32% below its net asset value, the shares of this Reit are on my passive income radar

Share Care reit (LSE: CRT) They are currently quoted 32% below the company's net (NAV) value. And the action has a dividend yield of 8.5% for passive income investors at this time.

It is Real Estate Investment Trust (Reit) in a sector that I think seems very promising and there is much to like the underlying business. As a result, I am adding it to my list of actions to monitor.

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Care houses

Despite a brief interruption during pandemic, people in the United Kingdom tend to live longer. As a result, I hope that the long -term demand for care homes is strong.

Care Reit is not the largest operator in the sector, that is Target Healthcare Reit. But it has a 140 -properties portfolio (mostly care homes) that rents suppliers.

Most of its tenants are local authorities, representing about 58% of their income. The rest is a mixture of private organizations (31%) and NHS (11%).

All this seems encouraging and in its most recent update, Care Reit declared that his NAV was 118.74p per action. Then, with the negotiation of actions to around 81p, I am interested in a closer look.

Key metric

There are several key metrics that I look at in a reit. On the operational side, I am first interested in the company's ability to attract tenants and raise rental income from them.

The care level of Care Reit is around 89%. That is good, instead of great, but what really highlights me is the amount of time left in its current leases.

The average lease contract expires within 20 years, which is exceptionally long. And with rental increases linked to inflation, this could be a sign of a long -term passive income opportunity.

The other metric that I look at is the rental collection. While the budgets of the local authorities may be under pressure, Reit attention regularly collects 100% of its expected rent, it cannot say more fair than that.

Financing

Reit has to distribute 90% of its rental income to investors as dividends. This makes them interesting passive income opportunities, but you can also create complications.

Not being able to retain profits means that Reit often have a lot of debt in their balances. And investors should pay attention to how the company achieves this.

At this time, Reit attention has an average debt cost of around 4.68%. And much of that does not expire until 2035, which gives the company a lot of time to plan and prepare.

However, about 30%will mature in 2026. Therefore, if the rates do not fall, the company could be paying more in interest costs, which could reduce profits and dividends.

In my radar

The question for investors is whether a 32% discount for NAV and a dividend yield of 8.5% is sufficient to compensate for this risk. I think it could be.

If the Reit attention pays its 2026 debt issuing capital, that would increase the count of shares by 22%. On equal terms, that would reduce the dividend yield to 6.8%.

While the debt problem should not be ruled out, I also see the actions in Reit attention as a good value at this time. Go to my list of actions to monitor the next time I seek to invest.