M&A Spike Continues With £450M Care REIT Takeover

One of the largest owners of care homes in the UK will be taken private by a U.S. senior living specialist as smaller listed UK property companies continue to attract takeover interest.

Care REIT said Tuesday that it had accepted an offer from U.S.-listed CareTrust REIT to buy the company for £450M.

The announcement came the day after another listed real estate company, Assura, said that it was close to accepting a £1.6B takeover offer from U.S. private equity firm KKR.

Blackstone is also bidding to take Warehouse REIT private for about £500M.

In each situation, the metrics are essentially the same. The bidder is offering a premium to the share price at which the company is trading but a discount to the value of the company’s property portfolio.

Bidders are betting that stock market investors have underpriced the value of the assets owned by these companies. Real estate has been battered by the rise in interest rates over the past two years, but the value of shares in listed real estate companies has fallen further than the value of their assets.

In the case of Care REIT, CareTrust offered 108p per share for the company. That is a premium of 33% to its share price before the offer was announced but a discount of 9% to the net value of its assets.

Care REIT owns a portfolio of 137 care homes across the UK comprising 7,700 beds, which are leased to 15 tenants. The portfolio is valued at £679M and produces £51M a year in rent. The company has £193M of debt, and the portfolio has average lease lengths of 20.5 years.

CareTrust is listed on the New York Stock Exchange and has a market capitalisation of $4.9B. Its portfolio covers 34 states in the U.S., with more than 400 net-leased properties totalling approximately 43,000 operating beds leased to 34 operators.

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