The Ensign Group (Nasdaq: ENSG) announced today it will separate its health care business and real estate business by forming a real estate investment trust spinoff that will leave the former entity as two publicly held companies.
Ensign, a national provider of assisted living, skilled nursing, rehab, home health, hospice and other care services, says the strategic separation will leave The Ensign Group, Inc. as the operations entity, and will create CareTrust REIT to own, acquire and lease real estate services throughout the health care business.
At the time the spinoff takes place, CareTrust will hold Ensign’s property and will operate three independent living facilities. Following the spinoff, all of the other properties will be leased back to Ensign on a triple-net lease basis. The company’s portfolio consists of 119 skilled nursing, assisted living, and independent living properties, 94 of which are to be leased from CareTrust.
Company executives said they are working toward stability of the two platforms with growth potential within each one including expected 1.85x initial rent coverage ratio and $59 million in annual rental revenue under CareTrust.
“Our first and most pressing priority has been to ensure that the separation would result in two very healthy platforms for growth,” said Ensign’s President and Chief Executive Officer, Christopher Christensen, who will serve as a CareTrust director during the transition. “This priority has been our guiding principle from the beginning.”
Ensign Executive vice President and Secretary Gregory Stapley will serve as president and CEO of the new CareTrust REIT, which has applied be listed on the NASDAQ exchange under the symbol CTRE.
The new REIT will seek acquisitions of senior housing properties including skilled nursing, assisted living and independent living, as well as other health care properties such as medical office buildings, long term care acute hospitals and inpatient rehabilitation facilities not limited to the current geographic footprint in which Ensign operates.
“Although CareTrust will be independent and will make diversification of its tenant base a top priority, at the outset our biggest advantage will be our relationship with Ensign,” Stapley said.
Ensign currently has 10,000 operational beds and units, according to its most recent filing with the Securities and Exchange commission.
Written by Elizabeth Ecker