with subsequent increases to $1.70 in 2025 and $1.92 by 2026. These recent developments underline the company's strong performance and positive outlook.
InvestingPro Insights
In light of CareTrust REIT's recent equity distribution agreement, current and potential investors may find it beneficial to consider the latest financial metrics and analyst insights from InvestingPro. With a market capitalization of $4.57 billion, CareTrust REIT exhibits a strong presence in the healthcare facility real estate investment sector. The company's Price-to-Earnings (P/E) ratio stands at 50.32, which reflects investor expectations of future earnings growth, supported by a PEG ratio of 0.88 indicating potential value relative to its earnings growth.
InvestingPro Tips highlight that CareTrust REIT has a history of raising its dividend for 8 consecutive years, suggesting a commitment to returning value to shareholders. Additionally, analysts expect both net income and sales growth this year, which could indicate a positive outlook for the company's financial health. For those looking to delve deeper into CareTrust REIT's performance and future prospects, InvestingPro offers 16 additional tips that provide a comprehensive analysis of the company's financial and market position.
With a strong gross profit margin of 95.8% over the last twelve months, CareTrust REIT demonstrates its ability to efficiently manage its operating costs. The company's revenue growth of 21.2% over the same period suggests a solid increase in its business activities. These figures, alongside a dividend yield of 3.9%, make CareTrust REIT an interesting consideration for investors seeking both growth and income. For further insights, including analyst revisions and stock volatility data, interested parties are encouraged to explore the full suite of InvestingPro Tips.
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