CareTrust REIT, Inc. (NYSE:CTRE) Q3 2025 Earnings Call Transcript

CareTrust REIT, Inc. (NYSE:CTRE) Q3 2025 Earnings Call Transcript November 6, 2025

Operator: 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.

Lauren Beale: 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 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; 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?

David Sedgwick: Well, thank you, Lauren, and good morning, everybody. Thank you for joining us. This feels a little like Deja vu. 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. At the time, I said, if you liked our 2024, you’re going to love 2025. Well, this time around, I’ll say it again. If you liked 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 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 Care REIT’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, even eclipsing last year’s massive year of $1.5 billion. And now with a pipeline of $600 million that seems to reload 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 one 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 one 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 and next, we may not have expended the significant resources and brain power on the U.K. or to prepare for SHOP. Instead, our sights 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’d love ’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. 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?

James Callister: 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 in 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 leased 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. skilled 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 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. 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.

William Wagner: Thank you, James. It’s been a privilege for me to serve our colleagues, Board and shareholders since CareTrust’s 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 work 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.

Derek Bunker: 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 with 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 replenished the pipe, all while maintaining net debt-to-EBITDA around 1.1x, we’re excited about our ability to continue growing as we prepare to enter 2026. With that said, we’ll give full year ’26 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.

David Sedgwick: Great. Thanks, Derek. Well, we hope you have found this report helpful and happy to take your questions now.

Q&A Session

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

Jonathan Hughes: 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 seniors housing. And are you seeing those compress as the outlook continues to improve and…

James Callister: Jonathan, sure. I think across the 3 spectrums, I mean, I don’t think there’s going to be too big of a surprise. I think across SNFs, you’re going to see typically 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, there’s really a range, Jonathan, 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 a year 1 yield of 7% or higher.

Jonathan Hughes: Okay. And are there any loans or preferred investments in the pipeline? Or is it all…

James Callister: There’s a couple of strategic loans or — preferred, but not anything meaningful really, Jonathan.

Jonathan Hughes: Okay. And then just one 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 forward component for equity raises. Are there any plans to utilize that in the future and try and minimize that duration gap?

Derek Bunker: 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 be closing at a pretty brisk pace and replenished at an equally brisk pace. And so it hasn’t made a ton of sense to kind of go down that route yet, but we’ll keep that option open for the future.

Jonathan Hughes: Thank you, Bill. I want to say I’ve enjoyed the time spent together in the past 10 years. Congrats on a great career and enjoy your free time and Derek, congrats…

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

Michael Carroll: 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? I mean 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?

David Sedgwick: 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 will probably look to add, I don’t know, 2 or 3 more people potentially throughout next year related to SHOP.

Michael Carroll: 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 that 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?

David Sedgwick: 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 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.

Michael Carroll: And Bill, — congrats on your retirement.

Operator: Your next question comes from the line of Farrell Granath with Bank of America.

Farrell Granath: 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 that U.S. skilled nursing was your bread and butter, but it seemed like there have 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?

James Callister: Yes. Farrell, it’s James. I think I think you have to look back a little bit in terms of when we acquired Care REIT, they’ve really been at 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 recently announced very large transactions in the U.K. I think there’s definitely significant activity there, and we’ll continue to — we think we remain competitive and 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.

Farrell Granath: Okay. And I was just wanted to touch on how you had mentioned the investment into a data science platform. I was 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?

David Sedgwick: 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.

Farrell Granath: Congratulations to both Bill and Derek.

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

Juan Sanabria: I guess just for the team as a whole, just curious of 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 on how big the G&A cost side could grow next year would be appreciated.

David Sedgwick: 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 pickup there counter 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 STI and then — in our favor, just probably looking kind of on track to what Q3 and Q4 are looking like.

Juan Sanabria: 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 lack thereof to do something similar and pursue skilled nursing, [ OpCo ] or RIDEA investments.

David Sedgwick: Yes, it is interesting. I think that 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.

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

Austin Wurschmidt: 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 and close, should we assume that those have been struck with kind of a future pipeline in mind that’s going to be sort of an expansive relationship? And then at this point in time, is there any specific number of operators that you’re initially targeting?

David Sedgwick: So 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.

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

David Sedgwick: Yes. Right now, we’re focused on the U.S. But again, like I said in 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.

Austin Wurschmidt: Then just one last one 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 and how that coverage level compares to where it stood previously and just overall kind of why that made sense?

David Sedgwick: 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.

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

John Pawlowski: 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. So can you remind me what specifically has driven potentially soft revenue or outsized expenses since you closed the portfolio to drive that tick down in coverage?

David Sedgwick: No, 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.

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

Derek Bunker: Yes. I mean, look, there’s a lot of puts and takes. We’ve grown a tremendous amount. We’re building out SHOP. And so each quarter, as we assess our 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 years as well as the pipeline and really what’s kind of funneling into the pipeline. The one 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 is 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.

Operator: Your next question comes from the line of John Kilichowski with Wells Fargo.

John Kilichowski: Fantastic. Dave, in the press release, you made the comment that the pipeline is swelling. 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 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?

David Sedgwick: 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 one 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 fuel and there’s plenty of activity in the funnel of deal flow above of our stated pipe.

John Kilichowski: 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 then what are your expectations for stabilized occupancy and margins on these assets?

David Sedgwick: 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 as you look over the course of a decade that realistically, the demographics are going to be really pushing that up.

John Kilichowski: Got it. And Bill, congrats again on a great career and congrats, Derek, on the new role.

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

David Sedgwick: Rich, we don’t hear you.

Richard Anderson: Can you hear me now — okay. Great. Sorry. I get this right eventually. And congrats to you, Dave, for the CFO upgrade. So I want to — of course, a joke, Bill, good luck to you. The decision to move on to SHOP, not worst kept secret or 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 2, 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 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?

David Sedgwick: That’s a great question. And it 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, like 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. wouldn’t have been 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 an area that we feel like would be sticking to our knitting and then Shop is a natural addition, and it’s worth the investment.

Richard Anderson: 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?

David Sedgwick: 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 are turnaround artists. And not everybody is a good match for every geography. So really, the — 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 playing field there. We can do stabilize, we can do turnaround. I think it would probably — but having said all that, I think a real tough turnaround in a tough market that requires a ton of CapEx is probably not going to be high on our list.

Richard Anderson: Okay. Fair enough. And then just quickly, the obligatory [ PAC ] question. They got their forbearance extension to November 30. What are your thoughts around a possible delisting there, if that’s an outcome? Any perspective that you could provide at all on [ PACs, ] assuming 30th comes and goes and we still have nothing. I’m just curious where you stand on that.

David Sedgwick: Yes. We really don’t have any update or comment on PAC until they report.

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

Wesley Golladay: 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 IL? Do you have a preference for campuses? What are you looking for there?

David Sedgwick: We’re omnivorous.

Wesley Golladay: 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?

David Sedgwick: 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.

Wesley Golladay: Okay. Congratulations, Bill and Derek.

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

David Sedgwick: 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.

Operator: Thank you. This concludes today’s call. Thank you for attending. You may now disconnect.