What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-10 compared with 2020-02-20 · 700 added, 910 removed, 726 unchanged (69% of the section changed)

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Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of CareTrust REIT Inc.

To the stockholders and the Board of Directors of CareTrust REIT Inc.

Opinion on Internal Control over Financial Reporting

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Other Information

Appointment of New President

On February 9, 2021, our board of directors appointed David Sedgwick, who has served as our Chief Operating Officer since August 2018, to serve as our President, effective immediately.

Sedgwick will continue to serve as Chief Operating Officer.

Sedgwick’s biographical information is described in our definitive proxy statement on Schedule 14A, filed with the SEC on March 20, 2020.

In connection with his appointment to President, Mr.

Sedgwick’s annual base salary has been increased t o $495,000 effective as of January 1, 2021.

There are no arrangements or understandings between Mr.

Sedgwick and any other person pursuant to which Mr.

Sedgwick was appointed as President and Chief Operating Officer and there are no transactions in which Mr.

Sedgwick has an interest that would require disclosure under Item 404(a) of Regulation S-K.

Other than as disclosed in our definitive proxy statement on Schedule 14A filed with the SEC on March 20, 2020, no family relationship exists between Mr.

Sedgwick and any director or other executive officer of the Company.

Concurrently with Mr.

Sedgwick’s appointment as President and Chief Operating Officer, Mr.

Greg Stapley relinquished the position of President.

Stapley will continue to serve as Chief Executive Officer and Chairman of the Board of Directors.

Directors, Executive Officers and Corporate Governance

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Exhibits, Financial Statements and Financial Statement Schedules

Financial Statements

(a)(1) Financial Statements

See Index to Consolidated Financial Statements on page F-1 of this report.

Financial Statement Schedules

(a)(2) Financial Statement Schedules

Schedule III:

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All other schedules have been omitted because the required information is presented in the financial statements and the related notes or because the schedules are not applicable.

(a)(3) Exhibits

Membership Interest Purchase Agreement, dated as of January 27, 2019, by and between BME Texas Holdings LLC and CTR Partnership, L.P.

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(incorporated by reference to Exhibit 4.1 to CareTrust REIT, Inc.’s Registration Statement on Form 10, filed on April 15, 2014).

Description of CareTrust REIT, Inc.’s Capital Stock

Description of CareTrust REIT, Inc.’s Capital Stock (incorporated by reference to Exhibit 4.5 to CareTrust REIT, Inc.’s Annual Report on Form 10-K, filed on February 20, 2020).

Form of Master Lease by and among certain subsidiaries of The Ensign Group, Inc.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

*101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

*101.SCH XBRL Taxonomy Extension Schema Document

*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

*101.DEF XBRL Taxonomy Extension Definition Linkbase Document

*101.LAB XBRL Taxonomy Extension Label Linkbase Document

*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

*104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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/ S / GREGORY K.

President and Chief Executive Officer

Chief Executive Officer

February 10, 2021

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/s/ GREGORY K.

Director, President and Chief Executive Officer (Principal Executive Officer)

February 20, 2020

STAPLEY Director and Chief Executive Officer (Principal Executive Officer) February 10, 2021

/s/ WILLIAM M.

Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)

February 20, 2020

/s/ DIANA LAING

February 20, 2020

/s/ SPENCER PLUMB

February 20, 2020

WAGNER Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) February 10, 2021

BARBIERI Director February 10, 2021

KLINE Director February 10, 2021

/s/ DIANA LAING Director February 10, 2021

/s/ SPENCER PLUMB Director February 10, 2021

Spencer Plumb

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Reports of Independent Registered Public Accounting Firms with respect to CareTrust REIT, Inc.

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Income Statements for the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017

Notes to Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 5

Consolidated Income Statements for the years ended December 31, 2020, 2019 and 2018 F- 6

Consolidated Statements of Equity for the years ended December 31, 2020, 2019 and 2018 F- 7

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 F- 8

Notes to Consolidated Financial Statements F- 9

Schedule III:

Real Estate Assets and Accumulated Depreciation

Mortgage Loans on Real Estate

Real Estate Assets and Accumulated Depreciation F-29

Mortgage Loans on Real Estate F-37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of CareTrust REIT, Inc.

To the stockholders and the Board of Directors of CareTrust REIT, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of CareTrust REIT, Inc.

and subsidiaries (the "Company") as of December 31, 2019, the related consolidated income statement and statements of equity and cash flows, for the year then ended, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of CareTrust REIT, Inc.

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated income statements and statements of equity and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 10, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

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These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Real Estate Investments - Refer to Notes 2 and 3 to the financial statements

Impairment of Long-Lived Assets — Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company classifies its real estate investments as held for sale when the applicable criteria have been met, which entails a formal plan to sell the properties that is expected to be completed within one year, among other criteria.

Upon designation as held for sale, the Company writes down the excess of the carrying value over the estimated fair value less costs to sell, resulting in an impairment of the real estate investments, if necessary.

Management’s estimates of fair value of the real estate investments are based on current market conditions and consider matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, comparable sales data, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers.

Impairment of real estate investments recorded during the year ended December 31, 2019 was $16.7 million .

We identified the impairment of real estate investments that relate to assets held for sale as a critical audit matter because of the significant estimates and assumptions management makes to evaluate the fair value of the assets held for sale.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimated fair value less costs to sell, specifically related to the inputs for forecasted operating

cash flows, capitalization rates, and comparable sales data, due to the sensitivity of the inputs .

At each reporting period, the Company evaluates its real estate investments to be held and used for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The judgment regarding the existence of impairment indicators, used to determine if an impairment assessment is necessary, is based on factors such as, but not limited to, market conditions, operator performance and legal structure.

If indicators of impairment are present, the Company evaluates the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying facilities.

The most significant inputs to the undiscounted cash flows include, but are not limited to, facility level financial results, a lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate.

The analysis is also significantly impacted by determining the lowest level of cash flows, which generally would be at the master lease level of cash flows.

Provisions for impairment losses related to long-lived assets are recognized when expected future undiscounted cash flows are determined to be less than the carrying values of the assets.

The impairment is measured as the excess of carrying value over fair value.

We identified the impairment of long-lived assets as a critical audit matter because of the significant estimates and assumptions

management makes to evaluate the recoverability of the long-lived assets, specifically the estimates of lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate for the applicable long lived assets or group of assets.

Auditing the assumptions used by the Company in estimating future undiscounted cash flows required a high degree of auditor judgment and an increased extent of effort, when performing audit procedures to evaluate the reasonableness of the Company’s recoverability analysis.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the inputs for forecasted operating cash flows, capitalization rates, and comparable sales data used by management to estimate fair value less costs to sell included the following, among others:

We tested the effectiveness of controls over management’s evaluation of impairment of real estate investments for assets held for sale, including those controls relating to the determination of the fair value of assets held for sale, such as controls related to management’s review of forecasted operating cash flows, selection of capitalization rates, and use of comparable sales data.

We evaluated the reasonableness of management’s inputs for forecasted operating cash flows, capitalization rates, and comparable sales data used in the Company’s fair value evaluation by:

Evaluating the source information used by management to develop and support the respective input

Independently obtaining market data to compare to that used by management

Comparing inputs used to historical transactions executed by the Company

Evaluating evidence related to prospective sales of the real estate investments for overall consistency with inputs selected by management

Inspecting minutes of the meetings of board of directors and other available information to identify any evidence that may contradict management’s assertions regarding its selected inputs.

Our audit procedures related to the significant inputs to the recoverability assessment of undiscounted cash flows included the following, among others:

• We tested the effectiveness of controls over management’s evaluation of the recoverability of long-lived assets based on undiscounted cash flows, including those over the lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate used in the assessment.

• We evaluated the reasonableness of significant assumptions in the undiscounted cash flow analyses, including estimates of the lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate, for properties with impairment indicators.

• We evaluated the reasonableness of management’s assertions regarding the intended hold period of its real estate assets, more specifically by performing the following:

◦ Engaged in discussions with management, including the Chief Executive Officer and Chief Financial Officer,

◦ Inspected Board of Directors meeting minutes regarding the assumptions utilized in the determination of intended hold periods,

◦ Performed a retrospective review around the Company’s estimates of hold periods used in previous periods in relation to real estate assets with impairment indicators, including those that were subsequently disposed of, and

◦ Evaluated audit evidence to determine whether it supported or contradicted the conclusions reached by management.

• We developed independent estimates of the lease coverage ratio and a terminal capitalization rate, focusing on property type, historical transactions of the Company and external market sources and compared our independent estimates to the estimates and assumptions used by the Company.

• In addition, we tested the mathematical accuracy of the undiscounted cash flow analyses.

• We evaluated whether the assumptions were consistent with evidence obtained in other areas of the audit.

/s/ DELOITTE & TOUCHE LLP

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of CareTrust REIT, Inc.

(the Company), as of December 31, 2018, the related consolidated income statements, statements of equity, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes and the financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2018, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with U.S.

We have audited the accompanying consolidated income statement, statement of equity and cash flows of CareTrust REIT, Inc.

(the Company) for the year ended December 31, 2018, and the related notes and the financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2018, and the consolidated results of its operations and its cash flows for the year ended December 31, 2018, in conformity with U.S.

generally accepted accounting principles.

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Accounts and other receivables, net 1,823 2,571

Prepaid expenses and other assets

Prepaid expenses and other assets, net 10,450 10,850

Deferred financing costs, net 2,042 3,023

Total assets $ 1,503,559 $ 1,518,861

Liabilities and Equity:

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Preferred stock, $ 0.01 par value;

100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2019 and December 31, 2018

100,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2020 and December 31, 2019

Common stock, $ 0.01 par value;

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Cumulative distributions in excess of earnings ( 251,212 ) ( 236,350 )

Total equity 914,142 927,591

Total liabilities and equity $ 1,503,559 $ 1,518,861

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Year Ended December 31,

2020 2019 2018

Rental income $ 173,612 $ 155,667 $ 140,073

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Interest expense 23,661 28,125 27,860

Loss on the extinguishment of debt

Property taxes 2,836 3,048 11,924

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Provision for loan losses — 1,076 —

Reserve for advances and deferred rent

General and administrative 16,302 15,158 12,555

Total expenses 97,428 118,819 101,069

Other income:

Gain on sale of real estate

Gain on disposition of other real estate investment

Other (loss) income:

(Loss) gain on sale of real estate ( 37 ) 1,777 2,051

Net income $ 80,867 $ 46,359 $ 57,923

Earnings per common share:

Basic $ 0.85 $ 0.49 $ 0.73

Diluted $ 0.85 $ 0.49 $ 0.72

Weighted-average number of common shares:

Basic 95,200 93,088 79,386

Diluted 95,207 93,098 79,392

See accompanying notes to consolidated financial statements.

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(in thousands, except share and per share amounts)

Common Stock Additional

Capital Cumulative

Distributions

of Earnings Total

Shares Amount

Balance as of December 31, 2017 75,478,202 $ 755 $ 783,237 $ ( 189,375 ) $ 594,617

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Common dividends ($ 0.82 per share)

— — — ( 66,738 ) ( 66,738 )

Net income — — — 57,923 57,923

Balance as of December 31, 2018 85,867,044 859 965,578 ( 198,190 ) 768,247

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Common dividends ($ 0.90 per share)

— — — ( 84,519 ) ( 84,519 )

Net income — — — 46,359 46,359

Balance as of December 31, 2019 95,103,270 951 1,162,990 ( 236,350 ) 927,591

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Common dividends ($ 1.00 per share)

— — — ( 95,729 ) ( 95,729 )

Net income — — — 80,867 80,867

Balance as of December 31, 2020 95,215,797 $ 952 $ 1,164,402 $ ( 251,212 ) $ 914,142

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Year Ended December 31,

2020 2019 2018

Cash flows from operating activities:

Net income $ 80,867 $ 46,359 $ 57,923

Adjustments to reconcile net income to net cash provided by operating activities:

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Amortization of deferred financing costs 1,950 2,003 1,938

Loss on the extinguishment of debt

Amortization of stock-based compensation 3,790 4,104 3,848

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Noncash interest income — ( 797 ) ( 238 )

Gain on sale of real estate

Loss (gain) on sale of real estate 37 ( 1,777 ) ( 2,051 )

Interest income distribution from other real estate investment 1,346 463 —

Reserve for advances and deferred rent

Impairment of real estate investments — 16,692 —

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Accounts and other receivables, net 825 ( 6,283 ) ( 3,800 )

Prepaid expenses and other assets

Prepaid expenses and other assets, net 387 ( 495 ) ( 270 )

Accounts payable and accrued liabilities 3,791 2,695 ( 1,443 )

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Acquisitions of real estate, net of deposits applied ( 89,650 ) ( 321,458 ) ( 111,640 )

Improvements to real estate

Purchases of equipment, furniture and fixtures

Purchases of, and improvements to, equipment, furniture and fixtures and real estate ( 8,297 ) ( 6,289 ) ( 9,012 )

Investment in real estate mortgage and other loans receivable ( 30,498 ) ( 18,246 ) ( 5,648 )

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Repayment of other real estate investment 2,327 2,204 —

Escrow deposits for acquisitions of real estate

Escrow deposits for potential acquisitions of real estate ( 3,000 ) — ( 5,000 )

Net proceeds from sales of real estate 6,608 3,499 13,004

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Cash flows from financing activities:

Proceeds from the issuance of common stock, net

Proceeds from the issuance of senior unsecured notes payable

Proceeds from (costs paid for) the issuance of common stock, net ( 404 ) 195,924 179,882

Proceeds from the issuance of senior unsecured term loan — 200,000 —

Borrowings under unsecured revolving credit facility 65,000 243,000 65,000

Payments on senior unsecured notes payable

Payments on senior unsecured term loan — ( 100,000 ) —

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Dividends paid on common stock ( 93,161 ) ( 80,619 ) ( 62,999 )

Net cash provided by financing activities

Net cash (used in) provided by financing activities ( 105,561 ) 173,247 45,595

Net (decrease) increase in cash and cash equivalents ( 1,408 ) ( 16,465 ) 29,883

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Right-of-use asset obtained in exchange for new operating lease obligation $ 599 $ 1,010 $ —

Application of escrow deposit to acquisition real estate

Transfer of pre-acquisition costs to acquired assets $ 168 $ 242 $ —

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Description of Business— CareTrust REIT, Inc.’s (“CareTrust REIT” or the “Company”) primary business consists of acquiring, financing, developing and owning real property to be leased to third-party tenants in the healthcare sector.

As of December 31, 2019 , the Company owned and leased to independent operators, including The Ensign Group, Inc.

(“Ensign”), 216 skilled nursing, multi-service campuses, assisted living and independent living facilities consisting of 21,963 operational beds and units located in 28 states with the highest concentration of properties located in California, Texas, Louisiana, Arizona and Idaho.

The Company also owned and operated one independent living facility which had a total of 168 units and is located in Texas.

As of December 31, 2019 , the Company also had other real estate investments consisting of one preferred equity investment of $ 3.8 million and two mortgage loans receivable with a carrying value of $ 29.5 million .

As of December 31, 2020, the Company owned and leased to independent operators, 218 skilled nursing, multi-service campuses, assisted living and independent living facilities consisting of 22,466 operational beds and units located in 28 states with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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All intercompany transactions and account balances within the Company have been eliminated.

Recent Accounting Standards Adopted by the Company —On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842), (“ASU 2016-02”) that sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a lease agreement (i.e., lessees and lessors).

Upon adoption of ASU 2016-02 on January 1, 2019, the Company elected the following practical expedients provided by ASU No.

2018-11, Leases - Targeted Improvements, and ASU No.

2018-20, Narrow Scope Improvements for Lessors (together with ASU 2016-02, the “new lease ASUs”):

Package of practical expedients – provides that the Company is not required to reevaluate its existing or expired leases as of January 1, 2019, under the new lease ASUs.

Optional transition method practical expedient – allows the Company to apply the new lease ASUs prospectively from the adoption date of January 1, 2019.

Single component practical expedient – allows the Company to account for lease and non-lease components associated with that lease as a single component under the new lease ASUs, if certain criteria are met.

Short-term leases practical expedient – for the Company’s operating leases with a term of less than 12 months in which it is the lessee, this expedient allows the Company not to record on its balance sheet related lease liabilities and right-of-use assets.

Overview related to both lessee and lessor accounting —The new lease ASUs set new criteria for determining the classification of finance leases for lessees and sales-type leases for lessors.

The criteria to determine whether a lease should be accounted for as a finance (sales-type) lease include the following:

(i) ownership is transferred from lessor to lessee by the end of the lease term, (ii) an option to purchase is reasonably certain to be exercised, (iii) the lease term is for the major part of the underlying asset’s remaining economic life, (iv) the present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset, and (v) the underlying asset is specialized and is expected to have no alternative use at the end of the lease term.

If any of these criteria is met, a lease is classified as a finance lease by the lessee and as a sales-type lease by the lessor.

If none of the criteria are met, a lease is classified as an operating lease by the lessee, but may still qualify as a direct financing lease or an operating lease for the lessor.

The existence of a residual value guarantee from an unrelated third party other than the lessee may qualify the lease as a direct financing lease by the lessor.

Otherwise, the lease is classified as an operating lease by the lessor.

The election of the package of practical expedients discussed above and the optional transition method allowed the Company not to reassess:

Whether any expired or existing contracts as of January 1, 2019 were leases or contained leases.

This practical expedient is primarily applicable to entities that have contracts containing embedded leases.

As of January 1, 2019, the Company had no such contracts;

therefore, this practical expedient had no effect on the Company.

The lease classification for any leases expired or existing as of January 1, 2019.

Recent Accounting Standards Adopted by the Company —In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Loses on Financial Instruments (“ASU 2016-13”) , that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected credit losses, rather than incurred losses as previously required by the other-than-temporary impairment model.

ASU 2016-13 applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans receivable, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures (e.g., loan commitments).

In November 2018, the FASB released ASU No.

2018-19, Codification Improvements to Topic 326 Financial Instruments - Credit Losses (“ASU 2018-19”).

ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of ASU 2016-13.

Instead, impairment of receivables arising from operating leases should be accounted for under Subtopic 842-30 “Leases - Lessor.” Additionally, the FASB issued ASU No.

2019-05, Targeted Transition Relief (“ASU 2019-05”), to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments.

The fair value option election does not apply to held-to-maturity debt securities.

Entities are required to make this election on an instrument-by-instrument basis.

ASU 2016-13 became effective for reporting periods beginning after December 15, 2019, and was applied as a cumulative adjustment to retained earnings as of the effective date.

The Company adopted ASU 2016-13 on January 1, 2020.

With the Company’s primary business being leasing real property to third-party tenants, the majority of receivables that arise in the ordinary course of business qualify as operating leases and are not in the scope of ASU 2016-13.

However, based on the instruments held upon adoption on January 1, 2020, the standard applied to the Company’s then outstanding mortgage loans receivable, for which the Company elected the fair value option as provided for by ASU 2019-05.

Instruments for which the fair value option has been elected are measured at fair value on a recurring basis with changes in fair value recognized in other (loss) income on the Company’s consolidated income statements.

Interest income is recognized as earned within interest and other income in the consolidated income statements.

As of December 31, 2020, the Company had one mezzanine loan receivable for which the fair value option had been elected.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”) , which modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures.

ASU 2018-13 was effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods, with early adoption permitted.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

The Company adopted ASU 2018-13 on January 1, 2020.

Adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU No.

2020-09, Debt (Topic 470) (“ASU 2020-09”), which amends and supersedes the SEC paragraphs in the Accounting Standards Codification (“ASC”) to reflect the issuance of SEC Release No.

In March 2020, the SEC adopted amendments to reduce and simplify the financial disclosure requirements for guarantors and issuers of guaranteed registered securities.

The amendments were effective January 4, 2021, but voluntary compliance with the amendments in advance of January 4, 2021 was permitted.

The Company elected to comply with these amendments effective in the first quarter of 2020.

As a result, the Company will no longer include in the financial statement footnotes of its Quarterly and Annual Reports on Form 10-Q and Form 10-K separate condensed consolidating financial

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The election of the package of practical expedients provides that the Company is not required to reassess the classification of its leases existing as of January 1, 2019.

This means that all of the Company’s leases that were classified as operating leases in accordance with the lease accounting standards in effect prior to January 1, 2019 continue to be classified as operating leases after adoption of the new lease ASUs.

The Company applied the package of practical expedients consistently to all leases (i.e., regardless of whether the Company was the lessee or a lessor) that commenced before January 1, 2019.

The election of this package permits the Company to “run off” its leases that commenced before January 1, 2019, for the remainder of their lease terms and to apply the new lease ASUs to leases commencing or modified after January 1, 2019.

Lessor Accounting —On January 1, 2019, the Company elected the single component practical expedient, which allows a lessor, by class of underlying asset, not to allocate the total consideration to the lease and non-lease components based on their relative stand-alone selling prices.

This single component practical expedient requires the Company to account for the lease component and non-lease component(s) associated with that lease as a single component if (i) the timing and pattern of transfer of the lease component and the non-lease component(s) associated with it are the same and (ii) the lease component would be classified as an operating lease if it were accounted for separately.

If the Company determines that the lease component is the predominant component, the Company accounts for the single component as an operating lease in accordance with the new lease ASUs.

Conversely, the Company is required to account for the combined component under the revenue recognition standard if the Company determines that the non-lease component is the predominant component.

As a result of this assessment, rental revenues and tenant recoveries from the lease of real estate assets that qualify for this expedient are accounted for as a single component under the new lease ASUs, with tenant recoveries primarily as variable consideration.

Tenant recoveries that do not qualify for the single component practical expedient and are considered non-lease components are accounted for under the revenue recognition standard.

The components of the Company’s operating leases qualify for the single component presentation.

For the years ended December 31, 2018 and 2017 , the Company recognized tenant recoveries for real estate taxes of $ 11.9 million and $ 10.3 million , respectively, which were classified as tenant reimbursements on the Company’s consolidated income statements.

Prior to the adoption of the new lease ASU, the Company recognized tenant recoveries as tenant reimbursement revenues regardless of whether the third party was paid by the lessor or lessee.

information for its wholly owned subsidiaries that issued or guaranteed the Notes (See Note 6, Debt, for further detail) .

In addition, in accordance with the amendments adopted by the SEC and FASB, because the assets, liabilities and results of operations of the combined issuers and guarantors of the Notes are not materially different than the corresponding amounts presented in the Company’s consolidated financial statements, it is also not required to present combined summary financial information regarding such subsidiary issuers and guarantors.

Lessor Accounting —The Company recognizes lease revenue in accordance with ASC 842, Leases .

The Company’s lease agreements typically contain annual escalators based on the percentage change in the Consumer Price Index which are accounted for as variable lease payments in the period in which the change occurs.

For lease agreements that contain fixed rent escalators, the Company generally recognizes lease revenue on a straight-line basis of accounting.

The Company generates revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the tenant is solely responsible for the costs related to the property.

Tenant reimbursements related to property taxes and insurance paid by lessee directly to a third-party on behalf of a lessor are required to be excluded from variable payments and from recognition in the lessor’s income statements.

Otherwise, tenant recoveries for taxes and insurance are classified as additional rental revenues recognized by the lessor on a gross basis in its income statements.

For the year ended December 31, 2018, the Company recognized tenant recoveries for real estate taxes of $ 11.9 million which was classified as tenant reimbursements on the Company’s consolidated income statements.

Prior to the adoption of ASC 842, the Company recognized tenant recoveries as tenant reimbursement revenues regardless of whether the third party was paid by the lessor or lessee.

Effective January 1, 2019, such tenant recoveries are recognized to the extent that the Company pays the third party directly and classified as rental income on the Company’s consolidated income statements.

Due to the application of the new lease ASUs, the Company recognized, on a gross basis, tenant recoveries related to real estate taxes of $ 2.9 million , for the year ended December 31, 2019 .

Under the new lease ASUs, the Company’s assessment of collectibility of its tenant receivables includes a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement are probable of collection.

Due to the application of ASC 842, the Company recognized, on a gross basis, tenant recoveries related to real estate taxes of $ 3.1 million and $ 2.9 million, for the years ended December 31, 2020 and December 31, 2019, respectively.

The Company’s assessment of collectibility of its tenant receivables includes a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement are probable of collection.

The Company considers the operator’s performance and anticipated trends, payment history, and the existence and creditworthiness of guarantees, among other factors, in making this determination.

For such leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term if deemed probable of collection.

For such leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term, if applicable.

For such leases that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectibility determination.

For the year ended December 31, 2019 , the Company recorded $ 11.8 million of adjustments to rental income related to previously recognized rental income.

Such write-offs and recoveries are recorded as decreases or increases through rental income on the Company’s consolidated income statements.

For the year ended December 31, 2020, the Company recorded recovery adjustments of $ 1.0 million and did no t recognize any write-off adjustments to rental income.

For the year ended December 31, 2019, the Company recorded $ 11.8 million of write-off adjustments to rental income related to rental income recognized in prior periods.

See Note 3, Real Estate Investments, Net for further detail.

Lessee Accounting —Under the new lease ASUs, lessees are required to apply a dual approach by classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee.

This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, which corresponds to a similar evaluation performed by lessors.

In addition to this classification, a lessee is also required to recognize a right-of-use asset and a lease liability for all leases regardless of their classification, whereas a lessor is not required to recognize a right-of-use asset and a lease liability for any operating leases.

As of December 31, 2019 , the Company’s lease liability related to its ground lease arrangements for which it is the lessee totaled approximately $ 1.0 million with a weighted average remaining lease term of 73 years .

While these ground leases

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

were subject to the new lease ASUs effective January 1, 2019, the lease liabilities and corresponding right-of-use assets and lease expense do not have a material effect on the Company’s consolidated financial statements.

The Company has not recognized a right-of-use asset and/or lease liability for leases with a term of 12 months or less and without an option to purchase the underlying asset.

Estimates and Assumptions —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

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Typically, when the contingent payments are funded, cash rent is increased by the amount funded multiplied by a rate stipulated in the agreement.

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Generally, if the contingent payment is an earn-out provided to the seller, the payment is capitalized to the property’s basis when earn-out becomes probable and estimable.

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While the Company believes its assumptions are reasonable, changes in these assumptions may have a material impact on financial results.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Real Estate Investments —Included in “Other real estate investments, net,” on the Company’s consolidated balance sheet, is one preferred equity investment and two mortgage loans receivable.

The preferred equity investment is accounted for at unpaid principal balance, plus accrued return, net of reserves.

Other Real Estate Investments —Included in other real estate investments, net, on the Company’s consolidated balance sheets at December 31, 2020, is one mezzanine loan receivable.

At December 31, 2019, included in other real estate investments, net is one preferred equity investment and two mortgage loans receivable.

The preferred equity investment was accounted for at unpaid principal balance, plus accrued return, net of reserves.

The Company recognizes return income on a quarterly basis based on the outstanding investment including any accrued and unpaid return, to the extent there is outside contributed equity or cumulative earnings from operations.

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Any unpaid accrued preferred return, whether recorded or unrecorded by the Company, will be repaid upon redemption or as available cash flow is distributed from the joint venture.

The Company’s two mortgage loans receivable are recorded at amortized cost, which consists of the outstanding unpaid principal balance, net of unamortized costs and fees directly associated with the origination of the loan.

Interest income on the Company’s mortgage loans receivable is recognized over the life of the investment using the interest method.

Origination costs and fees directly related to loans receivable are amortized over the term of the loan as an adjustment to interest income.

The Company evaluates at each reporting period each of its other real estate investments for indicators of impairment.

Prior to the adoption of ASU 2016-13, mortgage and mezzanine loans receivable were recorded at amortized cost, which consists of the outstanding unpaid principal balance, net of unamortized costs and fees directly associated with the origination of the loan.

Interest income on the Company’s mortgage and mezzanine loans receivable was recognized over the life of the applicable investment using the interest method.

Origination costs and fees directly related to loans receivable were amortized over the term of the loan as an adjustment to interest income.

For instruments recorded at amortized cost, the Company evaluates at each reporting period each of its other real estate investments for indicators of impairment.

An investment is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms.

A reserve is established for the excess of the carrying value of the investment over its fair value.

The Company adopted ASU 2016-13 on January 1, 2020.

Fair value was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements.

Instruments for which the fair value option has been elected are measured at fair value on a

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recurring basis with changes in fair value recognized in other (loss) income on our consolidated income statements.

Interest income is recognized as earned within interest and other income in the consolidated income statements.

As of December 31, 2020, the Company had one mezzanine loan receivable for which the fair value option had been elected.

Prepaid expenses and other assets —Prepaid expenses and other assets consist of prepaid expenses, deposits, pre-acquisition costs and other loans receivable.

Included in other loans receivable is a bridge loan to Priority Life Care, LLC (“Priority”) under which the Company agreed to fund up to $ 1.4 million until the earlier of (i) October 31, 2019, (ii) the date that a new credit facility is established such that the borrower may submit draw requests to the applicable lender, or (iii) the date on which Priority’s lease is terminated with respect to any facility.

Included in other loans receivable at December 31, 2019 is a bridge loan to Priority Life Care, LLC (“Priority”) under which the Company agreed to fund up to $ 1.4 million until the earlier of (i) October 31, 2019, (ii) the date that a new credit facility is established such that the borrower may submit draw requests to the applicable lender, or (iii) the date on which Priority’s lease is terminated with respect to any facility.

Borrowings under the bridge loan accrue interest at an annual base rate of 8.0 %.

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The Company anticipates the estimated useful lives of its assets by class to be generally as follows:

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Building improvements

Tenant improvements

Shorter of lease term or expected useful life

Integral equipment, furniture and fixtures

Identified intangible assets

Shorter of lease term or expected useful life

Building 25 - 40 years

Building improvements 10 - 25 years

Tenant improvements Shorter of lease term or expected useful life

Integral equipment, furniture and fixtures 5 years

Identified intangible assets Shorter of lease term or expected useful life

Cash and Cash Equivalents —Cash and cash equivalents consist of bank term deposits and money market funds with original maturities of three months or less at time of purchase and therefore approximate fair value.

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For the unsecured revolving credit facility, deferred financing costs are included in assets on the Company’s balance sheet.

Amortization of deferred financing costs is classified as interest expense in the consolidated income statements.

Amortization of deferred financing costs is classified as interest expense in

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the consolidated income statements.

Accumulated amortization of deferred financing costs was $ 9.0 million and $ 7.1 million at December 31, 2020 and December 31, 2019, respectively.

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The Company has one reportable segment consisting of investments in healthcare-related real estate assets.

Earnings (Loss) Per Share —The Company calculates earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings Per Share .

Earnings Per Share —The Company calculates earnings per share (“EPS”) in accordance with ASC 260, Earnings Per Share .

Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period.

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Beds, Units, Occupancy and Other Measures —Beds, units, occupancy and other non-financial measures used to describe real estate investments included in these Notes to the consolidated financial statements are presented on an unaudited basis and are not subject to audit by the independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements —In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Subtopic 326) (“ASU 2016-13”), that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected credit losses, rather than incurred losses as required currently by the other-than-temporary impairment model.

ASU 2016-13 will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans receivable, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures (e.g., loan commitments).

In November 2018, the FASB released ASU No.

2018-19, Codification Improvements to Topic 326 Financial Instruments - Credit Losses (“ASU 2018-19”).

ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of ASU 2016-13.

Instead, impairment of receivables arising from operating leases should be accounted for under Subtopic 842-30 “Leases - Lessor.” ASU 2016-13 is effective for reporting periods beginning after December 15, 2019, and will be applied as a cumulative adjustment to retained earnings as of the effective date.

The Company is currently assessing the potential effect the adoption of ASU 2016-13 will have on the Company’s consolidated financial statements.

With the Company’s primary business being leasing real property to third party tenants, the majority of receivables that arise in the ordinary course of business qualify as operating leases and are not in scope of ASU 2016-13.

However, based on the instruments held upon adoption on January 1, 2020, the standard applies to the Company’s mortgage loans receivable, for which the allowance for expected credit losses is in the process of being quantified.

Recent Accounting Pronouncements — In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), that provides optional relief to applying reference rate reform to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”), which will be discontinued by the end of 2021.

The amendments in this update are effective immediately and may be applied through December 31, 2022.

The Company is still evaluating the impact of ASU 2020-04 and expects to take full advantage of the offered optional expedients and exceptions, but does not expect the adoption of the standard to have a material impact on the Company’s consolidated financial statements.

REAL ESTATE INVESTMENTS, NET

The following table summarizes the Company’s investment in owned properties at December 31, 2020 and December 31, 2019 (dollars in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Land $ 205,356 $ 204,154

Buildings and improvements 1,477,849 1,400,927

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Real estate investments, net $ 1,448,099 $ 1,414,200

As of December 31, 2019 , 85 of the Company’s 217 facilities were leased to subsidiaries of Ensign on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease” and, collectively, the “Ensign Master Leases”) which commenced on June 1, 2014.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, 85 of the Company’s 218 facilities were leased to subsidiaries of Ensign on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease” and, collectively, the “Ensign Master Leases”) which commenced on June 1, 2014 and were subsequently modified (see “Pennant Spin” below for further information).

The obligations under the Ensign Master Leases are guaranteed by Ensign.

A default by any subsidiary of Ensign with regard to any facility leased pursuant to an Ensign Master Lease will result in a default under all of the Ensign Master Leases.

As of December 31, 2019 , annualized revenues from the Ensign Master Leases were $ 53.4 million and are escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero ) or 2.5 % , and (2) the prior year’s rent.

As of December 31, 2020, annualized contractual rental income from the Ensign Master leases was $ 53.4 million and are escalated annually, in June, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero ) or 2.5 %, and (2) the prior year’s rent.

In addition to rent, the subsidiaries of Ensign that are tenants under the Ensign Master Leases are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).

On October 1, 2019, Ensign completed its previously announced separation of its home health and hospice operations and substantially all of its senior living operations into a separate independent publicly traded company through the distribution of shares of common stock of The Pennant Group, Inc.

(“Pennant” and, such separation, the “Pennant Spin”).

See Lease Amendments for additional information.

As of December 31, 2019 , 15 of the Company facilities were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”).

During the year ended December 31, 2020, the Company acquired four additional facilities leased to subsidiaries of Ensign on a triple-net basis which are not included under the Ensign Master Leases.

As of December 31, 2020, annualized contractual rental income from the four additional Ensign facilities was $ 3.8 million and are escalated annually, in December, by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 2.5 %, and (2) the prior year’s rent.

In addition to rent, the subsidiaries of Ensign that are tenants under the four additional facilities are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).

The four additional facilities leased to subsidiaries of Ensign are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases.

As of December 31, 2020, 15 of the Company’s facilities were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”).

The PMG Master Lease commenced on December 1, 2016, and provides an initial term of fifteen years , with two five-year renewal options.

As of December 31, 2019 , annualized revenues from the PMG Master Lease were $ 27.4 million and are escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 3.0 % , and (2) the prior year’s rent.

As of December 31, 2020, annualized contractual rental income from the PMG Master Lease were $ 27.9 million and are escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 3.0 %, and (2) the prior year’s rent.

In addition to rent, the subsidiaries of PMG that are tenants under the PMG Master Lease are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).

As of December 31, 2020, 114 of the Company’s 218 facilities were leased to various other operators under triple-net leases.

All of these leases contain annual escalators based on the percentage change in the CPI (but not less than zero), some of which are subject to a cap, or fixed rent escalators.

As of December 31, 2020, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands):

2021 $ 174,400

Thereafter 1,026,675

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 , 116 of the Company’s 217 facilities were leased to various other operators under triple-net leases.

All of these leases contain annual escalators based on CPI some of which are subject to a cap, or fixed rent escalators.

As of December 31, 2019 , the Company has one independent living facility that the Company owns and operates.

As of December 31, 2019 , the Company’s total future minimum rental revenues for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands):

As of December 31, 2018 , the Company’s total future minimum rental revenues for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands):

Tenant Purchase Options

Certain of the Company’s operators hold purchase options allowing them to acquire properties they currently lease from the Company.

A summary of these purchase options is presented below (dollars in thousands):

Asset Type Properties Lease Expiration 1st Option Open Date Option Type Current Cash Rent (1)

ALF 7 October 2034 1/1/2021 A $ 3,207

SNF 11 January 2031 1/1/2022 C $ 4,800

SNF 1 March 2030 4/1/2022 B / C (2)

SNF / Campus 2 October 2032 1/1/2023 B $ 959

SNF 4 November 2034 12/1/2024 B $ 3,789

ALF 2 October 2034 1/1/2026 A $ 1,559

A - Fixed base price plus a specified share on any appreciation.

B - Fixed base price.

C - Fixed capitalization rate on lease revenue.

(1) Based on annualized cash revenue for contracts in place at December 31, 2020.

(2) Purchase option reflects two option types.

Rental Income

The following table summarizes components of the Company’s rental income (dollars in thousands):

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Contractual rent due (1)

$ 171,309 $ 166,056

Straight-line rent 77 1,385

Adjustment for collectibility of rental income (2)

Initial cash rent including operating expense reimbursements adjusted for rental escalators and increases due to landlord funded capital improvements.

In accordance with the new lease ASUs, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from five operators through matu rity.

As such, the Company reversed rental income comprised of $ 7.8 million of unpaid contractual rent, $ 3.5 million of straight-line rent and $ 0.5 million of property tax reimbursements during the year ended December 31, 2019 .

If lease payments are subsequently deemed probable of collection, the Company increases rental income accordingly.

Adjustment for collectibility (2)

Recovery of previously reversed rent (3)

Lease termination revenue (4)

Total $ 173,612 $ 155,667

(1) Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company.

For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received.

(2) During the year ended December 31, 2019, and in accordance with ASC 842, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from five operators through maturity.

As such, the Company reversed $ 7.8 million of contractual rent, $ 3.5 million of straight-line rent and $ 0.5 million of property tax reimbursements during the year ended December 31, 2019.

If lease payments are subsequently deemed probable of collection, the Company increases rental income for such recoveries.

(3) During the year ended December 31, 2020, the Company recovered $ 1.0 million in rental income that was previously written off related to one operator.

(4) During the year ended December 31, 2020, in connection with the agreement to terminate its lease agreements with affiliates of Metron Integrated Health Systems (“Metron”) and to sell the facilities to a third-party, the Company received $ 1.2 million from Metron affiliates.

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The following table summarizes the Company’s acquisitions for the year ended December 31, 2020 (dollar amounts in thousands):

Type of Property

Purchase Price (1)

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties

Number of Beds/Units (3)

Number of Properties Number of Beds/Units (3)

Skilled nursing $ 75,545 $ 6,453 6 715

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Assisted living 7,396 590 1 62

Purchase price includes capitalized acquisition costs.

Initial annual cash rent excludes ground lease income.

The number of beds/units includes operating beds at acquisition date.

Total $ 89,817 $ 7,598 8 961

The following table summarizes the Company’s acquisitions for the year ended December 31, 2019 (dollar amounts in thousands):

Type of Property

Purchase Price (1)

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties

Number of Beds/Units (2)

Number of Properties Number of Beds/Units (3)

Skilled nursing $ 254,760 $ 22,909 17 2,099

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Assisted living 12,596 1,031 1 96

Total $ 326,700 $ 29,143 22 2,957

The following table summarizes the Company’s acquisitions for the year ended December 31, 2018 (dollar amounts in thousands):

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

Skilled nursing $ 85,814 $ 7,715 10 926

Multi-service campuses 27,520 (4) 2,240 2 177

Assisted living — — — —

Total $ 113,334 $ 9,955 12 1,103

(1) Purchase price includes capitalized acquisition costs.

(2) Initial annual cash rent excludes ground lease income.

(3) The number of beds/units includes operating beds at acquisition date.

The Company has committed to fund approximately $ 1.4 million in revenue-producing capital expenditures over the next 24 months based on the in-place lease yield, which is included in the purchase price.

(4) The Company committed to fund approximately $ 1.4 million in revenue-producing capital expenditures over 24 months based on the in-place yield, which was included in the purchase price.

Lease Amendments

Twenty/20 Lease Termination and New Noble Master Lease .

On December 1, 2020, five assisted living facilities in Virginia operated by Twenty/20 Management, Inc.

(“Twenty/20”) were transferred to affiliates of Noble Senior Services (“Noble”).

In connection with the transfer, the Company entered into a new triple-net master lease with Noble.

The new lease has a remaining initial term of approximately 14 years, with two five-year renewal options and CPI-based rent escalators.

Initial annual cash rent under the new lease is approximately $ 3.2 million .

Pennant Spin .

As a result of the Pennant Spin, as of October 1, 2019, the Company amended the Ensign Master Leases to lease 85 facilities to subsidiaries of Ensign, which have a total of 8,908 operational beds, and entered into a new triple-net master lease with subsidiaries of Pennant (the “Pennant Master Lease”) to lease 11 facilities, which have a total of 1,151 operational beds.

As a result of the Pennant Spin, as of October 1, 2019, the Company amended the Ensign Master Leases to lease 85 facilities to subsidiaries of Ensign, which had a total of 8,908 operational beds, and entered into a new triple-net master lease with subsidiaries of Pennant (the “Pennant Master Lease”) to lease 11 facilities, which had a total of 1,151 operational beds.

The contractual initial annual cash rent under the Pennant Master Lease is approximately $ 7.8 million.

The Pennant Master Lease carries an initial term of 15 years , with two five-year renewal options and CPI-based rent escalators.

The Pennant Master Lease carried an initial term of 15 years, with two five-year renewal options and CPI-based rent escalators.

The contractual annual cash rent under the amended Ensign Master Leases was reduced by approximately $ 7.8 million.

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If Pennant achieves a specified portfolio coverage and continuously maintains it for a specified period, Ensign’s obligations under the guaranty with respect to the Pennant Master Lease would be released.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Trillium Lease Termination and New Master Lease.

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The Company recorded an adjustment to reduce rental income recognized under the Original Trillium Lease for unpaid contractual rent, straight-line rent and property tax reimbursements by approximately $ 3.8 million in the three months ended September 30, 2019.

On September 1, 2019, four of the seven skilled nursing Ohio properties operated by Trillium under the Original Trillium Lease were transferred to affiliates of Providence Group, Inc.

On September 1, 2019, four of the seven skilled nursing properties in Ohio operated by Trillium under the Original Trillium Lease were transferred to affiliates of Providence Group, Inc.

(“Providence”).

In connection with the transfer, the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company amended its triple-net master lease with Providence.

The amended lease has a remaining initial term of approximately 13 years , with two five-year renewal options and CPI-based rent escalators.

In connection with the transfer, the Company amended its triple-net master lease with Providence.

The amended lease had a remaining initial term of approximately 13 years as of September 1, 2019, and includes two five-year renewal options and CPI-based rent escalators.

Annual cash rent under the amended lease increased by approximately $ 2.1 million.

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Impairment of Real Estate Investments, Asset Sales and Assets Held for Sale

On September 1, 2019, the Company sold three of the seven skilled nursing Ohio properties operated by Trillium under the Original Trillium Lease for a purchase price of $ 28.0 million .

On September 1, 2019, the Company sold three of the seven skilled nursing properties in Ohio operated by Trillium under the Original Trillium Lease for a purchase price of $ 28.0 million.

During the three months ended September 30, 2019 and prior to the disposition, the Company recorded an impairment expense of approximately $ 7.8 million.

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See Note 4, Other Real Estate Investments, Net for additional information.

As of September 30, 2019, the Company met the criteria to classify six skilled nursing facilities operated by affiliates of Metron Integrated Health Systems (“Metron”) as held for sale, which resulted in an impairment expense of approximately $ 8.8 million to reduce the carrying value to fair value less costs to sell the properties.

As of December 31, 2019 , the properties continued to be held for sale and the carrying value of $ 34.6 million is primarily comprised of real estate assets.

In February 2020, the six skilled nursing facilities were sold.

See Note 14, Subsequent Events, for further detail.

As of September 30, 2019, the Company met the criteria to classify six skilled nursing facilities operated by affiliates of Metron as held for sale, which resulted in an impairment expense of approximately $ 8.8 million to reduce the carrying value to fair value less costs to sell the properties.

The fair values of the assets impaired during the three months ended September 30, 2019 were based on contractual sales prices, which are considered to be Level 2 measurements within the fair value hierarchy.

As of December 31, 2019, the properties continued to be held for sale and the carrying value of $ 34.6 million was primarily comprised of real estate assets.

In February 2020, the six skilled nursing facilities were sold.

In connection with

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the sale for $ 36.0 million, the Company received $ 3.5 million in cash and provided subsidiaries of Cascade Capital Group, LLC (“Cascade”), the purchaser of the properties, with a short-term mortgage loan secured by these properties for $ 32.4 million.

The mortgage loan bore interest at 7.5 % and initially had a maturity date of March 31, 2020.

In connection with the sale, the Company recognized a loss of approximately $ 0.1 million during the three months ended March 31, 2020.

In April 2020, the mortgage loan was settled in connection with a new mortgage loan transaction between the Company and a third-party institutional lender as co-lenders, pursuant to which we received $ 18.9 million in cash and a new mortgage loan for $ 13.9 million.

In July 2020, the Company received prepayment in full, including accrued interest, for the new $ 13.9 million mortgage loan.

See Note 4, Other Real Estate Investments, Net, for further detail on the new mortgage loan.

On November 1, 2020, the Company sold the one remaining owned and operated independent living facility consisting of 168 units located in Texas with an aggregate carrying value of $ 4.2 million for gross proceeds of $ 4.5 million.

In connection with the sale, the Company recognized a gain of $ 20,000 .

During the year ended December 31, 2019, the Company sold one of its owned and operated independent living facilities consisting of 38 units located in Texas with an aggregate carrying value of $ 1.7 million for net proceeds of $ 3.3 million.

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In connection with the sale, the Company recognized a gain of $ 2.1 million.

During the fourth quarter of 2020, the Company met the criteria to classify one skilled nursing facility operated by affiliates of Five Oaks as held for sale.

Assets held for sale includes the net book value of property the Company plans to sell within the next year.

If the determination is made that the Company no longer expects to sell an asset within the next year, the asset is reclassified out of assets held for sale.

As of December 31, 2020, the property continued to be held for sale and the carrying value of $ 7.2 million is primarily comprised of real estate assets.

In February 2021, the property was sold.

See Note 13, Subsequent Events, for additional information.

OTHER REAL ESTATE INVESTMENTS, NET

Mezzanine Loan Receivable —In November 2020, the Company provided Next VA Star Realty Holdings, LLC a mezzanine loan for nine skilled nursing facilities secured by membership interests in affiliates of Next VA Star Realty Holdings, LLC for approximately $ 15.0 million, at an annual interest rate of 12 %.

The loan requires monthly interest payments, is set to mature on November 30, 2025, and may (subject to certain restrictions) be prepaid before the maturity date if paid in full and for an exit fee ranging from 1 % to 3 % of the loan plus unpaid interest payments equal to 24 months (less the amount of monthly interest payments made by the borrower through the date of prepayment).

Mortgage Loans Receivable —In October 2017, the Company provided an affiliate of Providence a mortgage loan secured by a skilled nursing facility for approximately $ 12.5 million inclusive of transaction costs, which bore a fixed interest rate of 9 %.

The mortgage loan, which required Providence to make monthly principal and interest payments, was set to mature on October 26, 2020 and had an option to be prepaid before the maturity date.

During the three months ended December 31, 2019, Providence exercised its option to prepay the loan in full, and prepayment was received by the Company.

In February 2019, the Company provided affiliates of Covenant Care a mortgage loan secured by first mortgages on five skilled nursing facilities for approximately $ 11.4 million, at an annual interest rate of 9 %.

The loan required monthly interest payments, was set to mature on February 11, 2020, and included two , six-month extension options.

During the three months ended September 30, 2019, Covenant Care exercised its option to prepay the loan in full, and prepayment was received by the Company.

In July 2019, the Company provided MCRC, LLC a real estate loan secured by a 176 bed skilled nursing facility in Manteca, California for $ 3.0 million, which bore a fixed interest rate of 8 % and required monthly interest payments.

Concurrently, the Company entered into a purchase and sale agreement to purchase the Manteca facility from MCRC, LLC for approximately $ 16.4 million subject to normal diligence and other contingencies.

The loan documents provided for a maturity date of the earlier to occur of the closing date of the acquisition, or five business days following the termination of the purchase and sale agreement.

MCRC, LLC breached its obligation to sell the Manteca facility to the Company on the terms outlined in the purchase and sale agreement and to repay the real estate loan upon its stated maturity.

As a result, the Company commenced non-judicial foreclosure proceedings with respect to the Manteca facility.

In January 2020, the borrower further collateralized the loan by causing one of its affiliates to grant the Company a deed of trust in the real estate and improvements that constitute

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OTHER REAL ESTATE INVESTMENTS, NET

Palm Gardens Assisted Living Facility in Yolo County, California.

During the three months ended June 30, 2020, payment for the loan principal and accrued interest, including default interest, as well as reimbursement for attorney’s fees and certain other costs of suit, were received in full by the Company and, as a result, the Company withdrew all foreclosure-related proceedings related to the Manteca facility loan.

In September 2019, the Company provided affiliates of CommuniCare a $ 26.5 million loan secured by mortgages on the three skilled nursing facilities sold to CommuniCare, which bore a fixed interest rate of 10 %.

The mortgage loan, which required CommuniCare to make monthly interest payments, was set to mature on February 29, 2020, and included an option to be prepaid before the maturity date.

In January 2020, the Company amended the mortgage loan’s maturity date to April 30, 2020.

In April 2020, the Company amended the mortgage loan’s maturity date to May 29, 2020.

During the three months ended June 30, 2020, payment for the mortgage loan and accrued interest was received in full by the Company.

In February 2020, the Company provided provided subsidiaries of Cascade a $ 32.4 million loan secured by mortgages on the six skilled nursing facilities formerly operated by affiliates of Metron sold to Cascade in February 2020, as discussed in Note 3, Real Estate investments, Net .

The mortgage loan bore interest at 7.5 % and initially had a maturity date of March 31, 2020.

In April 2020, the mortgage loan was settled in connection with a new mortgage loan transaction between the Company and a third-party institutional lender as co-lenders, pursuant to which the Company received $ 18.9 million in cash and a new mortgage loan for $ 13.9 million.

The new mortgage loan with Cascade was secured by the same six skilled nursing facilities purchased by Cascade and was for a combined principal amount of $ 33.9 million, with the Company’s $ 13.9 million portion of the indebtedness initially bearing interest at a variable rate equal to LIBOR plus 4.00 %, subject to a LIBOR floor of 1.75 %.

The new mortgage loan had a maturity date of April 29, 2022 and included two six-month extension options.

In July 2020, prepayment for the mortgage loan of $ 13.9 million and accrued interest was received in full by the Company.

As of December 31, 2020, the Company had no remaining mortgage loan receivables.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 2.3 million, $ 2.8 million and $ 1.2 million, respectively, of interest income related to the mortgage and mezzanine loans.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 0.3 million, $ 0.2 million and $ 0.2 million, respectively, of interest income related to its other loans receivable.

Preferred Equity Investments —In July 2016, the Company completed a $ 2.2 million preferred equity investment with an affiliate of Cascadia Development, LLC.

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In June 2019, the Company purchased the skilled nursing facility for approximately $ 16.2 million, inclusive of transaction costs.

The Company paid $ 12.9 million after receiving back its initial investment of $ 2.2 million and cumulative contractual preferred return through June 18, 2019, the acquisition date, of $ 1.1 million , of which $ 0.6 million was recognized as interest income during the year ended December 31, 2019 .

The Company paid $ 12.9 million after receiving back its initial investment of $ 2.2 million and cumulative contractual preferred return through June 18, 2019, the acquisition date, of $ 1.1 million.

In September 2016, the Company completed a $ 2.3 million preferred equity investment with an affiliate of Cascadia Development, LLC.

The preferred equity investment yields a return equal to prime plus 9.5 % but in no event less than 12.0 % calculated on a quarterly basis on the outstanding carrying value of the investment.

The investment is being used to develop a 99 -bed skilled nursing facility in Boise, Idaho.

The preferred equity investment yielded a return equal to prime plus 9.5 % but in no event less than 12.0 % calculated on a quarterly basis on the outstanding carrying value of the investment.

The investment was used to develop a 99 -bed skilled nursing facility in Boise, Idaho.

In connection with its investment, CareTrust REIT obtained an option to purchase the development at a fixed-formula price upon stabilization, with an initial lease yield of at least 9.0 %.

The project was completed in the first quarter of 2018 and began lease-up during the second quarter of 2018.

In January 2020, the Company purchased the skilled nursing facility for approximately $ 18.7 million , inclusive of estimated transaction costs.

The Company paid $ 15.0 million after receiving back its initial investment of $ 2.3 million and cumulative contractual preferred return through January 17, 2020, the acquisition date, of $ 1.4 million , of which $ 0.7 million was recognized as interest income during the year ended December 31, 2019 .

See Note 14, Subsequent Events, for further detail.

During the years ended December 31, 2019 , 2018 and 2017 , the Company recognized $ 1.3 million (including $ 0.6 million for unrecognized preferred return related to prior periods), $ 0.2 million and $ 1.7 million , respectively, of interest income related to these preferred equity investments.

Performing Mortgage Loans Receivable —In October 2017, the Company provided an affiliate of Providence a mortgage loan secured by a skilled nursing facility for approximately $ 12.5 million inclusive of transaction costs, which bore a fixed interest rate of 9 % .

The mortgage loan, which required Providence to make monthly principal and interest payments, was set to mature on October 26, 2020 and had an option to be prepaid before the maturity date.

During the three months ended December 31, 2019 , Providence exercised its option to prepay the loan in full, and prepayment was received by the Company.

The loan required monthly interest payments, was set to mature on February 11, 2020, and included two , six -month extension options.

During the three months ended September 30, 2019 , Covenant Care exercised its option to prepay the loan in full, and prepayment was received by the Company.

In July 2019, the Company provided MCRC, LLC a real estate loan secured by a 176 bed skilled nursing facility in Manteca, California for $ 3.0 million , which bears a fixed interest rate of 8 % and requires monthly interest payments.

The loan documents provide for a maturity date of the earlier to occur of the closing date of the acquisition, or five business days following the termination of the purchase and sale agreement.

MCRC, LLC breached its obligation to sell the Manteca facility to the Company on the terms outlined in the purchase and sale agreement and, as a result, the Company has commenced non-judicial foreclosure proceedings with respect to the Manteca facility.

The Company expects the Manteca facility to go to auction in early 2020 at which point the Company expects to either purchase the facility or be repaid the loan and accrued interest.

In September 2019, the Company provided affiliates of CommuniCare a $ 26.5 million loan secured by mortgages on the three skilled nursing facilities sold to CommuniCare, as discussed in Note 3, Real Estate Investments, which bears a fixed interest rate of 10 % .

The mortgage loan, which requires CommuniCare to make monthly interest payments, was originally set to mature on February 29, 2020, with an option to be prepaid before the maturity date.

In January 2020, the Company

In January 2020, the Company purchased the skilled nursing facility for approximately $ 18.7 million, inclusive of transaction costs.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized less than $ 0.1 million, $ 1.3 million (including $ 0.6 million for unrecognized preferred return related to prior periods) and $ 0.2 million, respectively, of interest income related to these preferred equity investments.

As of December 31, 2020, the Company had no remaining preferred equity investments.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amended the maturity date to April 30, 2020.

See Note 14, Subsequent Events, for further detail.

Given the structure of the arrangement, the Company has concluded that the acquiring entities whom are joint and severally liable for the loan constitute variable interest entities.

The loan includes standard lender protective rights and does not allow the Company to control the entities.

During the years ended December 31, 2019 , 2018 and 2017 , the Company recognized $ 3.0 million , $ 1.2 million and $ 0.2 million , respectively, of interest income related to the mortgage loans.

FAIR VALUE MEASUREMENTS

Financial Instruments:

Considerable judgment is necessary to estimate the fair value of financial instruments.

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment.

GAAP guidance defines three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.

Changes in the type of inputs may result in a reclassification for certain assets.

The Company does not expect that changes in classifications between levels will be frequent.

Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2020, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

Level 1 Level 2 Level 3 Balance as of December 31, 2020

Mezzanine loan receivable $ — $ — $ 15,000 $ 15,000

Mezzanine loan receiv able:

The fair value of the mezzanine loan receivable was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements.

As such, the Company classifies the instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms.

However, the fair value is not sensitive to changes in market interest rates due to the recent issuance of the loan at market interest rates.

Future changes in market interest rates could materially impact the estimated discounted cash flows.

As of December 31, 2020, the Company did not have any loans that were 90 days or more past due.

For the year ended December 31, 2020, there were no changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Measured at Fair Value on a Non-Recurring Basis

Real Estate Investments:

The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of its real estate assets may not be recoverable.

The Company estimates fair values using Level 3 inputs and uses a combined income and market approach.

Specifically, t he fair value of the real estate investment is based on current market conditions and considers matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, comparable sales data, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers.

For the year ended December 31, 2020, there were no real estate assets deemed to be impa ired.

For the year ended December 31, 2019, the Company recorded an impairment expense of $ 16.7 million.

See Note 3, Real Estate Investments, Net, for additional information.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Items Disclosed at Fair Value

Considerable judgment is necessary to estimate the fair value disclosure of financial instruments.

The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments.

A summary of the face values, carrying amounts and fair values of the Company’s financial instruments as of December 31, 2019 and 2018 using Level 2 inputs, for the senior unsecured notes payable, and Level 3 inputs, for all other financial instruments, is as follows (dollars in thousands):

December 31, 2019

December 31, 2018

A summary of the face values, carrying amounts and fair values of the Company’s financial instruments as of December 31, 2020 and December 31, 2019 using Level 2 inputs for the Notes (as defined in Note 6, Debt, below), and Level 3 inputs, for all other financial instruments, is as follows (dollars in thousands):

December 31, 2020 December 31, 2019

Value Carrying

Financial assets:

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Senior unsecured notes payable :

The fair value of the Notes was determined using third-party quotes derived from orderly trades.

The fair value of the Notes (as defined in Note 6, Debt, below) was determined using third-party quotes derived from orderly trades.

Unsecured revolving credit facility and senior unsecured term loan:

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The following table summarizes the balance of the Company’s indebtedness as of December 31, 2020 and 2019 (in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Principal Deferred Carrying Principal Deferred Carrying

Amount Loan Fees Value Amount Loan Fees Value

Senior unsecured notes payable $ 300,000 $ ( 3,331 ) $ 296,669 $ 300,000 $ ( 4,089 ) $ 295,911

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Unsecured revolving credit facility 50,000 — 50,000 60,000 — 60,000

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ 550,000 $ ( 4,406 ) $ 545,594 $ 560,000 $ ( 5,376 ) $ 554,624

Senior Unsecured Notes Payable

3 unchanged sentences

The Notes were issued at par, resulting in gross proceeds of $ 300.0 million and net proceeds of approximately $ 294.0 million after deducting underwriting fees and other offering expenses.

The Company used the net proceeds from the offering of the Notes to redeem all $ 260.0 million aggregate principal amount outstanding of its 5.875 % Senior Notes due 2021, including payment of the redemption price at 102.938 % and all accrued and unpaid interest thereon.

The Company used the net proceeds from the offering of the Notes to redeem all $ 260.0 million aggregate principal amount outstanding of its 5.875 % Senior Notes due 2021, including payment of

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the redemption price at 102.938 % and all accrued and unpaid interest thereon.

The Company used the remaining portion of the net proceeds of the Notes offering to pay borrowings outstanding under its senior unsecured revolving credit facility.

1 unchanged sentence

Interest on the Notes is payable on June 1 and December 1 of each year, beginning on December 1, 2017.

The Issuers may redeem the Notes any time before June 1, 2020 at a redemption price of 100 % of the principal amount of the Notes redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date, plus a “make-whole” premium described in the indenture governing the Notes and, at any time on or after June 1, 2020, at the redemption prices set forth in the indenture.

At any time on or before June 1, 2020, up to 40 % of the aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings if at least 60 % of the originally issued aggregate principal amount of the Notes remains outstanding.

In such case, the redemption price will be equal to 105.25 % of the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date.

As of June 1, 2020, the Issuers may redeem the Notes any time at the redemption prices set forth in the indenture.

As of December 31, 2020, the Issuers have not elected to redeem any of the Notes.

If certain changes of control of the Company occur, holders of the Notes will have the right to require the Issuers to repurchase their Notes at 101 % of the principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by the Company and certain of the Company’s wholly owned existing and, subject to certain exceptions, future material subsidiaries (other than the Issuers);

provided, however, that such guarantees are subject to automatic release under certain customary circumstances, including if the subsidiary guarantor is sold or sells all or substantially all of its assets, the subsidiary guarantor is designated “unrestricted” for covenant purposes under the indenture, the subsidiary guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied.

See Note 12, Summarized Condensed Consolidating Information .

provided, however, that such guarantees are subject to automatic release under certain customary circumstanc es, including if the subsidiary guarantor is sold or sells all or substantially all of its assets, the subsidiary guarantor is designated “unrestricted” for covenant purposes under the indenture, the subsidiary guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied.

The indenture contains customary covenants such as limiting the ability of the Company and its restricted subsidiaries to:

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The Prior Term Loan was scheduled to mature on February 1, 2023 and could be prepaid at any time subject to a 2 % premium in the first year after issuance and a 1 % premium in the second year after issuance.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On February 8, 2019, the Operating Partnership, as the borrower, the Company, as guarantor, CareTrust GP, LLC, and certain of the Operating Partnership’s wholly owned subsidiaries entered into an amended and restated credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender, and the lenders party thereto (the “Amended Credit Agreement”).

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Future borrowings under the Amended Credit Facility will be used for working capital purposes, for capital expenditures, to fund acquisitions and for general corporate purposes.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The interest rates applicable to loans under the Revolving Facility are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.10 % to 0.55 % per annum or LIBOR plus a margin ranging from 1.10 % to 1.55 % per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt).

8 unchanged sentences

The Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Amended Credit Facility or other material indebtedness, the failure to satisfy certain covenants (including the financial maintenance covenants), the occurrence of change of control and specified events of bankruptcy and insolvency.

As of December 31, 2019 , the Company was in compliance with all applicable financial covenants under the Credit Agreement.

Loss on the Extinguishment of Debt

During the year ended December 31, 2017 , the loss on the extinguishment of debt included $ 7.6 million related to the redemption of the Company’s 5.875 % Senior Notes due 2021 at a redemption price of 102.938 % and a $ 4.2 million write-off of deferred financing costs associated with the redemption.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

Schedule of Debt Maturities

As of December 31, 2020, the Company’s debt maturities were (dollars in thousands):

Thereafter 200,000

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Public Offering of Common Stock —On April 15, 2019, the Company completed an underwritten public offering of 6,641,250 shares of its common stock, par value $ 0.01 per share, at an initial price to the public of $ 23.35 , including 866,250 shares of common stock sold pursuant to the full exercise of an option to purchase additional shares of common stock granted to the underwriters, resulting in approximately $ 149.0 million in net proceeds, after deducting the underwriting discount and offering expenses.

1 unchanged sentence

At-The-Market Offering —On March 10, 2020, the Company entered into a new equity distribution agreement to issue and sell, from time to time, up to $ 500.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “New ATM Program”).

In connection with the entry into the equity distribution agreement and the commencement of the New ATM Program, the Company’s “at-the-market” equity offering program pursuant to the Company’s prior equity distribution agreement, dated as of May 17, 2017, was terminated (the “Prior ATM Program”).

There was no New ATM Program activity for 2019 .

The following table summarizes the quarterly Prior ATM Program activity for 2019 and 2018 (in thousands, except per share amounts):

For the Years Ended December 31,

In connection with the entry into the equity distribution agreement and the commencement of the New ATM Program, the Company’s “at-the-market” equity offering program pursuant to the Company’s prior equity distribution agreement, dated as of March 4, 2019, was terminated (the “Prior ATM Program”).

There was no New ATM Program or Prior ATM Program activity (or activity under any predecessor at-the-market equity offering programs) for 2020.

The following table summarizes predecessor at-the-market equity offering program activity for the year ended 2019 (in thousands, except per share amounts):

For the Year Ended December 31,

Number of shares 2,459

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Gross proceeds (1)

Total gross proceeds is before $ 0.6 million and $ 2.3 million , respectively, of commissions paid to the sales agents during the years ended December 31, 2019 and 2018 under the Prior ATM Program.

(1) Total gross proceeds is before $ 0.6 million of commissions paid to the sales agents during the year ended December 31, 2019 under the predecessor ATM Program.

As of December 31, 2020, the Company had $ 500.0 million available for future issuances under the New ATM Program.

Share Repurchase Program — On March 20, 2020, the Company’s Board of Directors authorized a share repurchase program up to $ 150.0 million of outstanding shares of the Company’s common stock (the “Repurchase Program”).

Repurchases under the Repurchase Program, which expires on March 31, 2023, may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by management.

Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act.

The Company expects to finance any share repurchases under the Repurchase Program using available cash and may also use short-term borrowings under the Revolving Facility.

The Company did no t repurchase any shares of common stock under the Repurchase Program during the year ended December 31, 2020.

The Repurchase Program may be modified, discontinued or suspended at any time.

CARETRUST REIT, INC.

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For the Three Months Ended

September 30,

2020 March 31, June 30, September 30, December 31,

Dividends declared $ 0.25 $ 0.25 $ 0.25 $ 0.25

Dividends payment date

April 15, 2019

July 15, 2019

October 15, 2019

January 15, 2020

Dividends payment date April 15, 2020 July 15, 2020 October 15, 2020 January 15, 2021

Dividends payable as of record date $ 23,931 $ 23,931 $ 23,934 $ 23,933

Dividends record date

March 29, 2019

June 28, 2019

September 30, 2019

December 31, 2019

Dividends record date March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020

Dividends declared $ 0.225 $ 0.225 $ 0.225 $ 0.225

Dividends payment date

April 13, 2018

July 13, 2018

October 15, 2018

January 15, 2019

Dividends payment date April 15, 2019 July 15, 2019 October 15, 2019 January 15, 2020

Dividends payable as of record date $ 20,011 $ 21,508 $ 21,500 $ 21,500

Dividends record date

March 30, 2018

June 29, 2018

September 28, 2018

December 31, 2018

Dividends record date March 29, 2019 June 28, 2019 September 30, 2019 December 31, 2019

Dividends declared $ 0.205 $ 0.205 $ 0.205 $ 0.205

Dividends payment date

April 14, 2017

July 14, 2017

October 13, 2017

January 16, 2018

Dividends payment date April 13, 2018 July 13, 2018 October 15, 2018 January 15, 2019

Dividends payable as of record date $ 15,608 $ 16,224 $ 17,196 $ 17,710

Dividends record date

March 31, 2017

June 30, 2017

September 29, 2017

December 29, 2017

Dividends record date March 30, 2018 June 29, 2018 September 28, 2018 December 31, 2018

STOCK-BASED COMPENSATION

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The following table summarizes restricted stock award and performance award activity for the years ended December 31, 2020 and 2019:

Weighted Average Share Price

Shares Weighted Average Share Price

Unvested balance at December 31, 2018 519,272 $ 14.69

Granted 180,629 22.22

Vested ( 247,534 ) 14.50

Forfeited ( 134 ) 15.21

Unvested balance at December 31, 2019 452,233 17.90

Granted 270,191 19.11

Vested ( 201,563 ) 17.41

Forfeited ( 3,175 ) 20.30

Unvested balance at December 31, 2020 517,686 $ 18.71

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the stock-based compensation expense recognized (dollars in thousands):

For Year Ended December 31,

2020 2019 2018

Stock-based compensation expense $ 3,790 $ 4,104 $ 3,848

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, there was $ 5.5 million of unamortized stock-based compensation expense related to these unvested awards and the weighted-average remaining vesting period of such awards was 2.3 years.

In connection with the separation of Ensign’s healthcare business and its real estate business into two separate and independently publicly traded companies (the “Spin-Off”) on June 1, 2014, employees of Ensign who had unvested shares of restricted stock were given one share of CareTrust REIT unvested restricted stock totaling 207,580 shares at the Spin-Off.

These restricted shares are subject to a time vesting provision only and the Company does not recognize any stock compensation expense associated with these awards.

During the year ended December 31, 2019 , no shares vested or were forfeited.

At December 31, 2019 , there were 1,760 unvested restricted stock awards outstanding.

These restricted shares were subject to a time vesting provision only and the Company did not recognize any stock compensation expense associated with these awards.

During the year ended December 31, 2020, 1,760 shares were forfeited.

At December 31, 2020, there were no unvested restricted stock awards outstanding.

In January 2020 and March 2020, the Compensation Committee of the Company’s Board of Directors granted 27,000 and 107,790 shares of restricted stock, respectively, to officers and employees.

Each share had a fair market value on the date of grant of $ 22.18 and $ 19.06 per share, respectively, based on the closing market price of the Company’s common stock on that date, and the shares vest in four equal installments beginning on the first anniversary of the grant date.

Additionally, in March 2020, the Compensation Committee granted 107,790 performance stock awards to officers.

Each share had a fair market value on the date of grant of $ 19.06 per share, based on the closing market price of the Company’s common stock on that date.

Performance stock awards are subject to both time and performance based conditions and vest over a one -to four-year period.

The amount of performance awards that will ultimately vest is dependent on the Company’s Normalized Funds from Operations (“NFFO”) per share, as defined by the Compensation Committee, meeting or exceeding a fixed per share amount.

In April 2020, the Compensation Committee of the Company’s Board of Directors granted 27,611 shares of restricted stock to members of the Board of Directors.

Each share had a fair market value on the date of grant of $ 16.48 per share, based on the closing market price of the Company’s common stock on that date, and the shares vest in full on the earlier to occur of April 29, 2021 or the Company’s 2021 Annual Meeting of Stockholders.

In February 2019, the Compensation Committee of the Company’s Board of Directors granted 91,440 shares of restricted stock to officers and employees.

5 unchanged sentences

In May 2019, the Compensation Committee of the Company's Board of Directors granted 17,749 shares of restricted stock to members of the Board of Directors.

Each share had a fair market value on the date of grant of $ 24.23 per share, based on the closing market price of the Company's common stock on that date, and the shares vest in full on the earlier to occur of April 30, 2020 or the Company’s 2020 Annual Meeting of Stockholders.

In February 2018, the Compensation Committee of the Company’s Board of Directors granted 141,060 shares of restricted stock to officers and employees.

Each share had a fair market value on the date of grant of $ 15.13 per share, based on the market price of the Company’s common stock on that date, and the shares vest in four equal annual installments beginning on the first anniversary of the grant date.

Additionally, the Compensation Committee granted 120,460 performance stock awards to officers and employees.

Each share had a fair market value on the date of grant of $ 15.13 per share, based on the market price of the Company’s common stock on that date.

Performance stock awards are subject to both time and performance based conditions and vest over a one- to four-year period.

The amount of performance awards that will ultimately vest is dependent on the Company meeting or exceeding fiscal year over year NFFO per share growth of 6.0 % or greater.

In May 2018, the Compensation Committee of the Company's Board of Directors granted 26,462 shares of restricted stock to members of the Board of Directors.

Each share had a fair market value on the date of grant of $ 16.44 per share, based on the market price of the Company's common stock on that date, and the shares vest in full on the earlier to occur of May 30, 2019 or when the Company holds its 2019 Annual Meeting.

Each share had a fair market value on the date of grant of $ 24.23 per share, based on the closing market price of the Company's common stock on that date, and the shares vested in full on April 30, 2020.

CARETRUST REIT, INC.

3 unchanged sentences

Year Ended December 31,

2020 2019 2018

Net income $ 80,867 $ 46,359 $ 57,923

Net income allocated to participating securities ( 298 ) ( 296 ) ( 364 )

1 unchanged sentence

Weighted-average basic common shares outstanding 95,200 93,088 79,386

Dilutive performance stock awards 7 10 6

Weighted-average diluted common shares outstanding 95,207 93,098 79,392

5 unchanged sentences

Claims and lawsuits may include matters involving general or professional liability asserted against the Company’s tenants, which are the responsibility of the Company’s tenants and for which the Company is entitled to be indemnified by its tenants under the insurance and indemnification provisions in the applicable leases.

Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except that, for the facilities under the Ensign Master Leases, the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of its initial investment in such property, subject to a corresponding rent increase at the time of funding.

Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except that, for the facilities leased to subsidiaries of Ensign, under the Ensign Master Leases, and The Pennant Group, Inc., the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of its initial investment in such property, subject to a corresponding rent increase at the time of funding.

For the Company’s other triple-net master leases, the tenants also have the option to request capital expenditure funding that would generally be subject to a corresponding rent increase at the time of funding, which are subject to tenant compliance with the conditions to the Company’s approval and funding of their requests.

2 unchanged sentences

Major operator concentration – As of December 31, 2020, Ensign leased 89 skilled nursing, assisted living and independent living facilities which had a total of 9,546 beds and units and are located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Texas, Utah and Washington.

The four states in which Ensign leases the highest concentration of properties are California, Texas, Utah and Arizona.

The four states in which Ensign leases the highest concentration of properties are Texas, California, Arizona and Utah.

During the years ended December 31, 2020, 2019 and 2018, Ensign represented 32 %, 38 % and 42 %, respectively, of the Company’s rental income, exclusive of operating expense reimbursements.

8 unchanged sentences

During the years ended December 31, 2020, 2019 and 2018, PMG represented 16 %, 15 % and 8 %, respectively, of the Company’s rental income, exclusive of operating expense reimbursements.

SUMMARIZED CONDENSED CONSOLIDATING INFORMATION

The Notes issued by the Operating Partnership and CareTrust Capital Corp.

on May 10, 2017 are jointly and severally, fully and unconditionally, guaranteed by CareTrust REIT, Inc., as the parent guarantor (the “Parent Guarantor”), and the wholly owned subsidiaries of the Parent Guarantor other than the Issuers (collectively, the “Subsidiary Guarantors” and, together with the Parent Guarantor, the “Guarantors”), subject to automatic release under certain customary circumstances, including if the Subsidiary Guarantor is sold or sells all or substantially all of its assets, the Subsidiary Guarantor is designated “unrestricted” for covenant purposes under the indenture governing the Notes, the Subsidiary Guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied.

The following provides information regarding the entity structure of the Parent Guarantor, the Issuers and the Subsidiary Guarantors:

CareTrust REIT, Inc.

– The Parent Guarantor was formed on October 29, 2013 in anticipation of the Spin-Off on June 1, 2014.

The Parent Guarantor did not conduct any operations or have any business prior to the date of the consummation of the Spin-Off related transactions.

CTR Partnership, L.P.

and CareTrust Capital Corp.

– The Issuers, each of which is a wholly owned subsidiary of the Parent Guarantor, were formed on May 8, 2014 and May 9, 2014 , respectively, in anticipation of the Spin-Off and the related transactions.

The Issuers did not conduct any operations or have any business prior to the date of the consummation of the Spin-Off related transactions.

Subsidiary Guarantors – The Subsidiary Guarantors consist of all of the subsidiaries of the Parent Guarantor other than the Issuers.

Pursuant to Rule 3-10 of Regulation S-X, the following summarized consolidating information is provided for the Parent Guarantor, the Issuers, and the Subsidiary Guarantors.

There are no subsidiaries of the Company other than the Issuers and the Subsidiary Guarantors.

This summarized financial information has been prepared from the financial statements of the Company and the books and records maintained by the Company.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 2019

(in thousands, except share and per share amounts)

Real estate investments, net

Other real estate investments, net

Assets held for sale, net

Cash and cash equivalents

Accounts and other receivables, net

Prepaid expenses and other assets

Deferred financing costs, net

Investment in subsidiaries

Liabilities and Equity:

Senior unsecured notes payable, net

Senior unsecured term loan, net

Unsecured revolving credit facility

Accounts payable and accrued liabilities

Dividends payable

Total liabilities

Total liabilities and equity

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 2018

(in thousands, except share and per share amounts)

Real estate investments, net

Other real estate investments, net

Cash and cash equivalents

Accounts and other receivables, net

Prepaid expenses and other assets

Deferred financing costs, net

Investment in subsidiaries

Liabilities and Equity:

Senior unsecured notes payable, net

Senior unsecured term loan, net

Unsecured revolving credit facility

Accounts payable and accrued liabilities

Dividends payable

Total liabilities

Common stock, $0.01 par value;

500,000,000 shares authorized, 85,867,044 shares issued and outstanding as of December 31, 2018

Additional paid-in capital

Cumulative distributions in excess of earnings

Total liabilities and equity

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING INCOME STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

(in thousands)

Rental income

Independent living facilities

Interest and other income

Total revenues

Depreciation and amortization

Interest expense

Property taxes

Independent living facilities

Impairment of real estate investments

Provision for loan losses

General and administrative

Total expenses

Gain on sale of real estate

Income in Subsidiary

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING INCOME STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2018

(in thousands)

Rental income

Tenant reimbursements

Independent living facilities

Interest and other income

Total revenues

Depreciation and amortization

Interest expense

Property taxes

Independent living facilities

General and administrative

Total expenses

Gain on sale of real estate

Income in Subsidiary

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING INCOME STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017

(in thousands)

Rental income

Tenant reimbursements

Independent living facilities

Interest and other income

Total revenues

Depreciation and amortization

Interest expense

Loss on the extinguishment of debt

Property taxes

Independent living facilities

Impairment of real estate investment

Reserve for advances and deferred rent

General and administrative

Total expenses

Gain on disposition of other real estate investment

Income in Subsidiary

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2019

(in thousands)

Cash flows from operating activities:

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Acquisitions of real estate, net of deposits applied

Improvements to real estate

Purchases of equipment, furniture and fixtures

Investment in real estate mortgage and other loans receivable

Principal payments received on real estate mortgage and other loans receivable

Repayment of other real estate investment

Net proceeds from sales of real estate

Distribution from Subsidiary

Intercompany financing

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from the issuance of common stock, net

Proceeds from the issuance of senior unsecured term loan

Borrowings under unsecured revolving credit facility

Payments on unsecured revolving credit facility

Payments on senior unsecured term loan

Payments of deferred financing costs

Net-settle adjustment on restricted stock

Dividends paid on common stock

Distribution to Parent

Intercompany financing

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2018

(in thousands)

Cash flows from operating activities:

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Acquisitions of real estate

Improvements to real estate

Purchases of equipment, furniture and fixtures

Investment in real estate mortgage and other loans receivable

Principal payments received on real estate mortgage and other loans receivable

Escrow deposit for acquisition of real estate

Net proceeds from the sale of real estate

Distribution from Subsidiary

Intercompany financing

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from the issuance of common stock, net

Borrowings under unsecured revolving credit facility

Payments on unsecured revolving credit facility

Net-settle adjustment on restricted stock

Dividends paid on common stock

Distribution to Parent

Intercompany financing

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2017

(in thousands)

Cash flows from operating activities:

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Acquisition of real estate

Improvements to real estate

Purchases of equipment, furniture and fixtures

Investment in real estate mortgage loan receivable

Sale of other real estate investment

Principal payments received on mortgage loan receivable

Distribution from Subsidiary

Intercompany financing

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from the issuance of common stock, net

Proceeds from the issuance of senior unsecured notes payable

Borrowings under unsecured revolving credit facility

Payments on senior unsecured notes payable

Payments on unsecured revolving credit facility

Net-settle adjustment on restricted stock

Payments of deferred financing costs

Dividends paid on common stock

Distribution to Parent

Intercompany financing

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

4 unchanged sentences

For the Year Ended December 31, 2020

Quarter Second

Quarter Third

Quarter Fourth

Operating data:

Total revenues $ 44,340 $ 44,168 $ 45,687 $ 44,137

Net income (loss)

Net income $ 19,325 $ 18,935 $ 21,552 $ 21,055

Earnings per common share, basic $ 0.20 $ 0.20 $ 0.23 $ 0.22

3 unchanged sentences

For the Year Ended December 31, 2019

Quarter Second

Quarter Third

Quarter Fourth

Operating data:

Total revenues $ 39,658 $ 46,201 $ 33,314 $ 44,228

Net income (loss) $ 16,053 $ 19,698 $ ( 10,054 ) $ 20,662

Earnings per common share, basic $ 0.18 $ 0.21 $ ( 0.11 ) $ 0.22

5 unchanged sentences

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Recent Acquisitions

In January 2020, the Company acquired one skilled nursing facility for approximately $ 18.7 million , which includes estimated capitalized acquisition costs.

The facility was leased to an affiliate of the operator which developed the property, Cascadia Healthcare, LLC.

The contractual initial annual cash rent from the acquisition is approximately $ 1.7 million .

The acquisition was funded using borrowings under the Company’s Revolving Facility, cash on hand and a credit for the Company’s original equity investment in the facility and preferred returns thereon.

See Note 4, Other Real Estate Investments, Net for further detail.

In February 2020, the Company acquired one assisted living facility for approximately $ 7.4 million , which includes estimated capitalized acquisition costs.

The facility was leased to an affiliate of Bayshire, LLC.

The contractual initial annual cash rent from the acquisition is approximately $ 0.6 million .

The acquisition was funded using borrowings under the Company’s Revolving Facility and cash on hand.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amended Agreements

In January 2020, the Company amended its loan agreement secured by mortgages on the three skilled nursing facilities sold to CommuniCare, as discussed in Note 3, Real Estate Investments, Net.

The amended agreement has a new maturity date of April 30, 2020.

See Note 4, Other Real Estate Investments, Net for further detail.

On February 14, 2020, the Company closed on the sale of the six Metron skilled nursing facilities which were held for sale as of December 31, 2019.

In connection with the sale for $ 36.0 million , the Company received $ 3.5 million in cash and provided subsidiaries of Cascade Capital Group, LLC, the purchaser of the properties, with a short-term mortgage loan secured by these properties for $ 32.4 million .

The mortgage loan bears interest at 7.5 % and has a maturity date of March 31, 2020.

On February 1, 2021, the Company closed on the sale of one skilled nursing facility consisting of 90 units located in Washington with a carrying value of $ 7.2 million, for gross sales proceeds of $ 7.3 million.

The Company does not expect to record a material gain or loss in connection with the sale.

The facility was classified as held for sale as of December 31, 2020.

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

1 unchanged sentence

(dollars in thousands)

Initial Cost to Company

Gross Carrying Value

Initial Cost to Company Gross Carrying Value

Description Facility Location Encum.

Land Building

Total (1) Accum.

Skilled Nursing Properties:

Ensign Highland LLC

Highland Manor

Meadowbrook Health Associates LLC

Sabino Canyon

Terrace Holdings AZ LLC

Desert Terrace

Rillito Holdings LLC

Valley Health Holdings LLC

North Mountain

Cedar Avenue Holdings LLC

Granada Investments LLC

Camarillo, CA

Plaza Health Holdings LLC

Walla Walla, WA

Mountainview Communitycare LLC

Park View Gardens

Santa Rosa, CA

CM Health Holdings LLC

Carmel Mountain

San Diego, CA

Polk Health Holdings LLC

Livingston, TX

Snohomish Health Holdings LLC

Emerald Hills

Cherry Health Holdings LLC

Golfview Holdings LLC

Cambridge SNF

Tenth East Holdings LLC

Arlington Hills

Salt Lake City, UT

Trinity Mill Holdings LLC

Carrollton, TX

Cottonwood Health Holdings LLC

Salt Lake City, UT

Verde Villa Holdings LLC

Lewisville, TX

Mesquite Health Holdings LLC

Arrow Tree Health Holdings LLC

Fort Street Health Holdings LLC

Trousdale Health Holdings LLC

Ensign Bellflower LLC

Bellflower, CA

RB Heights Health Holdings LLC

Scottsdale, AZ

San Corrine Health Holdings LLC

San Antonio, TX

Temple Health Holdings LLC

Anson Health Holdings LLC

Northern Oaks

Willits Health Holdings LLC

Lufkin Health Holdings LLC

Lowell Health Holdings LLC

Littleton, CO

Jefferson Ralston Holdings LLC

Lafayette Health Holdings LLC

Englewood, CO

Hillendahl Health Holdings LLC

Price Health Holdings LLC

Silver Lake Health Holdings LLC

Jordan Health Properties LLC

West Jordan, UT

Regal Road Health Holdings LLC

Youngstown, AZ

Paredes Health Holdings LLC

Brownsville, TX

Expressway Health Holdings LLC

Harlingen, TX

Rio Grande Health Holdings LLC

Grand Terrace

Fifth East Holdings LLC

Salt Lake City, UT

Emmett Healthcare Holdings LLC

Burley Healthcare Holdings LLC

Josey Ranch Healthcare Holdings LLC

Heritage Gardens

Carrollton, TX

Everglades Health Holdings LLC

Victoria Ventura

Irving Health Holdings LLC

Beatrice Manor

Falls City Health Holdings LLC

Careage Estates of Falls City

Falls City, NE

Gillette Park Health Holdings LLC

Careage of Cherokee

Gazebo Park Health Holdings LLC

Careage of Clarion

Oleson Park Health Holdings LLC

Careage of Ft.

Arapahoe Health Holdings LLC

Texas City, TX

Dixie Health Holdings LLC

Hurricane, UT

Memorial Health Holdings LLC

Pocatello, ID

Bogardus Health Holdings LLC

Whittier East

South Dora Health Holdings LLC

Silverada Health Holdings LLC

Orem Health Holdings LLC

Renee Avenue Health Holdings LLC

Pocatello, ID

Stillhouse Health Holdings LLC

Fig Street Health Holdings LLC

Palomar Vista

Escondido, CA

Lowell Lake Health Holdings LLC

Queensway Health Holdings LLC

Atlantic Memorial

Long Beach, CA

Long Beach Health Associates LLC

Long Beach, CA

Kings Court Health Holdings LLC

Richland Hills

51st Avenue Health Holdings LLC

Ives Health Holdings LLC

San Marcos, TX

Guadalupe Health Holdings LLC

The Courtyard (Victoria East)

49th Street Health Holdings LLC

Willows Health Holdings LLC

Cascade Vista

Tulalip Bay Health Holdings LLC

Mountain View

Marysville, WA

Sky Holdings AZ LLC

Bella Vita Health and Rehabilitation Center

Lemon River Holdings LLC

Plymouth Tower

Riverside, CA

Ensign Highland LLC Highland Manor Phoenix, AZ $ — $ 257 $ 976 $ 926 $ 257 $ 1,902 $ 2,159 $ ( 1,311 ) 2013 2000

Meadowbrook Health Associates LLC Sabino Canyon Tucson, AZ — 425 3,716 1,940 425 5,656 6,081 ( 3,103 ) 2012 2000

Terrace Holdings AZ LLC Desert Terrace Phoenix, AZ — 113 504 971 113 1,475 1,588 ( 865 ) 2004 2002

Rillito Holdings LLC Catalina Tucson, AZ — 471 2,041 3,055 471 5,096 5,567 ( 3,029 ) 2013 2003

Valley Health Holdings LLC North Mountain Phoenix, AZ — 629 5,154 1,519 629 6,673 7,302 ( 3,801 ) 2009 2004

Cedar Avenue Holdings LLC Upland Upland, CA — 2,812 3,919 1,994 2,812 5,913 8,725 ( 3,475 ) 2011 2005

Granada Investments LLC Camarillo Camarillo, CA — 3,526 2,827 1,522 3,526 4,349 7,875 ( 2,595 ) 2010 2005

Plaza Health Holdings LLC Park Manor Walla Walla, WA — 450 5,566 1,055 450 6,621 7,071 ( 3,878 ) 2009 2006

Mountainview Communitycare LLC Park View Gardens Santa Rosa, CA — 931 2,612 653 931 3,265 4,196 ( 2,082 ) 1963 2006

CM Health Holdings LLC Carmel Mountain San Diego, CA — 3,028 3,119 2,071 3,028 5,190 8,218 ( 2,981 ) 2012 2006

Polk Health Holdings LLC Timberwood Livingston, TX — 60 4,391 1,167 60 5,558 5,618 ( 3,116 ) 2009 2006

Snohomish Health Holdings LLC Emerald Hills Lynnwood, WA — 741 1,663 1,998 741 3,661 4,402 ( 2,564 ) 2009 2006

Cherry Health Holdings LLC Pacific Care Hoquiam, WA — 171 1,828 2,038 171 3,866 4,037 ( 2,525 ) 2010 2006

Golfview Holdings LLC Cambridge SNF Richmond, TX — 1,105 3,110 1,067 1,105 4,177 5,282 ( 2,246 ) 2007 2006

Tenth East Holdings LLC Arlington Hills Salt Lake City, UT — 332 2,426 2,507 332 4,933 5,265 ( 3,054 ) 2013 2006

Trinity Mill Holdings LLC Carrollton Carrollton, TX — 664 2,294 902 664 3,196 3,860 ( 2,262 ) 2007 2006

Cottonwood Health Holdings LLC Holladay Salt Lake City, UT — 965 2,070 958 965 3,028 3,993 ( 2,275 ) 2008 2007

Verde Villa Holdings LLC Lake Village Lewisville, TX — 600 1,890 470 600 2,360 2,960 ( 1,438 ) 2011 2007

Mesquite Health Holdings LLC Willow Bend Mesquite, TX — 470 1,715 8,661 470 10,376 10,846 ( 7,112 ) 2012 2007

Arrow Tree Health Holdings LLC Arbor Glen Glendora, CA — 2,165 1,105 324 2,165 1,429 3,594 ( 1,010 ) 1965 2007

Fort Street Health Holdings LLC Draper Draper, UT — 443 2,394 759 443 3,153 3,596 ( 1,603 ) 2008 2007

Trousdale Health Holdings LLC Brookfield Downey, CA — 1,415 1,841 1,861 1,415 3,702 5,117 ( 2,052 ) 2013 2007

Ensign Bellflower LLC Rose Villa Bellflower, CA — 937 1,168 357 937 1,525 2,462 ( 925 ) 2009 2007

RB Heights Health Holdings LLC Osborn Scottsdale, AZ — 2,007 2,793 1,762 2,007 4,555 6,562 ( 2,528 ) 2009 2008

San Corrine Health Holdings LLC Salado Creek San Antonio, TX — 310 2,090 719 310 2,809 3,119 ( 1,456 ) 2005 2008

Temple Health Holdings LLC Wellington Temple, TX — 529 2,207 1,163 529 3,370 3,899 ( 1,806 ) 2008 2008

Anson Health Holdings LLC Northern Oaks Abilene, TX — 369 3,220 1,725 369 4,945 5,314 ( 2,544 ) 2012 2008

Willits Health Holdings LLC Northbrook Willits, CA — 490 1,231 500 490 1,731 2,221 ( 889 ) 2011 2008

Lufkin Health Holdings LLC Southland Lufkin, TX — 467 4,644 782 467 5,426 5,893 ( 1,630 ) 1988 2009

Lowell Health Holdings LLC Littleton Littleton, CO — 217 856 1,735 217 2,591 2,808 ( 1,421 ) 2012 2009

Jefferson Ralston Holdings LLC Arvada Arvada, CO — 280 1,230 834 280 2,064 2,344 ( 920 ) 2012 2009

Lafayette Health Holdings LLC Julia Temple Englewood, CO — 1,607 4,222 6,195 1,607 10,417 12,024 ( 5,021 ) 2012 2009

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

Hillendahl Health Holdings LLC Golden Acres Dallas, TX — 2,133 11,977 1,421 2,133 13,398 15,531 ( 5,530 ) 1984 2009

Price Health Holdings LLC Pinnacle Price, UT — 193 2,209 849 193 3,058 3,251 ( 1,102 ) 2012 2009

Silver Lake Health Holdings LLC Provo Provo, UT — 2,051 8,362 2,011 2,051 10,373 12,424 ( 3,208 ) 2011 2009

Jordan Health Properties LLC Copper Ridge West Jordan, UT — 2,671 4,244 1,507 2,671 5,751 8,422 ( 1,817 ) 2013 2009

Regal Road Health Holdings LLC Sunview Youngstown, AZ — 767 4,648 729 767 5,377 6,144 ( 2,063 ) 2012 2009

Paredes Health Holdings LLC Alta Vista Brownsville, TX — 373 1,354 190 373 1,544 1,917 ( 464 ) 1969 2009

Expressway Health Holdings LLC Veranda Harlingen, TX — 90 675 430 90 1,105 1,195 ( 455 ) 2011 2009

Rio Grande Health Holdings LLC Grand Terrace McAllen, TX — 642 1,085 870 642 1,955 2,597 ( 934 ) 2012 2009

Fifth East Holdings LLC Paramount Salt Lake City, UT — 345 2,464 1,065 345 3,529 3,874 ( 1,355 ) 2011 2009

Emmett Healthcare Holdings LLC River's Edge Emmet, ID — 591 2,383 69 591 2,452 3,043 ( 801 ) 1972 2010

Burley Healthcare Holdings LLC Parke View Burley, ID — 250 4,004 424 250 4,428 4,678 ( 1,589 ) 2011 2010

Josey Ranch Healthcare Holdings LLC Heritage Gardens Carrollton, TX — 1,382 2,293 478 1,382 2,771 4,153 ( 934 ) 1996 2010

Everglades Health Holdings LLC Victoria Ventura Ventura, CA — 1,847 5,377 682 1,847 6,059 7,906 ( 1,667 ) 1990 2011

Irving Health Holdings LLC Beatrice Manor Beatrice, NE — 60 2,931 245 60 3,176 3,236 ( 1,063 ) 2011 2011

Falls City Health Holdings LLC Careage Estates of Falls City Falls City, NE — 170 2,141 82 170 2,223 2,393 ( 677 ) 1972 2011

Gillette Park Health Holdings LLC Careage of Cherokee Cherokee, IA — 163 1,491 12 163 1,503 1,666 ( 576 ) 1967 2011

Gazebo Park Health Holdings LLC Careage of Clarion Clarion, IA — 80 2,541 97 80 2,638 2,718 ( 1,052 ) 1978 2011

Oleson Park Health Holdings LLC Careage of Ft.

Dodge, IA — 90 2,341 759 90 3,100 3,190 ( 1,527 ) 2012 2011

Arapahoe Health Holdings LLC Oceanview Texas City, TX — 158 4,810 759 128 5,599 5,727 ( 2,030 ) 2012 2011

Dixie Health Holdings LLC Hurricane Hurricane, UT — 487 1,978 98 487 2,076 2,563 ( 525 ) 1978 2011

Memorial Health Holdings LLC Pocatello Pocatello, ID — 537 2,138 698 537 2,836 3,373 ( 1,077 ) 2007 2011

Bogardus Health Holdings LLC Whittier East Whittier, CA — 1,425 5,307 1,079 1,425 6,386 7,811 ( 2,258 ) 2011 2011

South Dora Health Holdings LLC Ukiah Ukiah, CA — 297 2,087 1,621 297 3,708 4,005 ( 2,096 ) 2013 2011

Silverada Health Holdings LLC Rosewood Reno, NV — 1,012 3,282 103 1,012 3,385 4,397 ( 803 ) 1970 2011

Orem Health Holdings LLC Orem Orem, UT — 1,689 3,896 3,235 1,689 7,131 8,820 ( 2,940 ) 2011 2011

Wisteria Health Holdings LLC Wisteria Abilene, TX — 746 9,903 290 746 10,193 10,939 ( 2,267 ) 2008 2011

Renee Avenue Health Holdings LLC Monte Vista Pocatello, ID — 180 2,481 966 180 3,447 3,627 ( 1,219 ) 2013 2012

Stillhouse Health Holdings LLC Stillhouse Paris, TX — 129 7,139 6 129 7,145 7,274 ( 1,079 ) 2009 2012

Fig Street Health Holdings LLC Palomar Vista Escondido, CA — 329 2,653 1,094 329 3,747 4,076 ( 1,627 ) 2007 2012

Lowell Lake Health Holdings LLC Owyhee Owyhee, ID — 49 1,554 29 49 1,583 1,632 ( 312 ) 1990 2012

Queensway Health Holdings LLC Atlantic Memorial Long Beach, CA — 999 4,237 2,331 999 6,568 7,567 ( 2,886 ) 2008 2012

Long Beach Health Associates LLC Shoreline Long Beach, CA — 1,285 2,343 2,172 1,285 4,515 5,800 ( 1,943 ) 2013 2012

Kings Court Health Holdings LLC Richland Hills Ft.

Worth, TX — 193 2,311 318 193 2,629 2,822 ( 635 ) 1965 2012

51st Avenue Health Holdings LLC Legacy Amarillo, TX — 340 3,925 32 340 3,957 4,297 ( 895 ) 1970 2013

Ives Health Holdings LLC San Marcos San Marcos, TX — 371 2,951 274 371 3,225 3,596 ( 697 ) 1972 2013

Guadalupe Health Holdings LLC The Courtyard (Victoria East) Victoria, TX — 80 2,391 15 80 2,406 2,486 ( 422 ) 2013 2013

49th Street Health Holdings LLC Omaha Omaha, NE — 129 2,418 24 129 2,442 2,571 ( 629 ) 1960 2013

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

Willows Health Holdings LLC Cascade Vista Redmond, WA — 1,388 2,982 202 1,388 3,184 4,572 ( 909 ) 1970 2013

Tulalip Bay Health Holdings LLC Mountain View Marysville, WA — 1,722 2,642 ( 980 ) 742 2,642 3,384 ( 660 ) 1966 2013

Sky Holdings AZ LLC Bella Vita Health and Rehabilitation Center Glendale, AZ — 228 1,124 1,380 228 2,504 2,731 ( 1,727 ) 2004 2002

Lemon River Holdings LLC Plymouth Tower Riverside, CA — 152 357 1,493 152 1,850 2,002 ( 1,163 ) 2012 2009

CTR Partnership, L.P.

Bethany Rehabilitation Center

Bethany Rehabilitation Center Lakewood, CO — 1,668 15,375 56 1,668 15,431 17,099 ( 2,285 ) 1989 2015

CTR Partnership, L.P.

Mira Vista Care Center

Mount Vernon, WA

Mira Vista Care Center Mount Vernon, WA — 1,601 7,425 — 1,601 7,425 9,026 ( 1,067 ) 1989 2015

CTR Partnership, L.P.

Shoreline Health and Rehabilitation Center

Shoreline, WA

Shoreline Health and Rehabilitation Center Shoreline, WA — 1,462 5,034 — 1,462 5,034 6,496 ( 703 ) 1987 2015

CTR Partnership, L.P.

Shamrock Nursing and Rehabilitation Center

Shamrock Nursing and Rehabilitation Center Dublin, GA — 251 7,855 — 251 7,855 8,106 ( 1,080 ) 2010 2015

CTR Partnership, L.P.

BeaverCreek Health and Rehab

Beavercreek, OH

BeaverCreek Health and Rehab Beavercreek, OH — 892 17,159 13 892 17,172 18,064 ( 2,254 ) 2014 2015

CTR Partnership, L.P.

Premier Estates of Cincinnati-Riverview

Cincinnati, OH

Premier Estates of Cincinnati-Riverview Cincinnati, OH — 833 18,086 192 833 18,278 19,111 ( 2,416 ) 1992 2015

CTR Partnership, L.P.

Englewood Health and Rehab

Englewood, OH

Englewood Health and Rehab Englewood, OH — 1,014 18,541 88 1,014 18,629 19,643 ( 2,464 ) 1962 2015

CTR Partnership, L.P.

Portsmouth Health and Rehab

Portsmouth, OH

Portsmouth Health and Rehab Portsmouth, OH — 282 9,726 428 282 10,154 10,436 ( 1,400 ) 2008 2015

CTR Partnership, L.P.

West Cove Care & Rehabilitation Center

West Cove Care & Rehabilitation Center Toledo, OH — 93 10,365 — 93 10,365 10,458 ( 1,360 ) 2007 2015

CTR Partnership, L.P.

BellBrook Health and Rehab

Bellbrook, OH

BellBrook Health and Rehab Bellbrook, OH — 214 2,573 231 214 2,804 3,018 ( 385 ) 2003 2015

CTR Partnership, L.P.

Xenia Health and Rehab

Xenia Health and Rehab Xenia, OH — 205 3,564 23 205 3,587 3,792 ( 471 ) 1981 2015

CTR Partnership, L.P.

Jamestown Place Health and Rehab

Jamestown, OH

Jamestown Place Health and Rehab Jamestown, OH — 266 4,725 268 266 4,993 5,259 ( 694 ) 1967 2015

CTR Partnership, L.P.

Sioux City, IA

Casa de Paz Sioux City, IA — 119 7,727 — 119 7,727 7,846 ( 950 ) 1974 2016

CTR Partnership, L.P.

Denison Care Center

Denison Care Center Denison, IA — 96 2,784 — 96 2,784 2,880 ( 342 ) 2015 2016

CTR Partnership, L.P.

Garden View Care Center

Shenandoah, IA

Garden View Care Center Shenandoah, IA — 105 3,179 — 105 3,179 3,284 ( 391 ) 2013 2016

CTR Partnership, L.P.

Grandview Health Care Center

Grandview Health Care Center Dayton, IA — 39 1,167 — 39 1,167 1,206 ( 143 ) 2014 2016

CTR Partnership, L.P.

Grundy Care Center

Grundy Center, IA

Grundy Care Center Grundy Center, IA — 65 1,935 — 65 1,935 2,000 ( 238 ) 2011 2016

CTR Partnership, L.P.

Iowa City Rehab and Health Care Center

Iowa City, IA

Iowa City Rehab and Health Care Center Iowa City, IA — 522 5,690 — 522 5,690 6,212 ( 699 ) 2014 2016

CTR Partnership, L.P.

Lenox Care Center

Lenox Care Center Lenox, IA — 31 1,915 — 31 1,915 1,946 ( 235 ) 2012 2016

CTR Partnership, L.P.

Osage Osage, IA — 126 2,255 — 126 2,255 2,381 ( 277 ) 2014 2016

CTR Partnership, L.P.

Pleasant Acres Care Center

Pleasant Acres Care Center Hull, IA — 189 2,544 — 189 2,544 2,733 ( 313 ) 2014 2016

CTR Partnership, L.P.

Cedar Falls Health Care Center

Cedar Falls, IA

Cedar Falls Health Care Center Cedar Falls, IA — 324 4,366 — 324 4,366 4,690 ( 518 ) 2015 2016

CTR Partnership, L.P.

Premier Estates of Highlands

Premier Estates of Highlands Norwood, OH — 364 2,199 282 364 2,481 2,845 ( 293 ) 2012 2016

CTR Partnership, L.P.

Shaw Mountain at Cascadia

Shaw Mountain at Cascadia Boise, ID — 1,801 6,572 395 1,801 6,967 8,768 ( 908 ) 1989 2016

CTR Partnership, L.P.

The Oaks Petaluma, CA — 3,646 2,873 110 3,646 2,983 6,629 ( 353 ) 2015 2016

CTR Partnership, L.P.

Arbor Nursing Center

Arbor Nursing Center Lodi, CA — 768 10,712 — 768 10,712 11,480 ( 1,183 ) 1982 2016

CTR Partnership, L.P.

Broadmoor Medical Lodge

Broadmoor Medical Lodge Rockwall, TX — 1,232 22,152 — 1,232 22,152 23,384 ( 2,262 ) 1984 2016

CTR Partnership, L.P.

Decatur Medical Lodge

Decatur Medical Lodge Decatur, TX — 990 24,909 — 990 24,909 25,899 ( 2,543 ) 2013 2016

CTR Partnership, L.P.

Royse City Medical Lodge

Royse City, TX

Royse City Medical Lodge Royse City, TX — 606 14,660 — 606 14,660 15,266 ( 1,497 ) 2009 2016

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

CTR Partnership, L.P.

Saline Care Nursing & Rehabilitation Center

Harrisburg, IL

Saline Care Nursing & Rehabilitation Center Harrisburg, IL — 1,022 5,713 — 1,022 5,713 6,735 ( 547 ) 2009 2017

CTR Partnership, L.P.

Carrier Mills Nursing & Rehabilitation Center

Carrier Mills, IL

Carrier Mills Nursing & Rehabilitation Center Carrier Mills, IL — 775 8,377 — 775 8,377 9,152 ( 803 ) 1968 2017

CTR Partnership, L.P.

StoneBridge Nursing & Rehabilitation Center

StoneBridge Nursing & Rehabilitation Center Benton, IL — 439 3,475 — 439 3,475 3,914 ( 333 ) 2014 2017

CTR Partnership, L.P.

DuQuoin Nursing & Rehabilitation Center

DuQuoin Nursing & Rehabilitation Center DuQuoin, IL — 511 3,662 — 511 3,662 4,173 ( 351 ) 2014 2017

CTR Partnership, L.P.

Pinckneyville Nursing & Rehabilitation Center

Pinckneyville, IL

Pinckneyville Nursing & Rehabilitation Center Pinckneyville, IL — 406 3,411 — 406 3,411 3,817 ( 327 ) 2014 2017

CTR Partnership, L.P.

Wellspring Health and Rehabilitation of Cascadia

Wellspring Health and Rehabilitation of Cascadia Nampa, ID — 774 5,044 111 774 5,155 5,929 ( 462 ) 2011 2017

CTR Partnership, L.P.

The Rio at Fox Hollow

Brownsville, TX

The Rio at Fox Hollow Brownsville, TX — 1,178 12,059 — 1,178 12,059 13,237 ( 1,080 ) 2016 2017

CTR Partnership, L.P.

The Rio at Cabezon

Albuquerque, NM

The Rio at Cabezon Albuquerque, NM — 2,055 9,749 — 2,055 9,749 11,804 ( 873 ) 2016 2017

CTR Partnership, L.P.

Eldorado Rehab & Healthcare

Eldorado Rehab & Healthcare Eldorado, IL — 940 2,093 — 940 2,093 3,033 ( 183 ) 1993 2017

CTR Partnership, L.P.

Secora Health and Rehabilitation of Cascadia

Secora Health and Rehabilitation of Cascadia Portland, OR — 1,481 2,216 110 1,481 2,326 3,807 ( 194 ) 2012 2017

CTR Partnership, L.P.

Mountain Valley

Mountain Valley Kellogg, ID — 916 7,874 — 916 7,874 8,790 ( 656 ) 1971 2017

CTR Partnership, L.P.

Caldwell Care

Caldwell Care Caldwell, ID — 906 7,020 516 906 7,536 8,442 ( 585 ) 1947 2017

CTR Partnership, L.P.

Canyon West Caldwell, ID — 312 10,410 431 312 10,841 11,153 ( 868 ) 1969 2017

CTR Partnership, L.P.

Lewiston Health and Rehabilitation

Lewiston Health and Rehabilitation Lewiston, ID — 625 12,087 152 625 12,239 12,864 ( 982 ) 1964 2017

CTR Partnership, L.P.

The Orchards Nampa, ID — 785 8,923 47 785 8,970 9,755 ( 725 ) 1958 2017

CTR Partnership, L.P.

Weiser Care Weiser, ID — 80 4,419 30 80 4,449 4,529 ( 359 ) 1964 2017

CTR Partnership, L.P.

Aspen Park Moscow, ID — 698 5,092 274 698 5,366 6,064 ( 438 ) 1965 2017

CTR Partnership, L.P.

Ridgmar Medical Lodge

Fort Worth, TX

Ridgmar Medical Lodge Fort Worth, TX — 681 6,587 1,256 681 7,843 8,524 ( 702 ) 2006 2017

CTR Partnership, L.P.

Mansfield Medical Lodge

Mansfield, TX

Mansfield Medical Lodge Mansfield, TX — 607 4,801 1,178 607 5,979 6,586 ( 513 ) 2006 2017

CTR Partnership, L.P.

Grapevine Medical Lodge

Grapevine, TX

Grapevine Medical Lodge Grapevine, TX — 1,602 4,536 891 1,602 5,427 7,029 ( 486 ) 2006 2017

CTR Partnership, L.P.

Brookfield Health and Rehab

Battle Ground, WA

Brookfield Health and Rehab Battle Ground, WA — 320 500 — 320 500 820 ( 42 ) 2012 2017

CTR Partnership, L.P.

The Oaks at Forest Bay

The Oaks at Lakewood Tacoma, WA — 1,000 1,779 — 1,000 1,779 2,779 ( 145 ) 1989 2017

CTR Partnership, L.P.

The Oaks at Lakewood

The Oaks at Timberline Vancouver, WA — 445 869 — 445 869 1,314 ( 71 ) 1972 2017

CTR Partnership, L.P.

The Oaks at Timberline

Vancouver, WA

Providence Waterman Nursing Center San Bernardino, CA — 3,831 19,791 — 3,831 19,791 23,622 ( 1,608 ) 1967 2017

CTR Partnership, L.P.

Providence Waterman Nursing Center

San Bernardino, CA

Providence Orange Tree Riverside, CA — 2,897 14,700 — 2,897 14,700 17,597 ( 1,194 ) 1969 2017

CTR Partnership, L.P.

Providence Orange Tree

Riverside, CA

Providence Ontario Ontario, CA — 4,204 21,880 — 4,204 21,880 26,084 ( 1,778 ) 1980 2017

CTR Partnership, L.P.

Providence Ontario

Greenville Nursing & Rehabilitation Center Greenville, IL — 188 3,972 — 188 3,972 4,160 ( 366 ) 1973 2017

CTR Partnership, L.P.

Greenville Nursing & Rehabilitation Center

Greenville, IL

Copper Ridge Health and Rehabilitation Center Butte, MT — 220 4,974 — 220 4,974 5,194 ( 398 ) 2010 2018

CTR Partnership, L.P.

Copper Ridge Health and Rehabilitation Center

Prairie Heights Healthcare Center Aberdeen, SD — 1,372 7,491 — 1,372 7,491 8,863 ( 510 ) 1965 2018

CTR Partnership, L.P.

Prairie Heights Healthcare Center

The Meadows on University Fargo, ND — 989 3,275 — 989 3,275 4,264 ( 196 ) 1966 2018

CTR Partnership, L.P.

The Meadows on University

The Suites - Parker Parker, CO — 1,178 17,857 — 1,178 17,857 19,035 ( 952 ) 2012 2018

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

CTR Partnership, L.P.

The Suites - Parker

Huntington Park Nursing Center Huntington Park, CA — 3,131 8,876 299 3,131 9,175 12,306 ( 464 ) 1955 2019

CTR Partnership, L.P.

Huntington Park Nursing Center

Huntington Park, CA

Shoreline Care Center Oxnard, CA — 1,699 9,004 — 1,699 9,004 10,703 ( 443 ) 1962 2019

CTR Partnership, L.P.

Shoreline Care Center

Downey Care Center Downey, CA — 2,502 6,141 — 2,502 6,141 8,643 ( 303 ) 1967 2019

CTR Partnership, L.P.

Downey Care Center

Courtyard Healthcare Center Davis, CA — 2,351 9,256 — 2,351 9,256 11,607 ( 464 ) 1969 2019

Gulf Coast Buyer 1 LLC Alpine Skilled Nursing and Rehabilitation Ruston, LA — 2,688 23,825 — 2,688 23,825 26,513 ( 1,100 ) 2014 2019

Gulf Coast Buyer 1 LLC The Bradford Skilled Nursing and Rehabilitation Shreveport, LA — 3,758 21,325 17 3,758 21,342 25,100 ( 992 ) 1980 2019

Gulf Coast Buyer 1 LLC Colonial Oaks Skilled Nursing and Rehabilitation Bossier City, LA — 1,635 21,180 — 1,635 21,180 22,815 ( 954 ) 2013 2019

Gulf Coast Buyer 1 LLC The Guest House Skilled Nursing and Rehabilitation Shreveport, LA — 3,437 20,889 184 3,437 21,073 24,510 ( 984 ) 2006 2019

Gulf Coast Buyer 1 LLC Pilgrim Manor Skilled Nursing and Rehabilitation Bossier City, LA — 2,979 24,617 — 2,979 24,617 27,596 ( 1,123 ) 2008 2019

Gulf Coast Buyer 1 LLC Shreveport Manor Skilled Nursing and Rehabilitation Shreveport, LA — 676 10,238 361 676 10,599 11,275 ( 481 ) 2008 2019

Gulf Coast Buyer 1 LLC Booker T.

Washington Skilled Nursing and Rehabilitation Shreveport, LA — 2,452 9,148 113 2,452 9,261 11,713 ( 447 ) 2013 2019

Gulf Coast Buyer 1 LLC Legacy West Rehabilitation and Healthcare Corsicana, TX — 120 6,682 409 120 7,091 7,211 ( 340 ) 2002 2019

Gulf Coast Buyer 1 LLC Legacy at Jacksonville Jacksonville, TX — 173 7,481 127 173 7,608 7,781 ( 369 ) 2006 2019

Gulf Coast Buyer 1 LLC Pecan Tree Rehabilitation and Healthcare Gainesville, TX — 219 10,097 285 219 10,382 10,601 ( 481 ) 1990 2019

Lakewest SNF Realty, LLC Lakewest Rehabilitation and Skilled Care Dallas, TX — — 6,905 — — 6,905 6,905 ( 322 ) 2011 2019

CTR Partnership, L.P.

Courtyard Healthcare Center

Gulf Coast Buyer 1 LLC

Alpine Skilled Nursing and Rehabilitation

Gulf Coast Buyer 1 LLC

The Bradford Skilled Nursing and Rehabilitation

Shreveport, LA

Gulf Coast Buyer 1 LLC

Colonial Oaks Skilled Nursing and Rehabilitation

Bossier City, LA

Gulf Coast Buyer 1 LLC

The Guest House Skilled Nursing and Rehabilitation

Shreveport, LA

Gulf Coast Buyer 1 LLC

Pilgrim Manor Skilled Nursing and Rehabilitation

Bossier City, LA

Gulf Coast Buyer 1 LLC

Shreveport Manor Skilled Nursing and Rehabilitation

Shreveport, LA

Gulf Coast Buyer 1 LLC

Washington Skilled Nursing and Rehabilitation

Shreveport, LA

Gulf Coast Buyer 1 LLC

Legacy West Rehabilitation and Healthcare

Corsicana, TX

Gulf Coast Buyer 1 LLC

Legacy at Jacksonville

Jacksonville, TX

Gulf Coast Buyer 1 LLC

Pecan Tree Rehabilitation and Healthcare

Gainesville, TX

Lakewest SNF Realty, LLC

Lakewest Rehabilitation and Skilled Care

Cascadia of Nampa Nampa, ID — 880 14,117 — 880 14,117 14,997 ( 594 ) 2017 2019

CTR Partnership, L.P.

Cascadia of Nampa

Valley Skilled Nursing Modesto, CA — 798 7,671 — 798 7,671 8,469 ( 249 ) 2016 2019

CTR Partnership, L.P.

Valley Skilled Nursing

Cascadia of Boise Boise, ID — 1,597 15,692 — 1,597 15,692 17,289 ( 412 ) 2018 2020

CTR Partnership, L.P.

Cooney Healthcare and Rehabilitation Helena, MT — 867 7,431 — 867 7,431 8,298 ( 65 ) 1984 2020

CTR Partnership, L.P.

Elkhorn Healthcare and Rehabilitation Clancy, MT — 183 7,380 — 183 7,380 7,563 ( 66 ) 1960 2020

CTR Partnership, L.P.

Beacon Harbor Healthcare and Rehabilitation Rockwall, TX — 1,295 17,069 — 1,295 17,069 18,364 ( 76 ) 1996 2020

CTR Partnership, L.P.

Pleasant Manor Healthcare and Rehabilitation Waxahachie, TX — 629 7,433 — 629 7,433 8,062 ( 33 ) 1972 2020

CTR Partnership, L.P.

Rowlett Health and Rehabilitation Center Rowlett, TX — 1,036 10,516 — 1,036 10,516 11,552 ( 47 ) 1990 2020

— 145,155 963,927 92,226 144,145 1,057,163 1,201,307 ( 194,390 )

Multi-Service Campus Properties:

Ensign Southland LLC

Southland Care

Wisteria Health Holdings LLC

Mission CCRC LLC

Joseph's Villa

Salt Lake City, UT

Wayne Health Holdings LLC

Careage of Wayne

4th Street Holdings LLC

West Bend Care Center

West Bend, IA

Big Sioux River Health Holdings LLC

Hillcrest Health

Prairie Health Holdings LLC

Colonial Manor of Randolph

Salmon River Health Holdings LLC

Discovery Care Center

Ensign Southland LLC Southland Care Norwalk, CA — 966 5,082 2,213 966 7,295 8,261 ( 5,292 ) 2011 1999

Mission CCRC LLC St.

Joseph's Villa Salt Lake City, UT — 1,962 11,035 464 1,962 11,499 13,461 ( 3,327 ) 1994 2011

Wayne Health Holdings LLC Careage of Wayne Wayne, NE — 130 3,061 122 130 3,183 3,313 ( 994 ) 1978 2011

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

4th Street Holdings LLC West Bend Care Center West Bend, IA — 180 3,352 — 180 3,352 3,532 ( 991 ) 2006 2011

Big Sioux River Health Holdings LLC Hillcrest Health Hawarden, IA — 110 3,522 75 110 3,597 3,707 ( 998 ) 1974 2011

Prairie Health Holdings LLC Colonial Manor of Randolph Randolph, NE — 130 1,571 22 130 1,593 1,723 ( 758 ) 2011 2011

Salmon River Health Holdings LLC Discovery Care Center Salmon, ID — 168 2,496 — 168 2,496 2,664 ( 525 ) 2012 2012

CTR Partnership, L.P.

Centerville Campus

Centerville Senior Independent Living Dayton, OH — 3,912 22,458 117 3,781 22,706 26,487 ( 3,018 ) 2007 2015

CTR Partnership, L.P.

Liberty Nursing Center

Liberty Nursing Center of Willard Willard, OH — 143 11,097 50 143 11,147 11,290 ( 1,477 ) 1985 2015

CTR Partnership, L.P.

Premier Estates of Middletown

Middletown, OH

Premier Estates of Middletown/Premier Retirement Estates of Middletown Middletown, OH — 990 7,484 172 990 7,656 8,646 ( 1,025 ) 1985 2015

CTR Partnership, L.P.

Premier Estates of Norwood Towers

Premier Estates of Norwood Towers/Premier Retirement Estates of Norwood Towers Norwood, OH — 1,316 10,071 499 1,316 10,570 11,886 ( 1,249 ) 1991 2016

CTR Partnership, L.P.

Turlock Nursing and Rehabilitation Center

Turlock Nursing and Rehabilitation Center Turlock, CA — 1,258 16,526 — 1,258 16,526 17,784 ( 1,825 ) 1986 2016

CTR Partnership, L.P.

Bridgeport Medical Lodge

Bridgeport, TX

Bridgeport Medical Lodge Bridgeport, TX — 980 27,917 — 980 27,917 28,897 ( 2,850 ) 2014 2016

CTR Partnership, L.P.

The Villas at Saratoga

The Villas at Saratoga Saratoga, CA — 8,709 9,736 1,396 8,709 11,132 19,841 ( 617 ) 2004 2018

CTR Partnership, L.P.

Madison Park Healthcare

Huntington, WV

Madison Park Healthcare Huntington, WV — 601 6,385 — 601 6,385 6,986 ( 359 ) 1924 2018

CTR Partnership, L.P.

Oakview Heights Nursing & Rehabilitation Center

Gulf Coast Buyer 1 LLC

Spring Lake Skilled Nursing and Rehabilitation

Shreveport, LA

Gulf Coast Buyer 1 LLC

The Village at Heritage Oaks

Corsicana, TX

Oakview Heights Nursing & Rehabilitation Center Mt.

Carmel, IL — 298 8,393 — 298 8,393 8,691 ( 455 ) 2004 2019

Gulf Coast Buyer 1 LLC Spring Lake Skilled Nursing and Rehabilitation Shreveport, LA — 3,217 21,195 2,525 3,217 23,720 26,937 ( 1,008 ) 2008 2019

Gulf Coast Buyer 1 LLC The Village at Heritage Oaks Corsicana, TX — 143 11,429 549 143 11,978 12,121 ( 560 ) 2007 2019

CTR Partnership, L.P.

City Creek Post-Acute and Assisted Living

Sacramento, CA

City Creek Post-Acute and Assisted Living Sacramento, CA — 3,980 10,106 408 3,980 10,514 14,494 ( 344 ) 1990 2019

CTR Partnership, L.P.

Crestwood Health and Rehabilitation Center Wills Point, TX — 143 6,075 — 143 6,075 6,218 ( 28 ) 1980 2020

— 29,336 198,991 8,612 29,205 207,734 236,939 ( 27,700 )

Assisted and Independent Living Properties:

Avenue N Holdings LLC

Cambridge ALF

Rosenburg, TX

Moenium Holdings LLC

Lafayette Health Holdings LLC

Chateau Des Mons

Englewood, CO

Expo Park Health Holdings LLC

Canterbury Gardens

Wisteria Health Holdings LLC

Everglades Health Holdings LLC

Flamingo Health Holdings LLC

Desert Springs ALF

Las Vegas, NV

18th Place Health Holdings LLC

Boardwalk Health Holdings LLC

Willows Health Holdings LLC

Cascade Plaza

Lockwood Health Holdings LLC

Santa Maria, CA

Saratoga Health Holdings LLC

Sky Holdings AZ LLC

Desert Sky Assisted Living

Lemon River Holdings LLC

The Grove Assisted Living

Riverside, CA

Mission CCRC LLC

Joseph's Villa IND

Salt Lake City, UT

Avenue N Holdings LLC Cambridge ALF Rosenburg, TX — 124 2,301 392 124 2,693 2,817 ( 1,367 ) 2007 2006

Moenium Holdings LLC Grand Court Mesa, AZ — 1,893 5,268 1,210 1,893 6,478 8,371 ( 3,453 ) 1986 2007

Lafayette Health Holdings LLC Chateau Des Mons Englewood, CO — 420 1,160 189 420 1,349 1,769 ( 433 ) 2011 2009

Expo Park Health Holdings LLC Canterbury Gardens Aurora, CO — 570 1,692 248 570 1,940 2,510 ( 858 ) 1986 2010

Wisteria Health Holdings LLC Wisteria IND Abilene, TX — 244 3,241 81 244 3,322 3,566 ( 1,487 ) 2008 2011

Everglades Health Holdings LLC Lexington Ventura, CA — 1,542 4,012 113 1,542 4,125 5,667 ( 894 ) 1990 2011

Flamingo Health Holdings LLC Desert Springs ALF Las Vegas, NV — 908 4,767 281 908 5,048 5,956 ( 2,509 ) 1986 2011

18th Place Health Holdings LLC Rose Court Phoenix, AZ — 1,011 2,053 490 1,011 2,543 3,554 ( 937 ) 1974 2011

Boardwalk Health Holdings LLC Park Place Reno, NV — 367 1,633 51 367 1,684 2,051 ( 510 ) 1993 2012

Willows Health Holdings LLC Cascade Plaza Redmond, WA — 2,835 3,784 395 2,835 4,179 7,014 ( 1,199 ) 2013 2013

Lockwood Health Holdings LLC Santa Maria Santa Maria, CA — 1,792 2,253 585 1,792 2,838 4,630 ( 1,248 ) 1967 2013

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

Saratoga Health Holdings LLC Lake Ridge Orem, UT — 444 2,265 176 444 2,441 2,885 ( 464 ) 1995 2013

Sky Holdings AZ LLC Desert Sky Assisted Living Glendale, AZ — 61 304 372 61 676 738 ( 466 ) 2004 2002

Lemon River Holdings LLC The Grove Assisted Living Riverside, CA — 342 802 3,360 342 4,162 4,504 ( 2,616 ) 2012 2009

Mission CCRC LLC St.

Joseph's Villa IND Salt Lake City, UT — 411 2,312 258 411 2,570 2,981 ( 1,432 ) 1994 2011

CTR Partnership, L.P.

Prelude Cottages of Woodbury

Prelude Cottages of Woodbury Woodbury, MN — 430 6,714 — 430 6,714 7,144 ( 1,007 ) 2011 2014

CTR Partnership, L.P.

English Meadows Senior Living Community

Christiansburg, VA

English Meadows Senior Living Community Christiansburg, VA — 250 6,114 43 250 6,157 6,407 ( 919 ) 2011 2014

CTR Partnership, L.P.

Bristol Court Assisted Living

Saint Petersburg, FL

Bristol Court Assisted Living Saint Petersburg, FL — 645 7,322 421 645 7,512 8,157 ( 1,013 ) 2010 2015

CTR Partnership, L.P.

Asbury Place Assisted Living

Pensacola, FL

Asbury Place Assisted Living Pensacola, FL — 212 4,992 240 212 5,213 5,425 ( 672 ) 1997 2015

CTR Partnership, L.P.

New Haven Assisted Living of San Angelo

San Angelo, TX

New Haven Assisted Living of San Angelo San Angelo, TX — 284 4,478 — 284 4,478 4,762 ( 550 ) 2012 2016

CTR Partnership, L.P.

Lamplight Inn of Fort Wayne

Fort Wayne, IN

Lamplight Inn of Fort Wayne Fort Wayne, IN — 452 8,703 214 452 8,889 9,341 ( 1,052 ) 2015 2016

CTR Partnership, L.P.

Lamplight Inn of West Allis

West Allis, WI

Lamplight Inn of West Allis West Allis, WI — 97 6,102 173 97 6,255 6,352 ( 737 ) 2013 2016

CTR Partnership, L.P.

Lamplight Inn of Baltimore

Baltimore, MD

Lamplight Inn of Baltimore Baltimore, MD — — 3,697 267 — 3,919 3,919 ( 447 ) 2014 2016

CTR Partnership, L.P.

Fort Myers Assisted Living

Fort Myers, FL

Fort Myers Assisted Living Fort Myers, FL — 1,489 3,531 765 1,489 4,665 6,154 ( 455 ) 1980 2016

CTR Partnership, L.P.

English Meadows Elks Home Campus

English Meadows Elks Home Campus Bedford, VA — 451 9,023 268 451 9,291 9,742 ( 1,107 ) 2014 2016

CTR Partnership, L.P.

Croatan Village

Croatan Village New Bern, NC — 312 6,919 — 312 6,919 7,231 ( 807 ) 2010 2016

CTR Partnership, L.P.

Countryside Village

Pikeville, NC

Countryside Village Pikeville, NC — 131 4,157 — 131 4,157 4,288 ( 485 ) 2011 2016

CTR Partnership, L.P.

The Pines of Clarkston

Village of Clarkston, MI

The Pines of Clarkston Village of Clarkston, MI — 603 9,326 — 603 9,326 9,929 ( 1,069 ) 2010 2016

CTR Partnership, L.P.

The Pines of Goodrich

The Pines of Goodrich Goodrich, MI — 241 4,112 9 241 4,121 4,362 ( 471 ) 2014 2016

CTR Partnership, L.P.

The Pines of Burton

The Pines of Burton Burton, MI — 492 9,199 — 492 9,199 9,691 ( 1,054 ) 2014 2016

CTR Partnership, L.P.

The Pines of Lapeer

The Pines of Lapeer Lapeer, MI — 302 5,773 — 302 5,773 6,075 ( 662 ) 2008 2016

CTR Partnership, L.P.

Arbor Place Lodi, CA — 392 3,605 — 392 3,605 3,997 ( 398 ) 1984 2016

CTR Partnership, L.P.

Applewood of Brookfield

Brookfield, WI

Applewood of Brookfield Brookfield, WI — 493 14,002 — 493 14,002 14,495 ( 1,371 ) 2013 2017

CTR Partnership, L.P.

Applewood of New Berlin

New Berlin, WI

Applewood of New Berlin New Berlin, WI — 356 10,812 — 356 10,812 11,168 ( 1,059 ) 2016 2017

CTR Partnership, L.P.

Tangerine Cove of Brooksville

Brooksville, FL

Tangerine Cove of Brooksville Brooksville, FL — 995 927 463 995 1,364 2,359 ( 114 ) 1984 2017

CTR Partnership, L.P.

Memory Care Cottages in White Bear Lake

White Bear Lake, MN

Memory Care Cottages in White Bear Lake White Bear Lake, MN — 1,611 5,633 — 1,611 5,633 7,244 ( 493 ) 2016 2017

CTR Partnership, L.P.

Culpepper, VA

Culpeper Culpepper, VA — 318 3,897 85 318 3,982 4,300 ( 374 ) 1997 2017

CTR Partnership, L.P.

Louisa Louisa, VA — 407 4,660 97 407 4,757 5,164 ( 455 ) 2002 2017

CTR Partnership, L.P.

Warrenton, VA

Warrenton Warrenton, VA — 1,238 7,247 98 1,238 7,345 8,583 ( 671 ) 1999 2017

CTR Partnership, L.P.

Vista Del Lago

Escondido, CA

Independent Living Properties:

Hillview Health Holdings LLC

Lakeland Hills

Vista Del Lago Escondido, CA — 4,362 7,997 — 4,362 7,997 12,359 ( 279 ) 2015 2019

CTR Partnership, L.P.

Inn at Barton Creek Bountiful, UT — 2,479 4,804 15 2,479 4,819 7,298 ( 119 ) 1999 2020

— 32,006 201,593 11,359 32,006 212,952 244,959 ( 37,713 )

— $ 206,497 $ 1,364,511 $ 112,197 $ 205,356 $ 1,477,849 $ 1,683,205 $ ( 259,803 )

(1) The aggregate cost of real estate for federal income tax purposes was $ 1.7 billion .

3 unchanged sentences

Year Ended December 31,

2020 2019 2018

Balance at the beginning of the period $ 1,605,081 $ 1,368,157 $ 1,266,484

Acquisitions 84,630 318,070 106,208

Improvements 7,223 3,103 7,230

Impairment — ( 21,465 ) —

Sales of real estate ( 13,729 ) ( 62,784 ) ( 11,765 )

3 unchanged sentences

Depreciation expense ( 41,914 ) ( 40,373 ) ( 34,676 )

Impairment — 5,220 —

Sales of real estate 2,470 720 935

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(dollars in thousands)

Contractual Interest Rate

Maturity Date

Periodic Payment Terms

Principal Balance

Book Value (3)

Description Contractual Interest Rate Maturity Date Periodic Payment Terms Prior Liens Principal Balance Book Value (2)

Carrying Amount of Loans Subject to Delinquent Principal or Interest

First Mortgage:

Ohio (3 SNF facilities)

Third Mortgage:

California (1 SNF facility)

Loan Loss Allowance

Mezzanine Loan:

Virginia (9 SNF facilities) 12.0 % 2025 (1) $ 110,000 (3) $ 15,000 $ 15,000 N/A

$ 110,000 $ 15,000 $ 15,000

(1) Interest is due monthly, and principal is due at the maturity date.

(2) The aggregate cost of investments in real estate mortgage loans for federal income tax purposes was $ 15.0 million.

Changes in mortgage loans are summarized as follows:

(3) The first mortgage loans on these properties are not held by the Company.

Accordingly, the amounts of the prior liens at December 31, 2020 are estimated.

Changes in mortgage loans are summarized as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Balance at beginning of period $ 29,500 $ 12,375 $ 12,517

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures