What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 207 added, 129 removed, 336 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Real estate investments, net $ 1,575,403 $ 1,448,099

Other real estate investments, net 15,155 15,000

Other real estate investments 15,150 15,000

Assets held for sale, net — 7,226

Cash and cash equivalents 1,771 18,919

Accounts and other receivables, net 1,780 1,823

Restricted cash 309,187 —

Accounts and other receivables 1,786 1,823

Prepaid expenses and other assets, net 7,570 10,450

10 unchanged sentences

Preferred stock, $ 0.01 par value;

100,000,000 shares authorized, no shares issued and outstanding as of March 31, 2021 and December 31, 2020

100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value;

500,000,000 shares authorized, 95,981,062 and 95,215,797 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

500,000,000 shares authorized, 96,296,673 and 95,215,797 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,189,402 1,164,402

6 unchanged sentences

(in thousands, except per share amounts)

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Rental income $ 47,744 $ 42,507 $ 92,990 $ 84,971

32 unchanged sentences

Balance at March 31, 2021 95,981,062 $ 960 $ 1,180,840 $ ( 256,359 ) $ 925,441

Issuance of common stock, net 288,000 3 6,752 — 6,755

Vesting of restricted common stock, net of shares withheld for employee taxes 27,611 — — — —

Amortization of stock-based compensation — — 1,810 — 1,810

Common dividends ($ 0.265 per share)

— — — ( 25,714 ) ( 25,714 )

Net income — — — 21,317 21,317

Balance at June 30, 2021 96,296,673 $ 963 $ 1,189,402 $ ( 260,756 ) $ 929,609

See accompanying notes to condensed consolidated financial statements.

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Balance at March 31, 2020 95,196,331 $ 952 $ 1,161,797 $ ( 240,956 ) $ 921,793

Issuance of common stock, net — — ( 314 ) — ( 314 )

Vesting of restricted common stock, net of shares withheld for employee taxes 17,749 — — — —

Amortization of stock-based compensation — — 963 — 963

Common dividends ($ 0.25 per share)

— — — ( 23,931 ) ( 23,931 )

Net income — — — 18,935 18,935

Balance at June 30, 2020 95,214,080 $ 952 $ 1,162,446 $ ( 245,952 ) $ 917,446

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

8 unchanged sentences

Change in operating assets and liabilities:

Accounts and other receivables, net ( 100 ) 335

Accounts and other receivables ( 93 ) 806

Prepaid expenses and other assets, net 88 528

7 unchanged sentences

Repayment of other real estate investment — 2,327

Escrow deposits for potential acquisitions of real estate — ( 1,000 )

Net proceeds from sales of real estate 6,814 2,134

Net cash used in investing activities ( 133,300 ) ( 24,300 )

Net cash (used in) provided by investing activities ( 145,043 ) 25,325

Cash flows from financing activities:

Proceeds from (costs paid for) the issuance of common stock, net 22,946 ( 404 )

Proceeds from the issuance of senior unsecured notes payable 400,000 —

Borrowings under unsecured revolving credit facility 170,000 15,000

Payments on unsecured revolving credit facility ( 170,000 ) ( 75,000 )

Payments of deferred financing costs ( 5,577 ) —

Net-settle adjustment on restricted stock ( 1,331 ) ( 1,986 )

1 unchanged sentence

Net cash provided by (used in) financing activities 366,525 ( 107,796 )

Net increase in cash and cash equivalents 11,550 3,610

Cash and cash equivalents, beginning of period 18,919 20,327

Cash and cash equivalents, end of period $ 30,469 $ 23,937

Net increase (decrease) in cash, cash equivalents, and restricted cash 292,039 ( 14,529 )

Cash, cash equivalents, and restricted cash as of the beginning of period 18,919 20,327

Cash, cash equivalents, and restricted cash as of the end of period $ 310,958 $ 5,798

Supplemental disclosures of cash flow information:

2 unchanged sentences

Increase in dividends payable $ 1,834 $ 2,456

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

Increased in deferred financing costs payable $ 618 $ —

Transfer of pre-acquisition costs to acquired assets $ 358 $ 167

4 unchanged sentences

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 March 31, 2021, the Company owned and leased to independent operators, 222 skilled nursing, multi-service campuses, assisted living and independent living facilities consisting of 23,222 operational beds and units located in 28 states with the highest concentration of properties by rental revenues located in California, Texas, Louisiana, Idaho and Arizona.

As of March 31, 2021, we also had other real estate investments consisting of one mezzanine loan receivable with a carrying value of $ 15.2 million.

The COVID-19 pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to reduce its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders.

As of June 30, 2021, the Company owned and leased to independent operators, 223 skilled nursing, multi-service campuses, assisted living and independent living facilities consisting of 23,301 operational beds and units located in 28 states with the highest concentration of properties by rental revenues located in California, Texas, Louisiana, Idaho and Arizona.

As of June 30, 2021, the Company also had other real estate investments consisting of one mezzanine loan receivable with a carrying value of $ 15.2 million.

COVID-19— The COVID-19 pandemic has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to reduce its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders.

Although most of these governmental restrictions have since been lifted or scaled back, resurgences of COVID-19 and the emergence of new variants thereof have resulted in the reimposition of certain restrictions and may lead to other restrictions being reimplemented in response to efforts to reduce the spread of COVID-19.

Given the dynamic nature of these circumstances and the related adverse impact these restrictions have had, and may continue to have, on the economy generally, the Company’s business, results of operations and financial condition may be adversely impacted by the COVID-19 pandemic.

The duration and extent of the COVID-19 pandemic’s effect on the Company’s operational and financial performance, and the operational and financial performance of the Company’s tenants, will depend on future developments, which are highly uncertain and cannot be predicted at this time, including new information which may emerge concerning the timing of vaccine rollouts, public acceptance and usage of vaccines and the effectiveness of vaccines in limiting the spread of COVID-19 and its variants that may continue to occur, and how quickly and to what extent normal economic and operating conditions can resume.

The duration and extent of the COVID-19 pandemic’s effect on the Company’s operational and financial performance, and the operational and financial performance of the Company’s tenants, will depend on future developments, which are highly uncertain and cannot be predicted at this time, including the rate of public acceptance and usage of vaccines and the effectiveness of vaccines in limiting the spread of COVID-19 and its variants, resurgences of COVID-19 and, in particular, new and more contagious and/or vaccine resistant variants, actions taken to contain the spread of COVID-19 and how quickly and to what extent normal economic and operating conditions can resume.

The adverse impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition could be material.

BASIS OF PRESENTATION

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation —The accompanying condensed consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X.

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

Restricted Cash —The Company presents cash and cash equivalents separately from restricted cash within the Company’s condensed consolidated balance sheets.

The Company includes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the condensed consolidated statements of cash flows.

The Company provides a reconciliation between the balance sheets and statements of cash flows, as required when the balance includes more than one line item for cash, cash equivalents, and restricted cash.

The Company also provides a disclosure of the nature of the restrictions related to material restricted cash balances.

As of June 30, 2021, the Company had $ 309.2 million in restricted cash related to the cash deposited with the trustee to pay the redemption price of the $ 300.0 million aggregate principal amount of 5.25 % Senior Notes due 2025 (the “2025 Notes”).

The 2025 Notes were redeemed on July 1, 2021.

See Note 6, Debt , and Note 12, Subsequent Events, for further detail.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Cash, cash equivalents and restricted cash consisted of the following as of June 30, 2021 and December 31, 2020 (dollars in thousands):

June 30, 2021 December 31, 2020

Cash and cash equivalents $ 1,771 $ 18,919

Restricted cash 309,187 —

Cash, cash equivalents and restricted cash $ 310,958 $ 18,919

Recent Accounting Pronouncements — In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

Dollar LIBOR, the overnight, one-month, three-month, six-month and one-year LIBOR rates will be discontinued in June 2023, while other U.S.

Dollar LIBOR rates will be discontinued at 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.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

REAL ESTATE INVESTMENTS, NET

The following table summarizes the Company’s investment in owned properties as of March 31, 2021 and December 31, 2020 (dollars in thousands):

March 31, 2021 December 31, 2020

The following table summarizes the Company’s investment in owned properties as of June 30, 2021 and December 31, 2020 (dollars in thousands):

June 30, 2021 December 31, 2020

Land $ 244,740 $ 205,356

5 unchanged sentences

Real estate investments, net $ 1,575,403 $ 1,448,099

As of March 31, 2021 , all 222 of the Company’s facilities wer e leased to various operators under triple-net leases.

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

As of March 31, 2021, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands):

2021 (nine months) $ 132,001

As of June 30, 2021 , all 223 of the Company’s facilities wer e leased to various operators under triple-net leases.

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

As of June 30, 2021, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands):

2021 (six months) $ 93,754

Thereafter 1,020,115

3 unchanged sentences

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

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

Asset Type Properties Lease Expiration Next Option Open Date Option Type (1)

Current Cash Rent (2)

9 unchanged sentences

C - Fixed capitalization rate on lease revenue.

(2) Based on annualized cash revenue for contracts in place at March 31, 2021.

(2) Based on annualized cash revenue for contracts in place as of June 30, 2021.

(3) Purchase option reflects two option types.

3 unchanged sentences

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Rental Income 2021 2020 2021 2020

6 unchanged sentences

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 three months ended March 31, 2021, 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 $ 0.1 million from Metron affiliates.

(2) During the six months ended June 30, 2021, 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 $ 0.1 million from Metron affiliates.

Recent Real Estate Acquisitions

The following table summarizes the Company’s acquisitions for the three months ended March 31, 2021 (dollars in thousands):

The following table summarizes the Company’s acquisitions for the six months ended June 30, 2021 (dollars in thousands):

Type of Property Purchase Price (1)

6 unchanged sentences

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

(3) Initial annual cash rent represents the first twelve months of rent upon commencement of the Company’s long-term net leases, which is scheduled to occur upon the tenants’ receipt of licensing approval and increases to $ 9.4 million in the second year with Consumer Price Index (“CPI”) based annual escalators thereafter.

The facilities are currently being leased back to the seller under a short-term lease with a term of less than one year.

(3) Initial annual cash rent represents the first twelve months of rent upon commencement of the Company’s long-term net leases, which occurred during the three months ended June 30, 2021, upon the tenants’ receipt of licensing approval and increases to $ 9.4 million in the second year with CPI-based annual escalators thereafter.

(4) Included within initial annual cash rent is approximately $ 0.8 million of initial rent which is subject to a fixed escalator in the first twelve months and increases to $ 0.9 million in the second year with CPI-based annual escalators thereafter.

Asset Sales and Assets Held for Sale

As of March 31, 2021, there were no assets classified as held for sale.

As of June 30, 2021, there were no assets classified as held for sale.

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

2 unchanged sentences

On February 1, 2021, the Company closed on the sale of the one skilled nursing facility consisting of 90 beds located in Washington with a carrying value of $ 7.2 million, for net sales proceeds of $ 7.0 million.

The Company recorded a loss of $ 0.2 million in connection with the sale.

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 three months ended December 31, 2020.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

During the six months ended June 30, 2021, the Company recorded a loss of $ 0.2 million in connection with the sale.

On February 14, 2020, the Company closed on the sale of six skilled nursing facilities formerly operated by affiliates of Metron.

1 unchanged sentence

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.

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 with $ 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.

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Lease Amendments

Five Oaks Lease Termination and Amended Ensign Master Lease.

On June 1, 2021, operating affiliates of The Ensign Group, Inc.

(“Ensign”) acquired certain operations and assets of Five Oaks Healthcare, LLC (“Five Oaks”) under an agreement with Five Oaks.

The agreement granted Ensign the right to occupy and operate four of the Company’s skilled nursing facilities in Washington that were previously being operated by Five Oaks.

In conjunction with consenting to the transfer, the Company terminated the existing Five Oaks master lease, and amended and extended the term of an existing triple-net master lease with Ensign to include the four skilled nursing facilities.

The Ensign lease, as amended, has a remaining term of approximately 15 years, with three five-year renewal options and CPI-based rent escalators.

Annual cash rent under the terminated Five Oaks master lease was approximately $ 2.6 million, and annual cash rent under the amended Ensign lease increased by the same amount.

Twenty/20 Lease Termination and New Noble Master Lease .

7 unchanged sentences

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).

During the three months ended March 31, 2021, the Company recognized $ 0.5 million of interest income related to its mezzanine loan.

During the three and six months ended June 30, 2021, the Company recognized $ 0.4 million and $ 0.9 million, respectively, of interest income related to its mezzanine loan.

Mortgage Loans Receivable —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.

5 unchanged sentences

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 %.

In September 2019, the Company provided affiliates of CommuniCare Family of Companies (“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.

2 unchanged sentences

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 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.

In February 2020, the Company provided subsidiaries of Cascade a $ 32.4 million loan secured by mortgages on the six skilled nursing facilities formerly operated by affiliates of Metron and 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.

1 unchanged sentence

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.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

As of March 31, 2021, the Company had no remaining mortgage loan receivables.

During the three months ended March 31, 2021 and 2020, the Company recognized no interest income and $ 1.1 million of interest income, respectively, related to its mortgage loans.

During both the three months ended March 31, 2021 and 2020, the Company recognized $ 0.1 million of interest income related to its other loans receivable.

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 June 30, 2021, the Company had no mortgage loan receivables.

During both the three and six months ended June 30, 2021, the Company recognized no interest income related to mortgage loans.

During the three and six months ended June 30, 2020, the Company recognized $ 0.9 million and $ 2.0 million of interest income, respectively, related to its mortgage loans.

During the three and six months ended June 30, 2021, the Company recognized less than $ 0.1 million and $ 0.1 million of interest income, respectively, related to its other loans receivable.

During the three and six months ended June 30, 2020, the Company recognized $ 0.1 million and $ 0.2 million of interest income, respectively, related to its other loans receivable.

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

4 unchanged sentences

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, of which less than $ 0.1 million was recognized as interest income during the three months ended March 31, 2020.

The Company did not recognize any interest income during the three months ended March 31, 2021 related to preferred equity investments.

As of March 31, 2021, the Company had no remaining preferred equity investments.

The Company did not recognize any interest income during the three months ended June 30, 2020 or the three and six months ended June 30, 2021 related to preferred equity investments.

As of June 30, 2021, the Company had no preferred equity investments.

FAIR VALUE MEASUREMENTS

9 unchanged sentences

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 March 31, 2021 and 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 March 31, 2021

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and 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 June 30, 2021

Mezzanine loan receivable $ — $ — $ 15,150 $ 15,150

1 unchanged sentence

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Mezzanine loan receivable:

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 determin ing market interest rates for investments with similar terms.

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.

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

A s of March 31, 2021 and December 31, 2020, the Company did no t have any loans that were 90 days or more past due.

For the three months ended March 31, 2021, there were no changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

As of June 30, 2021 and December 31, 2020, the Company did no t have any loans that were 90 days or more past due.

For the three and six months ended June 30, 2021, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Disclosed at Fair Value

1 unchanged sentence

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 March 31, 2021 and December 31, 2020 using Level 2 inputs for the Notes (as defined in Note 6, Debt, below), is as follows (dollars in thousands):

March 31, 2021 December 31, 2020

A summary of the face values, carrying amounts and fair values of the Company’s financial instruments as of June 30, 2021 and December 31, 2020 using Level 2 inputs for the Notes (as defined in Note 6, Debt, below), is as follows (dollars in thousands):

June 30, 2021 December 31, 2020

Value Carrying

2 unchanged sentences

2028 Senior unsecured notes payable 2 $ 400,000 $ 393,842 $ 410,000 $ — $ — $ —

Cash and cash equivalents, accounts and other receivables, other loans receivable, and accounts payable and accrued liabilities:

2025 Senior unsecured notes payable (1)

2 300,000 297,048 307,875 300,000 296,669 311,430

(1) The $ 300.0 million aggregate principal amount of the 2025 Notes were redeemed on July 1, 2021.

See Note 12, Subsequent Events, for further detail.

Cash and cash equivalents, restricted cash, 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.

1 unchanged sentence

The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates for similar debt arrangements.

The following table summarizes the balance of the Company’s indebtedness as of March 31, 2021 and December 31, 2020 (dollars in thousands):

March 31, 2021 December 31, 2020

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

The following table summarizes the balance of the Company’s indebtedness as of June 30, 2021 and December 31, 2020 (dollars in thousands):

June 30, 2021 December 31, 2020

Principal Amount Deferred Loan Fees Carrying Value Principal Amount Deferred Loan Fees Carrying Value

2028 Senior unsecured notes payable $ 400,000 $ ( 6,158 ) $ 393,842 $ — $ — $ —

2025 Senior unsecured notes payable 300,000 ( 2,952 ) 297,048 300,000 ( 3,331 ) 296,669

Senior unsecured term loan 200,000 ( 969 ) 199,031 200,000 ( 1,075 ) 198,925

2 unchanged sentences

Senior Unsecured Notes Payable

2025 Senior Notes.

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”).

(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 2025 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 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.

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

As of March 31, 2021, 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.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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);

The 2025 Notes were scheduled to mature on June 1, 2025 and bore interest at a rate of 5.25 % per year.

Interest on the 2025 Notes was payable on June 1 and December 1 of each year.

On July 1, 2021, the Issuers redeemed all $ 300.0 million aggregate principal amount of the 2025 Notes.

See Note 12, Subsequent Events, for additional information.

2028 Senior Notes.

On June 17, 2021, the Issuers completed a private offering of $ 400.0 million aggregate principal amount of 3.875 % Senior Notes due 2028 (the “Notes”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and to non-U.S.

persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended.

The Notes were issued at par, resulting in gross proceeds of $ 400.0 million and net proceeds of approximately $ 393.8 million after deducting underwriting fees and other offering expenses.

The Notes mature on June 30, 2028.

The Notes accrue interest at a rate of 3.875 % per annum payable semiannually in arrears on June 30 and December 30 of each year, commencing on December 30, 2021.

The Issuers may redeem some or all of the Notes at any time prior to March 30, 2028 at a price equal to 100 % of the principal amount of the Notes redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date, plus a “make-whole” premium.

At any time on or after March 30, 2028, the Issuers may redeem some or all of the Notes at a redemption price equal to 100 % of the principal amount of the Notes redeemed plus accrued interest on the Notes, if any, to, but not including, the redemption date.

In addition, at any time on or prior to June 30, 2024, up to 40 % of the aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings at a redemption price of 103.875 % of the aggregate principal amount of Notes to be redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date.

If certain changes of control of the Company occur, the Issuers will be required to make an offer to holders of the Notes to repurchase their Notes at a price of 101 % of their 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 all of CareTrust’s existing and future subsidiaries (other than the Issuers) that guarantee obligations under the Amended Credit Facility (as defined below);

provided, however, that such guarantees are subject to automatic release under certain customary circumstances.

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

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

incur or guarantee additional indebtedness;

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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.

The indenture governing the Notes also requires the Company and its restricted subsidiaries to maintain a specified ratio of unencumbered

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 March 31, 2021, the Company was in compliance with all applicable financial covenants under the indenture.

The indenture governing the Notes also contains customary events of default.

As of June 30, 2021, the Company was in compliance with all applicable financial covenants under the indenture governing the 2025 Notes and the indenture governing the Notes.

Unsecured Revolving Credit Facility and Term Loan

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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 March 31, 2021, the Operating Partnership had $ 200.0 million outstanding under the Term Loan and $ 170.0 million of borrowings outstanding under the Revolving Facility.

As of June 30, 2021, the Operating Partnership had $ 200.0 million outstanding under the Term Loan and $ 50.0 million of borrowings outstanding under the Revolving Facility.

Subsequent to June 30, 2021, the Operating Partnership borrowed an additional $ 50.0 million under the Revolving Facility.

See Note 12, Subsequent Events for additional information.

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.

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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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 March 31, 2021, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

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 Prior ATM Program or New ATM Program activity for the three months ended March 31, 2020.

The following table summarizes the New ATM Program activity for the three months ended March 31, 2021 (in thousands, except per share amounts).

For the Three Months Ended

March 31, 2021

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

As of June 30, 2021, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

In connection with the entry into the equity distribution agreement and the commencement of the 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 Prior ATM Program or ATM Program activity for the three and six months ended June 30, 2020.

The following table summarizes the ATM Program activity for the three and six months ended June 30, 2021 (in thousands, except per share amounts).

For the Three Months Ended For the Six Months Ended

June 30, 2021 June 30, 2021

Number of shares 288 990

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Gross proceeds (1)

(1) Total gross proceeds is before $ 0.2 million of commissions paid to the sales agents during the three months ended March 31, 2021 under the New ATM Program.

As of March 31, 2021, the Company had $ 483.4 million available for future issuances under the New ATM Program.

$ 6,926 $ 23,505

(1) Total gross proceeds is before $ 0.1 million and $ 0.3 million of commissions paid to the sales agents during the three and six months ended June 30, 2021, respectively, under the ATM Program.

As of June 30, 2021, the Company had $ 476.5 million available for future issuances under the ATM Program.

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

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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 three months ended March 31, 2021 and 2020 .

The Company did no t repurchase any shares of common stock under the Repurchase Program during the three and six months ended June 30, 2021 and 2020 .

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Dividends on Common Stock — The following table summarizes the cash dividends on the Company’s common stock declared by the Company’s Board of Directors for the first three months of 2021 (dollars in thousands, except per share amounts):

Dividends on Common Stock — The following table summarizes the cash dividends on the Company’s common stock declared by the Company’s Board of Directors for the first six months of 2021 (dollars in thousands, except per share amounts):

For the Three Months Ended

March 31, 2021

March 31, 2021 June 30, 2021

Dividends declared per share $ 0.265 $ 0.265

Dividends payment date April 15, 2021

Dividends payment date April 15, 2021 July 15, 2021

Dividends payable as of record date $ 25,633 $ 25,714

Dividends record date March 31, 2021

Dividends record date March 31, 2021 June 30, 2021

STOCK-BASED COMPENSATION

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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.

Restricted Stock Awards —In connection with the separation of the healthcare business and real estate business of the Ensign Group, Inc.

(“Ensign”) 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.

Restricted Stock Awards —In connection with the separation of the healthcare business and real estate business of Ensign into two separate and independent publicly traded companies (the “Spin-Off”) on June 1, 2014, employees of Ensign

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 March 31, 2021, there were no unvested restricted stock awards outstanding.

At June 30, 2021, there were no unvested restricted stock awards outstanding.

In January 2021 and February 2021, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) granted 140,514 and 99,189 shares of restricted stock, respectively, to officers and employees.

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

The amount of such 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 specified per share amount for the applicable vesting period.

The amount of such performance awards that will ultimately vest is dependent on the Company’s Normalized Funds from Operations per share, as defined by the Compensation Committee, meeting or exceeding a specified per share amount for the applicable vesting period.

Additionally, in February 2021, the Compensation Committee granted 99,189 performance stock awards to officers.

Each share had an estimated fair market value on the date of grant of $ 27.98 per share.

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

Performance stock awards are subject to both time and performance based conditions and cliff vest after a three-year period.

The amount of such performance awards that will ultimately vest is dependent on the Company’s total shareholder return (“TSR”) performance relative to a custom TSR peer group consisting of 16 other publicly traded healthcare REITs and will range from 0 % to 200 % of the TSR awards initially granted.

Compensation expense for awards with performance-based vesting conditions is recognized based upon the grant date fair value per share for each component multiplied by the estimated number of performance stock awards to be earned after considering the Company’s expectation of future performance and is recognized provided that the requisite service is rendered, regardless of when, if ever, the market condition is satisfied.

Compensation expense for awards with performance-based vesting conditions is recognized based upon the grant date fair value per share multiplied by the estimated number of performance stock awards to be earned after considering the Company’s expectation of future performance and is recognized provided that the requisite service is rendered, regardless of when, if ever, the market condition is satisfied.

Forfeitures of stock-based awards are recognized as they occur.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

The fair value of the TSR-based performance stock awards is estimated on the date of the grant using a Monte Carlo valuation model.

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The following are the key assumptions used in this valuation:

For the Three Months Ended March 31, 2021

Risk-free interest rate 0.27 %

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Expected dividend yield (assuming full reinvestment) — %

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

For the Three Months Ended March 31,

In April 2021, the Compensation Committee granted 20,266 shares of restricted stock to non-employee members of the Board of Directors.

Each share had a fair market value on the date of grant of $ 24.18 per share, based on the closing market price of the Company’s common stock on that date, and the shares vest in full on the earlier to occur of April 30, 2022 or the Company’s 2022 Annual Meeting of Stockholders.

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

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Stock-based compensation expense $ 1,810 $ 963 $ 3,395 $ 1,847

As of March 31, 2021, there was $ 14.5 million of unamortized stock-based compensation expense related to unvested awards and the weighted-average remaining vesting period of such awards was 2.5 years .

As of June 30, 2021, ther e was $ 13.2 million of unamortized stock-based compensation expense related to unvested awards and the weighted-average remaining vesting period of such awards was 2.2 years.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

EARNINGS PER COMMON SHARE

The following table presents the calculation of basic and diluted earnings per common share (“EPS”) for the Company’s common stock for the three months ended March 31, 2021 and 2020, 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 (amounts in thousands, except per share amounts):

For the Three Months Ended March 31,

The following table presents the calculation of basic and diluted earnings per common share (“EPS”) for the Company’s common stock for the three and six months ended June 30, 2021 and 2020, 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 (amounts in thousands, except per share amounts):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2021 2020 2021 2020

Net income $ 21,317 $ 18,935 $ 41,803 $ 38,260

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Weighted-average basic common shares outstanding 96,082 95,208 95,732 95,185

Dilutive market condition stock awards 38 — 23 —

Weighted-average diluted common shares outstanding 96,120 95,208 95,755 95,185

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Earnings per common share, diluted $ 0.22 $ 0.20 $ 0.43 $ 0.40

The Company’s unvest ed restricted shares associated with its incentive award plan and unvested restricted shares issued to employees of Ensign at the Spin-Off ha ve been excluded from the above calculation of earnings per diluted share for the three months ended March 31, 2021 and 2020, when their inclusion would have been anti-dilutive.

The Company’s unvest ed restricted shares associated with its incentive award plan and unvested restricted shares issued to employees of Ensign at the Spin-Off ha ve been excluded from the above calculation of earnings per diluted share for the three and six months ended June 30, 2021 and 2020, as applicable, when their inclusion would have been anti-dilutive.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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.

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 and The Pennant Group, Inc.

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

As of March 31, 2021, the Company had committed to fund certain capital improvements at certain triple-net leased facilities totaling $ 14.1 million, of which $ 13.1 million is subject to rent increase at the time of funding.

As of June 30, 2021, the Company had committed to fund certain capital improvements at certain triple-net leased facilities totaling $ 13.1 million, of which $ 11.6 million is su bject to rent increase at the time of funding.

CONCENTRATION OF RISK

Major operator concentrations – As of March 31, 2021, Ensign leased 89 skilled nursing, multi-service campuses, assisted living and independent living facilities which had a total of 9,551 beds and units and are located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Texas, Utah and Washington .

The four states in w hich Ensign leases the highest concentration of properties by rental revenues as of March 31, 2021 are Texas, California, Arizona and Utah.

During both the three months ended March 31, 2021 and 2020, Ensign represented 32 % of the Company’s rental income, exclusive of operating expense reimbursements.

Major operator concentrations – As of June 30, 2021, Ensign leased 93 skilled nursing, multi-service campuses, assisted living and independent living facilities which had a total of 9,907 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 by rental revenues as of June 30, 2021 are Texas, California, Arizona and Utah.

During the three and six months ended June 30, 2021, Ensign represented 31 % and 32 %, respectively, of the Company’s rental income,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

exclusive of operating expense reimbursements.

During both the three and six months ended June 30, 2020, Ensign represented 32 % of the Company’s rental income, exclusive of operating expense reimbursements.

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.

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The Company has not verified this information through an independent investigation or otherwise.

As of March 31, 2021 , Priority Management Group (“PMG”) leased 15 skilled nursing and campus facilities which had a total of 2,144 beds and units, and are located in Louisiana and Texas.

During both the three months ended March 31, 2021 and 2020, PMG represented 16 % of the Company’s rental income, exclusive of operating expense reimbursements.

As of June 30, 2021, Priority Management Group (“PMG”) leased 15 skilled nursing and campus facilities which had a total of 2,144 beds and units, and are located in Louisiana and Texas.

During both the three and six months ended June 30, 2021, PMG represented 15 % of the Company’s rental income, exclusive of operating expense reimbursements.

During both the three and six months ended June 30, 2020, PMG represented 17 % of the Company’s rental income, exclusive of operating expense reimbursements.

SUBSEQUENT EVENTS

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

Recent Acquisition

In April 2021, the Company acquired one skilled nursing facility with the Company’s existing tenant Bayshire, LLC (“Bayshire”).

The amended lease with Bayshire has a remaining term of approximately 13 years.

The purchase price for the facility was approximately $ 9.7 million , which includes an estimated purchase price and capitalized acquisition costs.

The estimated contractual initial annual cash rent from the acquisition is approximately $ 0.8 million and increases to $ 0.9 million in the second year with CPI-based annual escalators thereafter.

The acquisition was funded using cash on hand.

Senior Unsecured Notes Payable

On July 1, 2021 (the “Redemption Date”), the Issuers redeemed all $ 300.0 million aggregate principal amount of the 2025 Notes at a redemption price equal to 102.625 % of the principal amount of the 2025 Notes, plus accrued and unpaid interest thereon up to, but not including, the Redemption Date.

During the third quarter of 2021, the Company recorded a loss on the extinguishment of debt of $ 10.8 million, including a prepayment penalty of approximately $ 7.9 million and an approximately $ 2.9 million write-off of deferred financing costs associated with the redemption of the 2025 Notes.

Recent Acquisition and Amended Lease Agreement

In August 2021, the Company acquired two skilled nursing facilities for approximately $ 32.5 million, which includes estimated capitalized acquisition costs.

The facilities were leased to affiliates of Ensign.

In conjunction with the acquisition of the two facilities, the Company amended and extended the initial term of an existing triple-net master lease with Ensign to include the two skilled nursing facilities.

The Ensign lease, as amended, has a remaining initial term of approximately 17 years, with three five-year renewal options and CPI-based rent escalators.

Annual cash rent under the amended lease increased by approximately $ 2.2 million, with GAAP rent increasing by $ 2.5 million due to a $ 5.0 million prepayment of rent made at closing, which will be amortized on a straight-line basis over the remaining lease term.

The Operating Partnership drew on the Revolving Facility to fund the acquisition.

Asset Held for Sale

In August 2021, the Company met the held for sale criteria on one assisted living facility operated by affiliates of Noble Senior Services, and is in the process of estimating its fair value, which is expected to be below the net carrying value of $ 4.9 million.

The associated impairment loss is expected to be recorded in the quarter ending September 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements