CareTrust REIT, Inc. 10-K

ITEM 9A. Controls and Procedures Disclosure Controls and Procedures We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of December 31, 2020, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020. 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 52 Table of Contents 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; (ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of the Independent Registered Public Accounting Firm The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein. 53 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of CareTrust REIT Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of CareTrust REIT, Inc. and subsidiaries (the “Company”) 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 (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 10, 2021 , expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Costa Mesa, California February 10, 2021 54 Table of Contents ITEM 9B. 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. Mr. Sedgwick will continue to serve as Chief Operating Officer. Mr. 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. Mr. Stapley will continue to serve as Chief Executive Officer and Chairman of the Board of Directors. PART III ITEM 10. Directors, Executive Officers and Corporate Governance The information required under Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders. Code of Conduct and Ethics We have adopted a code of business conduct and ethics that applies to all employees, including employees of our subsidiaries, as well as each member of our Board of Directors. The code of business conduct and ethics is available at our website at www.caretrustreit.com under the Investors-Corporate Governance section. We intend to satisfy any disclosure requirement under applicable rules of the Securities and Exchange Commission or Nasdaq Stock Market regarding an amendment to, or waiver from, a provision of this code of business conduct and ethics by posting such information on our website, at the address specified above. ITEM 11. Executive Compensation The information required under Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required under Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders. ITEM 13. Certain Relationships and Related Transactions, and Director Independence The information required under Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders. ITEM 14. Principal Accountant Fees and Services The information required under Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2020 in connection with our 2021 Annual Meeting of Stockholders. 55 Table of Contents PART IV ITEM 15. Exhibits, Financial Statements and Financial Statement Schedules (a)(1) Financial Statements See Index to Consolidated Financial Statements on page F-1 of this report. (a)(2) Financial Statement Schedules Schedule III: Real Estate Assets and Accumulated Depreciation Schedule IV: Mortgage Loans on Real Estate Note: 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 2.1 Membership Interest Purchase Agreement, dated as of January 27, 2019, by and between BME Texas Holdings LLC and CTR Partnership, L.P. (incorporated by reference to Exhibit 2.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on April 2, 2019). 3.1 Articles of Amendment and Restatement of CareTrust REIT, Inc. (incorporated by reference to Exhibit 3.1 to CareTrust REIT, Inc.’s Registration Statement on Form 10, filed on May 13, 2014). 3.2 Articles of Amendment, dated May 30, 2018, to the Articles of Amendment and Restatement of CareTrust REIT, Inc. (incorporated by reference to Exhibit 3.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K filed on May 31, 2018). 3.3 Amended and Restated Bylaws of CareTrust REIT, Inc. (incorporated by reference to Exhibit 3.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K filed on March 7, 2019). 4.1 Indenture, dated as of May 24, 2017, among CTR Partnership, L.P. and CareTrust Capital Corp., as Issuers, the guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on May 24, 2017). 4.2 First Supplemental Indenture, dated as of May 24, 2017, to the Indenture dated as of May 24, 2017, among CTR Partnership, L.P. and CareTrust Capital Corp., as Issuers, the guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the CareTrust REIT, Inc.’s Current Report on Form 8-K filed on May 24, 2017). 4.3 Form of 5.25% Senior Note due 2025 (included in Exhibit 4.2). 4.4 Specimen Stock Certificate of CareTrust REIT, Inc. (incorporated by reference to Exhibit 4.1 to CareTrust REIT, Inc.’s Registration Statement on Form 10, filed on April 15, 2014). 4.5 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). 10.1 Form of Master Lease by and among certain subsidiaries of The Ensign Group, Inc. and certain subsidiaries of CareTrust REIT, Inc. (incorporated by reference to Exhibit 10.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). 10.2 Form of Guaranty of Master Lease by The Ensign Group, Inc. in favor of certain subsidiaries of CareTrust REIT, Inc., as landlords under the Ensign Master Leases (incorporated by reference to Exhibit 10.2 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). 10.3 Tax Matters Agreement, dated as of May 30, 2014, by and between The Ensign Group, Inc. and CareTrust REIT, Inc. (incorporated by reference to Exhibit 10.5 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). 10.4 Amended and Restated Credit and Guaranty Agreement, dated February 8, 2019 by and among CTR Partnership, L.P., as borrower, CareTrust REIT, Inc., as guarantor, CareTrust GP, LLC and the other guarantors named therein and KeyBank National Association, as administrative agent, an issuing lender and swingline lender and the other parties thereto. (incorporated by reference to Exhibit 10.1 to the CareTrust REIT, Inc.’s Current Report on Form 8-K filed on February 11, 2019). Table of Contents 10.5 First Amendment to Amended and Restated Credit and Guaranty Agreement, dated July 23, 2019, by and among CTR Partnership, L.P., as borrower, CareTrust REIT, Inc., as guarantor, CareTrust GP, LLC, and other guarantors named therein, the Lenders (as defined therein) from time to time party thereto and KeyBank National Association, as administrative agent, an issuing lender and swingline lender (incorporated by reference to Exhibit 10.1 to the CareTrust REIT, Inc.’s Quarterly Report on Form 10-Q filed on August 6, 2019). 10.6 Amended and Restated Partnership Agreement of CTR Partnership, L.P. (incorporated by reference to Exhibit 3.4 to CareTrust REIT, Inc.’s Registration Statement on Form S-4, filed on August 28, 2014). +10.7 Form of Indemnification Agreement between CareTrust REIT, Inc. and its directors and officers (incorporated by reference to Exhibit 10.11 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). +10.8 Incentive Award Plan (incorporated by reference to Exhibit 10.9 to CareTrust REIT, Inc.’s Registration Statement on Form 10, filed on May 13, 2014). +10.9 Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.14 to CareTrust REIT, Inc.’s Annual Report on Form 10-K, filed on February 11, 2015). +10.10 Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.15 to CareTrust REIT, Inc.’s Annual Report on Form 10-K, filed on February 11, 2015). +10.11 Form of Change in Control and Severance Agreement (incorporated by reference to Exhibit 10.1 to CareTrust REIT, Inc’s Current Report on Form 8-K filed on February 11, 2019). *21.1 List of Subsidiaries of CareTrust REIT, Inc. *23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. *23.2 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. *31.1 Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *31.2 Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *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) * Filed herewith. ** Furnished herewith. + Management contract or compensatory plan or arrangement. ITEM 16. 10-K Summary None. 57 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CARETRUST REIT, INC. By: / S / GREGORY K. STAPLEY Gregory K. Stapley Chief Executive Officer Dated: February 10, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ GREGORY K. STAPLEY Director and Chief Executive Officer (Principal Executive Officer) February 10, 2021 Gregory K. Stapley /s/ WILLIAM M. WAGNER Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) February 10, 2021 William M. Wagner /s/ ALLEN C. BARBIERI Director February 10, 2021 Allen C. Barbieri /s/ JON D. KLINE Director February 10, 2021 Jon D. Kline /s/ DIANA LAING Director February 10, 2021 Diana Laing /s/ SPENCER PLUMB Director February 10, 2021 Spencer Plumb 58 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firms with respect to CareTrust REIT, Inc. F- 2 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 F-29 Schedule IV: Mortgage Loans on Real Estate F-37 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of CareTrust REIT, Inc. Opinion on the Financial Statements 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. Basis for Opinion 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 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 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 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 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 The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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 Long-Lived Assets — Refer to Note 2 to the financial statements Critical Audit Matter Description 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 F-2 Table of Contents 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 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 Costa Mesa, California February 10, 2021 We have served as the Company's auditor since 2019. F-3 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of CareTrust REIT, Inc. Opinion on the Financial Statements 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. Basis for Opinion 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 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 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 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 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. /s/ ERNST & YOUNG LLP We served as the Company’s auditor from 2014 to 2019. Irvine, California February 13, 2019 F-4 Table of Contents CARETRUST REIT, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2020 2019 Assets: Real estate investments, net $ 1,448,099 $ 1,414,200 Other real estate investments, net 15,000 33,300 Assets held for sale, net 7,226 34,590 Cash and cash equivalents 18,919 20,327 Accounts and other receivables, net 1,823 2,571 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: Senior unsecured notes payable, net $ 296,669 $ 295,911 Senior unsecured term loan, net 198,925 198,713 Unsecured revolving credit facility 50,000 60,000 Accounts payable and accrued liabilities 19,572 14,962 Dividends payable 24,251 21,684 Total liabilities 589,417 591,270 Commitments and contingencies (Note 10) Equity: Preferred stock, $ 0.01 par value; 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; 500,000,000 shares authorized, 95,215,797 and 95,103,270 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively 952 951 Additional paid-in capital 1,164,402 1,162,990 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 See accompanying notes to consolidated financial statements. F-5 Table of Contents CARETRUST REIT, INC. CONSOLIDATED INCOME STATEMENTS (in thousands, except per share amounts) Year Ended December 31, 2020 2019 2018 Revenues: Rental income $ 173,612 $ 155,667 $ 140,073 Tenant reimbursements — — 11,924 Independent living facilities 2,077 3,389 3,379 Interest and other income 2,643 4,345 1,565 Total revenues 178,332 163,401 156,941 Expenses: Depreciation and amortization 52,760 51,822 45,766 Interest expense 23,661 28,125 27,860 Property taxes 2,836 3,048 11,924 Independent living facilities 1,869 2,898 2,964 Impairment of real estate investments — 16,692 — Provision for loan losses — 1,076 — General and administrative 16,302 15,158 12,555 Total expenses 97,428 118,819 101,069 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. F-6 Table of Contents CARETRUST REIT, INC. CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except share and per share amounts) Common Stock Additional Paid-in Capital Cumulative Distributions in Excess of Earnings Total Equity Shares Amount Balance as of December 31, 2017 75,478,202 $ 755 $ 783,237 $ ( 189,375 ) $ 594,617 Issuance of common stock, net 10,264,981 103 179,783 — 179,886 Vesting of restricted common stock, net of shares withheld for employee taxes 123,861 1 ( 1,290 ) — ( 1,289 ) Amortization of stock-based compensation — — 3,848 — 3,848 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 Issuance of common stock, net 9,100,250 91 195,833 — 195,924 Vesting of restricted common stock, net of shares withheld for employee taxes 135,976 1 ( 2,525 ) — ( 2,524 ) Amortization of stock-based compensation — — 4,104 — 4,104 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 Issuance of common stock, net — — ( 404 ) — ( 404 ) Vesting of restricted common stock, net of shares withheld for employee taxes 112,527 1 ( 1,996 ) — ( 1,995 ) Amortization of stock-based compensation — — 3,812 — 3,812 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 See accompanying notes to consolidated financial statements. F-7 Table of Contents CARETRUST REIT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) 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: Depreciation and amortization (including below-market ground leases) 52,819 51,866 45,783 Amortization of deferred financing costs 1,950 2,003 1,938 Amortization of stock-based compensation 3,790 4,104 3,848 Straight-line rental income ( 77 ) ( 1,385 ) ( 2,333 ) Adjustment for collectibility of rental income — 11,774 — Noncash interest income — ( 797 ) ( 238 ) Loss (gain) on sale of real estate 37 ( 1,777 ) ( 2,051 ) Interest income distribution from other real estate investment 1,346 463 — Impairment of real estate investments — 16,692 — Provision for loan losses — 1,076 — Change in operating assets and liabilities: Accounts and other receivables, net 825 ( 6,283 ) ( 3,800 ) Prepaid expenses and other assets, net 387 ( 495 ) ( 270 ) Accounts payable and accrued liabilities 3,791 2,695 ( 1,443 ) Net cash provided by operating activities 145,735 126,295 99,357 Cash flows from investing activities: Acquisitions of real estate, net of deposits applied ( 89,650 ) ( 321,458 ) ( 111,640 ) 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 ) Principal payments received on real estate mortgage and other loans receivable 80,928 24,283 3,227 Repayment of other real estate investment 2,327 2,204 — 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 Net cash used in investing activities ( 41,582 ) ( 316,007 ) ( 115,069 ) Cash flows from financing activities: 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 term loan — ( 100,000 ) — Payments on unsecured revolving credit facility ( 75,000 ) ( 278,000 ) ( 135,000 ) Payments of deferred financing costs — ( 4,534 ) — Net-settle adjustment on restricted stock ( 1,996 ) ( 2,524 ) ( 1,288 ) Dividends paid on common stock ( 93,161 ) ( 80,619 ) ( 62,999 ) 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 Cash and cash equivalents, beginning of period 20,327 36,792 6,909 Cash and cash equivalents, end of period $ 18,919 $ 20,327 $ 36,792 Supplemental disclosures of cash flow information: Interest paid $ 21,691 $ 26,005 $ 25,941 Supplemental schedule of noncash investing and financing activities: Increase in dividends payable $ 2,568 $ 3,900 $ 3,739 Right-of-use asset obtained in exchange for new operating lease obligation $ 599 $ 1,010 $ — Transfer of pre-acquisition costs to acquired assets $ 168 $ 242 $ — Sale of real estate settled with notes receivable $ 32,400 $ 27,500 $ — See accompanying notes to consolidated financial statements. F-8 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION 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, 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation —The accompanying consolidated financial statements of the Company reflect, for all periods presented, the historical financial position, results of operations and cash flows of the Company and its wholly-owned subsidiaries prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany transactions and account balances within the Company have been eliminated. 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. 33-10762. 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 F-9 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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 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. 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. 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. Management believes that the assumptions and estimates used in preparation of the underlying consolidated financial statements are reasonable. Actual results, however, could differ from those estimates and assumptions. Real Estate Acquisition Valuation — In accordance with ASC 805, Business Combinations , the Company’s acquisitions of real estate investments generally do not meet the definition of a business, and are treated as asset acquisitions. The assets acquired and liabilities assumed are measured at their acquisition date relative fair values. Acquisition costs are capitalized as incurred. The Company allocates the acquisition costs to the tangible assets, identifiable intangible assets/liabilities and assumed liabilities on a relative fair value basis. The Company assesses fair value based on available market information, such as capitalization and discount rates, comparable sale transactions and relevant per square foot or unit cost information. A real estate asset’s fair value may be determined utilizing cash flow projections that incorporate such market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, as well as market and economic conditions. The fair value of tangible assets of an acquired property is based on the value of the property as if it is vacant. As part of the Company’s real estate acquisitions, the Company may commit to provide contingent payments to a seller or lessee (e.g., an earn-out payable upon the applicable property achieving certain financial metrics). Typically, when the contingent payments are funded, cash rent is increased by the amount funded multiplied by a rate stipulated in the agreement. F-10 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. If the contingent payment is an earn-out provided to the lessee, the payment is recorded as a lease incentive and is amortized as a yield adjustment over the life of the lease. Impairment of Long-Lived Assets —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. All impairments are taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset. 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, and ceases depreciation. In the event of impairment, the 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. The Company’s ability to accurately estimate future cash flows and estimate and allocate fair values impacts the timing and recognition of impairments. While the Company believes its assumptions are reasonable, changes in these assumptions may have a material impact on financial results. 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. As the preferred member of the joint venture, the Company is not entitled to share in the joint venture’s earnings or losses. Rather, the Company is entitled to receive a preferred return, which is deferred if the cash flow of the joint venture is insufficient to pay all of the accrued preferred return. The unpaid accrued preferred return is added to the balance of the preferred equity investment up to the estimated economic outcome assuming a hypothetical liquidation of the book value of the joint venture. 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. 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 F-11 Table of Contents CARETRUST REIT, INC. 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 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 %. During the year ended December 31, 2019, the Company determined that the remaining contractual obligations under the bridge loan agreement to Priority were not collectible and recorded a $ 1.1 million provision for loan losses in the Company’s consolidated income statements. Income Taxes —The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). The Company believes it has been organized and has operated, and the Company intends to continue to operate, in a manner to qualify for taxation as a REIT under the Code. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute to its stockholders at least 90% of the Company’s annual REIT taxable income (computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes as qualifying dividends all of its REIT taxable income to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Real Estate Depreciation and Amortization —Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows: 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. The fair value of these investments is determined based on “Level 1” inputs, which consist of unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. The Company places its cash and short-term investments with high credit quality financial institutions. The Company’s cash and cash equivalents balance periodically exceeds federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts. Deferred Financing Costs —External costs incurred from placement of the Company’s debt are capitalized and amortized on a straight-line basis over the terms of the related borrowings, which approximates the effective interest method. For senior unsecured notes payable and the senior unsecured term loan, deferred financing costs are netted against the outstanding debt amounts on the balance sheet. 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 F-12 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. When financings are terminated, unamortized deferred financing costs, as well as charges incurred for the termination, are expensed at the time the termination is made. Gains and losses from the extinguishment of debt are presented within income from continuing operations in the Company’s consolidated income statements. Stock-Based Compensation —The Company accounts for share-based payment awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). ASC 718 requires all entities to apply a fair value-based measurement method in accounting for share-based payment transactions with directors, officers and employees. The Company measures and recognizes compensation expense for all share-based payment awards made to directors, officers and employees based on the grant date fair value, amortized over the requisite service period of the award. Net income reflects stock-based compensation expense of $ 3.8 million, $ 4.1 million and $ 3.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. Concentration of Credit Risk —The Company is subject to concentrations of credit risk consisting primarily of operating leases on its owned properties. See Note 11, Concentration of Risk , for a discussion of major operator concentration. Segment Disclosures —The Company is subject to disclosures about segments of an enterprise and related information in accordance with ASC Topic 280, Segment Reporting . The Company has one reportable segment consisting of investments in healthcare-related real estate assets. 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. Diluted EPS reflects the additional dilution for all potentially-dilutive securities. 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. 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. 3. 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, 2020 December 31, 2019 Land $ 205,356 $ 204,154 Buildings and improvements 1,477,849 1,400,927 Integral equipment, furniture and fixtures 97,836 93,005 Identified intangible assets 2,352 1,650 Real estate investments 1,783,393 1,699,736 Accumulated depreciation and amortization ( 335,294 ) ( 285,536 ) Real estate investments, net $ 1,448,099 $ 1,414,200 F-13 Table of Contents CARETRUST REIT, INC. 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, 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). 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, 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): Year Amount 2021 $ 174,400 2022 174,497 2023 174,193 2024 174,294 2025 174,396 Thereafter 1,026,675 $ 1,898,455 F-14 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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) $ 766 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 Option Type: A - Fixed base price plus a specified share on any appreciation. B - Fixed base price. C - Fixed capitalization rate on lease revenue. Notes: (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): For the Year Ended December 31, 2020 2019 Rental Income Contractual rent due (1) $ 171,309 $ 166,056 Straight-line rent 77 1,385 Adjustment for collectibility (2) — ( 11,774 ) Recovery of previously reversed rent (3) 1,047 — Lease termination revenue (4) 1,179 — 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. F-15 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recent Real Estate Acquisitions 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) Initial Annual Cash Rent (2) Number of Properties Number of Beds/Units (3) Skilled nursing $ 75,545 $ 6,453 6 715 Multi-service campuses 6,876 555 1 184 Assisted living 7,396 590 1 62 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) Initial Annual Cash Rent (2) Number of Properties Number of Beds/Units (3) Skilled nursing $ 254,760 $ 22,909 17 2,099 Multi-service campuses 59,344 5,203 4 762 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. (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 . 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 Pennant. 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 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. Ensign continues to guarantee obligations under the Ensign Master Leases and the Pennant Master Lease. 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. F-16 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Trillium Lease Termination and New Master Lease. On July 15, 2019, the Company terminated its existing master lease (the “Original Trillium Lease”) with affiliates of Trillium Healthcare Group, LLC (“Trillium”), which covered ten properties in Iowa, seven properties in Ohio and one property in Georgia. On August 16, 2019, the Company entered into a new master lease (the “New Trillium Lease”) with Trillium’s Iowa and Georgia affiliates covering the ten properties in Iowa and the one property in Georgia. 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 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 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. Trio Lease Amendment. On November 4, 2019, the Company amended its existing master lease with affiliates of Trio Healthcare, Inc. (“Trio”), which covered seven facilities based in Dayton, Ohio. The amended lease has a remaining initial term of approximately 13 years, with two five-year renewal options and CPI-based rent escalators. The annual base rent due under the amended lease with Trio is approximately $ 4.7 million and provides for payment of percentage rent if Trio achieves certain increases in portfolio revenue. Pristine Lease Termination. On February 27, 2018, the Company announced that it entered into a Lease Termination Agreement (the “LTA”) with Pristine for its nine remaining properties, with a target completion date of April 30, 2018. Under the LTA, Pristine agreed to continue to operate the facilities until possession could be surrendered, and the operations therein transitioned, to operator(s) designated by the Company. Among other things, Pristine also agreed to amend certain pending agreements to sell the rights to certain Ohio Medicaid beds (the “Bed Sales Agreements”) and cooperate with the Company to turn over any claim or control it might have had with respect to the sale process and the proceeds thereof, if any, to the Company. The transactions were timely completed, and on May 1, 2018, Trio took over operations in the seven facilities based primarily in the Dayton, Ohio area under a new 15 -year master lease, while Hillstone Healthcare, Inc. (“Hillstone”) assumed the operation of the two facilities in Willard and Toledo, Ohio under a new 12 -year master lease. In addition, amendments to the Bed Sales Agreements were subsequently executed, confirming the Company as the sole seller of the bed rights and the sole recipient of any proceeds therefrom. The aggregate annual base rent due under the new master leases with Trio and Hillstone is approximately $ 10.0 million, subject to CPI-based or fixed escalators. Under the LTA, the Company agreed, upon Pristine’s full performance of the terms thereof, to terminate Pristine’s master lease and all future obligations of the tenant thereunder; however, under the terms of the master lease the Company’s security interest in Pristine’s accounts receivable has survived any such termination. Such security interest was subject to the prior lien and security interest of Pristine’s working capital lender, Capital One, National Association (“CONA”), with whom the Company has an existing intercreditor agreement that defines the relative rights and responsibilities of CONA and with its respect to the loan and lease collateral represented by Pristine’s accounts receivable and the Company’s respective security interests therein. 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 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. In connection with the sale, the Company provided affiliates of CommuniCare Family of Companies (“CommuniCare”), the purchaser of the three Ohio properties, with a mortgage loan secured by the three Ohio properties for approximately $ 26.5 million. 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 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 F-17 Table of Contents 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. In connection with the sale, the Company recognized a gain of $ 1.6 million. During the year ended December 31, 2018, the Company sold three assisted living facilities consisting of 102 units located in Idaho with an aggregate carrying value of $ 10.9 million for an aggregate price of $ 13.0 million. 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. 4. 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 F-18 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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 Nampa, 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 fourth quarter of 2017 and began lease-up during the first quarter of 2018. 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. In September 2016, the Company completed a $ 2.3 million preferred equity investment with an affiliate of Cascadia Development, LLC. 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 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. 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. F-19 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. FAIR VALUE MEASUREMENTS 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 Assets: 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. F-20 Table of Contents 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, 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 Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value Financial assets: Preferred equity investments $ — $ — $ — $ 2,327 $ 3,800 $ 3,674 Mortgage loans receivable — — — 29,500 29,500 29,500 Financial liabilities: Senior unsecured notes payable $ 300,000 $ 296,669 $ 311,430 $ 300,000 $ 295,911 $ 312,750 Cash and cash equivalents, accounts and other receivables, other loans receivable, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short-term nature of these instruments. Preferred equity investments : The fair values of the preferred equity investments were 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. Mortgage loans receivable : The fair values of the mortgage loans receivable were estimated using an internal valuation model that considered the expected future cash flows of the investments, the underlying collateral value, market interest rates and other credit enhancements. Senior unsecured notes payable : 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: The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates for similar debt arrangements. 6. DEBT The following table summarizes the balance of the Company’s indebtedness as of December 31, 2020 and 2019 (in thousands): 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 Senior unsecured term loan 200,000 ( 1,075 ) 198,925 200,000 ( 1,287 ) 198,713 Unsecured revolving credit facility 50,000 — 50,000 60,000 — 60,000 $ 550,000 $ ( 4,406 ) $ 545,594 $ 560,000 $ ( 5,376 ) $ 554,624 Senior Unsecured Notes Payable On May 10, 2017, the Company’s wholly owned subsidiary, CTR Partnership, L.P. (the “Operating Partnership”), and its wholly owned subsidiary, CareTrust Capital Corp. (together with the Operating Partnership, the “Issuers”), completed an underwritten public offering of $ 300.0 million aggregate principal amount of 5.25 % Senior Notes due 2025 (the “Notes”). 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 F-21 Table of Contents 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. The Notes mature on June 1, 2025 and bear interest at a rate of 5.25 % per year. Interest on the Notes is payable on June 1 and December 1 of each year, beginning on December 1, 2017. 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 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: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; enter into transactions with affiliates; merge or consolidate or sell all or substantially all of their assets; and create restrictions on the ability of the Issuers and their restricted subsidiaries to pay dividends or other amounts to the Issuers. The indenture also requires the Company and its restricted subsidiaries to maintain a specified ratio of unencumbered assets to unsecured indebtedness. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The indenture also contains customary events of default. As of December 31, 2020, the Company was in compliance with all applicable financial covenants under the indenture. Unsecured Revolving Credit Facility and Term Loan On August 5, 2015, the Company, CareTrust GP, LLC, the Operating Partnership, as the borrower, and certain of its wholly owned subsidiaries entered into a credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender, and the lenders party thereto (the “Prior Credit Agreement”). As later amended on February 1, 2016, the Prior Credit Agreement provided the following: (i) a $ 400.0 million unsecured asset based revolving credit facility (the “Prior Revolving Facility”), (ii) a $ 100.0 million non-amortizing unsecured term loan (the “Prior Term Loan” and, together with the Prior Revolving Facility, the “Prior Credit Facility”), and (iii) a $ 250.0 million uncommitted incremental facility. The Prior Revolving Facility was scheduled to mature on August 5, 2019, subject to two , six-month extension options. 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. 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”). The Amended Credit Agreement, which amended and restated the Prior Credit Agreement, provides for: (i) an unsecured revolving credit facility (the “Revolving Facility”) with revolving commitments in an aggregate principal amount of $ 600.0 million, including a letter of credit subfacility for 10 % of the then available revolving commitments and a swingline loan subfacility for 10 % of the then available revolving commitments and (ii) an unsecured term loan credit facility (the “Term Loan” and, together with the Revolving Facility, the “Amended Credit Facility”) in an aggregate principal amount of $ 200.0 million. Borrowing availability under the Revolving Facility is subject to no default or event of default under the Amended Credit Agreement having occurred at the time of borrowing. The proceeds of the Term Loan were used, in part, to repay in full all outstanding borrowings under the Prior Term Loan and Prior Revolving Facility under the Prior Credit Agreement. 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. F-22 Table of Contents 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). The interest rates applicable to loans under the Term Loan are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.50 % to 1.20 % per annum or LIBOR plus a margin ranging from 1.50 % to 2.20 % 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). In addition, the Operating Partnership will pay a facility fee on the revolving commitments under the Revolving Facility ranging from 0.15 % to 0.35 % per annum, based on the debt to asset value ratio of the Company and its consolidated subsidiaries (unless the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt and the Operating Partnership elects to decrease the applicable margin as described above, in which case the Operating Partnership will pay a facility fee on the revolving commitments ranging from 0.125 % to 0.30 % per annum based on the credit ratings of the Company’s senior long-term unsecured debt). As of December 31, 2020, the Operating Partnership had $ 200.0 million outstanding under the Term Loan and $ 50.0 million outstanding under the Revolving Facility. The Revolving Facility has a maturity date of February 8, 2023, and includes, at the sole discretion of the Operating Partnership, two , six-month extension options. The Term Loan has a maturity date of February 8, 2026. The Amended Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Amended Credit Agreement (other than the Operating Partnership). The Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend organizational documents and pay certain dividends and other restricted payments. The Amended Credit Agreement requires the Company to comply with financial maintenance covenants to be tested quarterly, consisting of a maximum debt to asset value ratio, a minimum fixed charge coverage ratio, a minimum tangible net worth, a maximum cash distributions to operating income ratio, a maximum secured debt to asset value ratio, a maximum secured recourse debt to asset value ratio, a maximum unsecured debt to unencumbered properties asset value ratio, a minimum unsecured interest coverage ratio and a minimum rent coverage ratio. 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, 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): Year Amount 2021 $ — 2022 — 2023 50,000 2024 — 2025 300,000 Thereafter 200,000 $ 550,000 F-23 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. EQUITY Common Stock 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. The Company used the proceeds from the offering to repay a portion of the outstanding borrowings on its Revolving Facility, which had been used to fund a portion of the purchase price of acquisitions in the second quarter of 2019. 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 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, 2019 Number of shares 2,459 Average sales price per share $ 19.48 Gross proceeds (1) $ 47,893 (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. F-24 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Dividends on Common Stock — The following table summarizes the cash dividends per share of common stock declared by the Company’s Board of Directors for 2020, 2019 and 2018 (dollars in thousands, except per share amounts): For the Three Months Ended 2020 March 31, June 30, September 30, December 31, Dividends declared $ 0.25 $ 0.25 $ 0.25 $ 0.25 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 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 2019 Dividends declared $ 0.225 $ 0.225 $ 0.225 $ 0.225 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 29, 2019 June 28, 2019 September 30, 2019 December 31, 2019 2018 Dividends declared $ 0.205 $ 0.205 $ 0.205 $ 0.205 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 30, 2018 June 29, 2018 September 28, 2018 December 31, 2018 8. STOCK-BASED COMPENSATION All stock-based awards are subject to the terms of the CareTrust REIT, Inc. and CTR Partnership, L.P. Incentive Award Plan (the “Plan”). The Plan provides for the granting of stock-based compensation, including stock options, restricted stock, performance awards, restricted stock units and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company. The following table summarizes restricted stock award and performance award activity for the years ended December 31, 2020 and 2019: 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 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 F-25 Table of Contents 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 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. Each share had a fair market value on the date of grant of $ 22.00 per share, based on the closing 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, in February 2019, the Compensation Committee granted 71,440 performance stock awards to officers. Each share had a fair market value on the date of grant of $ 22.00 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 fiscal year over year growth of 5.0 % or greater. 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 vested in full on April 30, 2020. F-26 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. EARNINGS PER COMMON SHARE The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the years ended December 31, 2020, 2019 and 2018, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the years ended December 31, 2020, 2019 and 2018 (amounts in thousands, except per share amounts): Year Ended December 31, 2020 2019 2018 Numerator: Net income $ 80,867 $ 46,359 $ 57,923 Less: Net income allocated to participating securities ( 298 ) ( 296 ) ( 364 ) Numerator for basic and diluted earnings available to common stockholders $ 80,569 $ 46,063 $ 57,559 Denominator: 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 Earnings per common share, basic $ 0.85 $ 0.49 $ 0.73 Earnings per common share, diluted $ 0.85 $ 0.49 $ 0.72 The Company’s unvested restricted shares associated with its incentive award plan and unvested restricted shares issued to employees of Ensign at the Spin-Off have been excluded from the above calculation of earnings per share for the years ended December 31, 2020, 2019 and 2018, when their inclusion would have been anti-dilutive. 10. COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of business, which are not individually or in the aggregate anticipated to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. 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 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. As of December 31, 2020, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totaling $ 15.4 million, of which $ 14.2 million is subject to rent increase at the time of funding. 11. CONCENTRATION OF RISK 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 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. On October 1, 2019, Ensign completed the Pennant Spin. See Note 3, Real Estate Investments, Net, for additional information regarding the Company’s facilities leased to Ensign subsequent to the Pennant Spin. F-27 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ensign is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. Ensign’s financial statements, as filed with the SEC, can be found at http://www.sec.gov. The Company has not verified this information through an independent investigation or otherwise. As of December 31, 2020, PMG leased 15 skilled nursing facilities which had a total of 2,145 beds and units and are located in Louisiana and Texas. 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. 12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table presents selected quarterly financial data for the Company. This information has been prepared on a basis consistent with that of the Company’s audited consolidated financial statements. The Company’s quarterly results of operations for the periods presented are not necessarily indicative of future results of operations. This unaudited quarterly data should be read together with the accompanying consolidated financial statements and related notes thereto (in thousands, except per share amounts): For the Year Ended December 31, 2020 First Quarter Second Quarter Third Quarter Fourth Quarter Operating data: Total revenues $ 44,340 $ 44,168 $ 45,687 $ 44,137 Net income $ 19,325 $ 18,935 $ 21,552 $ 21,055 Earnings per common share, basic $ 0.20 $ 0.20 $ 0.23 $ 0.22 Earnings per common share, diluted $ 0.20 $ 0.20 $ 0.23 $ 0.22 Other data: Weighted-average number of common shares outstanding, basic 95,161 95,208 95,214 95,215 Weighted-average number of common shares outstanding, diluted 95,161 95,208 95,214 95,244 For the Year Ended December 31, 2019 First Quarter Second Quarter Third Quarter Fourth Quarter 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 Earnings per common share, diluted $ 0.18 $ 0.21 $ ( 0.11 ) $ 0.22 Other data: Weighted-average number of common shares outstanding, basic 88,010 94,036 95,103 95,103 Weighted-average number of common shares outstanding, diluted 88,010 94,036 95,103 95,144 13. SUBSEQUENT EVENTS The Company evaluates subsequent events in accordance with ASC 855, Subsequent Events . The Company evaluates subsequent events up until the date the consolidated financial statements are issued. Asset Sale 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. F-28 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2020 (dollars in thousands) Initial Cost to Company Gross Carrying Value Description Facility Location Encum. Land Building Improvs. Costs Cap. Since Acq. Land Building Improvs. Total (1) Accum. Depr. Const./Ren. Date Acq. Date Skilled Nursing Properties: 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 F-29 SCHEDULE III 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 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 F-30 SCHEDULE III 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 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 — 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 — 1,462 5,034 — 1,462 5,034 6,496 ( 703 ) 1987 2015 CTR Partnership, L.P. 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 — 892 17,159 13 892 17,172 18,064 ( 2,254 ) 2014 2015 CTR Partnership, L.P. 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 — 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 — 282 9,726 428 282 10,154 10,436 ( 1,400 ) 2008 2015 CTR Partnership, L.P. 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 — 214 2,573 231 214 2,804 3,018 ( 385 ) 2003 2015 CTR Partnership, L.P. 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 — 266 4,725 268 266 4,993 5,259 ( 694 ) 1967 2015 CTR Partnership, L.P. 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, IA — 96 2,784 — 96 2,784 2,880 ( 342 ) 2015 2016 CTR Partnership, L.P. 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 Dayton, IA — 39 1,167 — 39 1,167 1,206 ( 143 ) 2014 2016 CTR Partnership, L.P. 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 — 522 5,690 — 522 5,690 6,212 ( 699 ) 2014 2016 CTR Partnership, L.P. 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 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 — 324 4,366 — 324 4,366 4,690 ( 518 ) 2015 2016 CTR Partnership, L.P. 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 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 Lodi, CA — 768 10,712 — 768 10,712 11,480 ( 1,183 ) 1982 2016 CTR Partnership, L.P. 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, TX — 990 24,909 — 990 24,909 25,899 ( 2,543 ) 2013 2016 CTR Partnership, L.P. Royse City Medical Lodge Royse City, TX — 606 14,660 — 606 14,660 15,266 ( 1,497 ) 2009 2016 F-31 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2020 (dollars in thousands) CTR Partnership, L.P. 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 — 775 8,377 — 775 8,377 9,152 ( 803 ) 1968 2017 CTR Partnership, L.P. 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, IL — 511 3,662 — 511 3,662 4,173 ( 351 ) 2014 2017 CTR Partnership, L.P. 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 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 — 1,178 12,059 — 1,178 12,059 13,237 ( 1,080 ) 2016 2017 CTR Partnership, L.P. 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, IL — 940 2,093 — 940 2,093 3,033 ( 183 ) 1993 2017 CTR Partnership, L.P. 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 Kellogg, ID — 916 7,874 — 916 7,874 8,790 ( 656 ) 1971 2017 CTR Partnership, L.P. 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, 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 — 681 6,587 1,256 681 7,843 8,524 ( 702 ) 2006 2017 CTR Partnership, L.P. 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 — 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 — 320 500 — 320 500 820 ( 42 ) 2012 2017 CTR Partnership, L.P. 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 Timberline Vancouver, WA — 445 869 — 445 869 1,314 ( 71 ) 1972 2017 CTR Partnership, L.P. 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 Orange Tree Riverside, CA — 2,897 14,700 — 2,897 14,700 17,597 ( 1,194 ) 1969 2017 CTR Partnership, L.P. Providence Ontario Ontario, CA — 4,204 21,880 — 4,204 21,880 26,084 ( 1,778 ) 1980 2017 CTR Partnership, L.P. Greenville Nursing & Rehabilitation Center Greenville, IL — 188 3,972 — 188 3,972 4,160 ( 366 ) 1973 2017 CTR Partnership, L.P. Copper Ridge Health and Rehabilitation Center Butte, MT — 220 4,974 — 220 4,974 5,194 ( 398 ) 2010 2018 CTR Partnership, L.P. Prairie Heights Healthcare Center Aberdeen, SD — 1,372 7,491 — 1,372 7,491 8,863 ( 510 ) 1965 2018 CTR Partnership, L.P. The Meadows on University Fargo, ND — 989 3,275 — 989 3,275 4,264 ( 196 ) 1966 2018 CTR Partnership, L.P. The Suites - Parker Parker, CO — 1,178 17,857 — 1,178 17,857 19,035 ( 952 ) 2012 2018 F-32 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2020 (dollars in thousands) CTR Partnership, L.P. 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. Shoreline Care Center Oxnard, CA — 1,699 9,004 — 1,699 9,004 10,703 ( 443 ) 1962 2019 CTR Partnership, L.P. Downey Care Center Downey, CA — 2,502 6,141 — 2,502 6,141 8,643 ( 303 ) 1967 2019 CTR Partnership, L.P. 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. Cascadia of Nampa Nampa, ID — 880 14,117 — 880 14,117 14,997 ( 594 ) 2017 2019 CTR Partnership, L.P. Valley Skilled Nursing Modesto, CA — 798 7,671 — 798 7,671 8,469 ( 249 ) 2016 2019 CTR Partnership, L.P. 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 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 F-33 SCHEDULE III 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 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 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/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 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, CA — 1,258 16,526 — 1,258 16,526 17,784 ( 1,825 ) 1986 2016 CTR Partnership, L.P. 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 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 — 601 6,385 — 601 6,385 6,986 ( 359 ) 1924 2018 CTR Partnership, L.P. 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 — 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 — 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 F-34 SCHEDULE III 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 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 — 250 6,114 43 250 6,157 6,407 ( 919 ) 2011 2014 CTR Partnership, L.P. 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 — 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 — 284 4,478 — 284 4,478 4,762 ( 550 ) 2012 2016 CTR Partnership, L.P. 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 — 97 6,102 173 97 6,255 6,352 ( 737 ) 2013 2016 CTR Partnership, L.P. 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 — 1,489 3,531 765 1,489 4,665 6,154 ( 455 ) 1980 2016 CTR Partnership, L.P. 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 New Bern, NC — 312 6,919 — 312 6,919 7,231 ( 807 ) 2010 2016 CTR Partnership, L.P. 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 — 603 9,326 — 603 9,326 9,929 ( 1,069 ) 2010 2016 CTR Partnership, L.P. 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 Burton, MI — 492 9,199 — 492 9,199 9,691 ( 1,054 ) 2014 2016 CTR Partnership, L.P. 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 — 493 14,002 — 493 14,002 14,495 ( 1,371 ) 2013 2017 CTR Partnership, L.P. 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 — 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 — 1,611 5,633 — 1,611 5,633 7,244 ( 493 ) 2016 2017 CTR Partnership, L.P. 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 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 — 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 . F-35 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2020 (dollars in thousands) Year Ended December 31, Real estate: 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 ) Balance at the end of the period $ 1,683,205 $ 1,605,081 $ 1,368,157 Accumulated depreciation: Balance at the beginning of the period $ ( 220,359 ) $ ( 185,926 ) $ ( 152,185 ) Depreciation expense ( 41,914 ) ( 40,373 ) ( 34,676 ) Impairment — 5,220 — Sales of real estate 2,470 720 935 Balance at the end of the period $ ( 259,803 ) $ ( 220,359 ) $ ( 185,926 ) F-36 SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 2020 (dollars in thousands) 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 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. (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 Additions during period: New mortgage loans 61,258 40,889 — Deductions during period: Paydowns/Repayments ( 75,758 ) ( 23,764 ) ( 142 ) Balance at end of period $ 15,000 $ 29,500 $ 12,375 F-37