Shares in Care Reit (LSE: CRT) currently trade 32% below the company’s net assets (NAV). And the shares currently have 8.5% dividend profitability for passive income investors.

It is trust in real estate investment (REIT) in the sector, which in my opinion looks very promising and there is a lot to like in the company underlying the company. As a result, I will add it to my stock list to have an eye.

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Nursing homes

Despite a brief break during a pandemic, people in Great Britain usually live longer. As a result, I expect that the long -term demand for nursing homes will be robust.

Care Reit is not the largest operator in the sector – this is Target Healthcare Reit. But he owns the 140 real estate portfolio (mainly nursing homes), which he rents to suppliers.

Most of his tenants are local authorities, which constitute about 58% of its income. The rest is a mix of private organizations (31%) and NHS (11%).

All this looks encouraging, and in the latest update, Care Reit said that its NAV was 118.74 pens per share. So, with trade in shares at the level of about 81 pence, I am interested in a closer look.

Key indicators

There are several key indicators that I look at at REIT. On the operational side, I am primarily interested in the company’s ability to attract tenants and collect revenues from them.

The Tard Reit level level is about 89%. It’s good, not great, but what really distinguishes me is the amount of time left on current lease agreements.

The average lease expires in 20 years, which is extremely long. With the boost in the rent related to inflation, this may be a sign of long -term passive income.

The second record I look at is collecting rent. While the budgets of local authorities can be under pressure, Care Reit regularly collects 100% of the expected rent – he cannot say more just.

Financing

Reit must divide 90% of income from renting investors as dividends. This makes them intriguing passive possibilities, but it can also cause complications.

The failure to maintain earnings means that REIT often has a lot of debt in their balances. And investors must pay attention to how the company manages it.

At the moment, Care Reit has an average debt cost of about 4.68%. And many of them only expire in 2035, giving the company a lot of time for planning and preparation.

However, about 30%are able to mature in 2026. So if the rates do not fall, the company may pay more interest costs, which can reduce the profits – and dividends.

On my radar

The question for investors is whether a 32% discount on NAV and 8.5% dividend performance is enough to balance this risk. I think it could be.

If Care Reit repays its debt in 2026, spending their own capital, it will boost the number of shares by 22%. Other things are equal, which would reduce the dividend to 6.8%.

Although the problem of debt should not be discounted, at the moment I perceive Care Reit shares as good value. He goes on my list of stocks to keep an eye on the next time I want to invest.