What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-05 · 163 added, 160 removed, 383 unchanged (46% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Real estate investments, net $ 1,590,418 $ 1,448,099

2 unchanged sentences

Cash and cash equivalents 17,716 18,919

Restricted cash 309,187 —

Accounts and other receivables 3,474 1,823

6 unchanged sentences

Unsecured revolving credit facility 80,000 50,000

Accounts payable and accrued liabilities 16,804 19,572

Accounts payable, accrued liabilities and deferred rent liabilities 26,740 19,572

Dividends payable 26,164 24,251

2 unchanged sentences

Preferred stock, $ 0.01 par value;

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

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

Common stock, $ 0.01 par value;

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

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

Additional paid-in capital 1,191,204 1,164,402

6 unchanged sentences

(in thousands, except per share amounts)

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

9 unchanged sentences

Total expenses 25,860 24,135 77,874 74,327

Loss on extinguishment of debt ( 10,827 ) — ( 10,827 ) —

Loss on sale of real estate — — ( 192 ) ( 56 )

Total other losses ( 10,827 ) — ( 11,019 ) ( 56 )

Net income $ 11,918 $ 21,552 $ 53,721 $ 59,812

22 unchanged sentences

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 — — — —

Vesting of restricted common stock 27,611 — — — —

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

3 unchanged sentences

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

Amortization of stock-based compensation — — 1,802 — 1,802

Common dividends ($ 0.265 per share)

— — — ( 25,714 ) ( 25,714 )

Net income — — — 11,918 11,918

Balance at September 30, 2021 96,296,673 $ 963 $ 1,191,204 $ ( 274,552 ) $ 917,615

See accompanying notes to condensed consolidated financial statements.

15 unchanged sentences

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

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

Vesting of restricted common stock 17,749 — — — —

Amortization of stock-based compensation — — 963 — 963

3 unchanged sentences

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

Amortization of stock-based compensation — — 972 — 972

Common dividends ($ 0.25 per share)

— — — ( 23,934 ) ( 23,934 )

Net income — — — 21,552 21,552

Balance at September 30, 2020 95,214,080 $ 952 $ 1,163,418 $ ( 248,334 ) $ 916,036

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities:

3 unchanged sentences

Amortization of deferred financing costs 1,531 1,462

Loss on extinguishment of debt 10,827 —

Amortization of stock-based compensation 5,197 2,819

5 unchanged sentences

Prepaid expenses and other assets, net ( 20 ) 267

Accounts payable and accrued liabilities ( 3,165 ) ( 2,256 )

Accounts payable, accrued liabilities and deferred rent liabilities 7,388 2,616

Net cash provided by operating activities 118,363 108,385

5 unchanged sentences

Repayment of other real estate investment — 2,327

Escrow deposits for potential acquisitions of real estate ( 3,100 ) ( 1,000 )

Net proceeds from sales of real estate 6,814 2,189

4 unchanged sentences

Borrowings under unsecured revolving credit facility 220,000 15,000

Payments on senior unsecured notes payable ( 300,000 ) —

Payments on unsecured revolving credit facility ( 190,000 ) ( 75,000 )

Payments of deferred financing costs ( 5,577 ) —

Payments on debt extinguishment and deferred financing costs ( 14,070 ) —

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

1 unchanged sentence

Net cash provided by (used in) financing activities 62,397 ( 131,673 )

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

Net decrease in cash and cash equivalents ( 1,203 ) ( 1,226 )

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

Cash and cash equivalents as of the end of period $ 17,716 $ 19,101

Supplemental disclosures of cash flow information:

3 unchanged sentences

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

Sale of real estate settled with note receivable $ — $ 32,400

Sale of real estate settled with notes receivable $ — $ 32,400

See accompanying notes to condensed consolidated financial statements.

2 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 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.

As of September 30, 2021, the Company owned and leased to independent operators, 225 skilled nursing, multi-service campuses, assisted living and independent living facilities consisting of 23,541 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.

A s of September 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 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 requirements, including restrictions imposed on unvaccinated individuals and employee vaccine mandates, and may lead to other restrictions and requirements 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.

8 unchanged sentences

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.

4 unchanged sentences

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 June 30, 2021 and December 31, 2020 (dollars in thousands):

June 30, 2021 December 31, 2020

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

September 30, 2021 December 31, 2020

Land $ 251,347 $ 205,356

5 unchanged sentences

Real estate investments, net $ 1,590,418 $ 1,448,099

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

As of September 30, 2021 , all 225 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

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

2021 (three months) $ 47,765

Thereafter 1,128,717

15 unchanged sentences

C - Fixed capitalization rate on lease revenue.

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

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

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Rental Income 2021 2020 2021 2020

2 unchanged sentences

Straight-line rent 6 17 26 65

Recovery of previously reversed rent (2)

— 1,047 — 1,047

Lease termination revenue (2)

— 1,106 63 1,106

Total $ 48,087 $ 45,036 $ 141,077 $ 130,007

1 unchanged sentence

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 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.

(2) During the three and nine months ended September 30, 2020, the Company recovered approximately $ 1.0 million in rental revenue related to affiliates of Metron Integrated Health Systems (“Metron”) that was previously written off.

In addition, in connection with the agreement to terminate its lease agreements with Metron and to sell the facilities to a third party, the Company received certain lease termination payments from Metron.

During the nine months ended September 30, 2021, the Company recognized approximately $ 0.1 million in lease termination revenue.

During the three and nine months ended September 30, 2020, the Company received approximately $ 1.1 million in lease termination revenue.

Recent Real Estate Acquisitions

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

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

Type of Property Purchase Price (1)

2 unchanged sentences

Multi-service campuses 125,708 8,604 (4) 4 640

125,708 8,604 4 640

Total $ 183,681 $ 13,103 8 1,149

1 unchanged sentence

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

(3) Initial annual cash rent represents initial cash rent for the first twelve months excluding any impact of straight-line rent.

(4) 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 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.

Assets held for sale include 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.

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.

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.

In connection with the sale for $ 36.0 million, the Company received $ 3.5 million in cash and provided subsidiaries of Cascade Capital Group, LLC (“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 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 mortgage loan.

CARETRUST REIT, INC.

1 unchanged sentence

Lease Amendments

Amended Noble Master Leases.

During the three months ended September 30, 2021, the Company did not collect a portion of rent from affiliates of Noble Senior Services and Noble VA Holdings, LLC (collectively, “Noble”).

On September 23, 2021, the Company amended its two existing triple-net master leases with Noble.

The lease amendment granted a deferral for a total of $ 1.8 million of unpaid base rent, which represented approximately 4 % of the Company’s total contractual base rent for the three months ended September 30, 2021.

In connection with its agreement to the rent deferral, the Company also entered int o a purchase agreement with Noble to acquire two assisted living facilities owned by Noble, which will be leased back to Noble under a short-term lease agreement upon closing of the acquisition while the Company pursues other tenants for the long-term.

The lease amendment requires the deferred rent, as well as all contractual rent for the fourth quarter of 2021, to be paid in full upon closing the purchase of the two facilities.

If the closing under the purchase agreement is not consummated within the timeframe provided in the purchase agreement, all unpaid rent will become immediately due and payable under the terms of the applicable master lease agreements.

During the three months ended September 30, 2021, the Company recognized $ 2.2 million of rental income, exclusive of operating expense reimbursements, related to Noble’s master leases and recorded a corresponding rent receivable of $ 1.8 million, included within accounts and other receivables on the Company’s condensed consolidated balance sheets.

As of September 30, 2021, the Company had $ 1.1 million of cash security deposits on-hand related to Noble.

Amended Ensign Master Lease .

On August 1, 2021, the Company acquired two skilled nursing facilities.

The facilities were leased to affiliates of The Ensign Group, Inc.

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 is being amortized on a straight-line basis over the remaining lease term.

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.

On June 1, 2021, operating affiliates of 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.

2 unchanged sentences

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 .

Premier Partial Lease Termination and Amended Noble VA Master Lease .

On March 10, 2021 and July 1, 2021, two assisted living facilities in Wisconsin operated by affiliates of Premier Senior Living, LLC (“Premier”) were transferred to affiliates of Noble VA Holdings, LLC (“Noble VA”).

In connection with the transfer, the Company partially terminated the Premier master lease and amended the existing triple-net master lease with Noble VA to include the two assisted living facilities.

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

Initial annual cash rent under the amended Noble VA master lease increased by approximately $ 1.3 million on March 10, 2021 and approximately $ 1.0 million on July 1, 2021 and annual cash rent under the partially terminated Premier master lease decreased by approximately the same amount.

See above under “Amended Noble Master Leases” for additional information regarding the Company’s leases with Noble.

Twenty/20 Lease Termination and New Noble VA 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 VA Holdings, LLC (“Noble”).

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

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

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

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 .

See above under “Amended Noble Master Leases” for additional information regarding the Company’s leases with Noble.

Assets Held for Sale and Asset Sales

During the third quarter of 2021, the Company met the held for sale criteria on one assisted living facility operated by affiliates of Noble.

As of September 30, 2021, the property continued to be held for sale and the carrying value of $ 4.9 million was primarily comprised of real estate assets.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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.

During the three months ended March 31, 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.

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 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 mortgage loan.

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).

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.

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 pay ments made by the borrower through the date of prepayment).

During the three and nine months ended September 30, 2021, the Company recognized $ 0.5 million and $ 1.4 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.

12 unchanged sentences

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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.

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

During the three and nine months ended September 30, 2020, the Company recognized zero and $ 2.0 million of interest income, respectively, related to its mortgage loan s.

During the three and nine months ended September 30, 2021, the Company recognized $ 0.1 million and $ 0.2 million of interest income, respectively, related to its other loans receivable.

Dur ing the three and nine months ended September 30, 2020, the Company recognized $ 17,000 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.

3 unchanged sentences

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, of which less than $ 0.1 million was recognized as interest income during the six months ended June 30, 2020.

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.

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

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

As of September 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 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

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 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 September 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:

2 unchanged sentences

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

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.

As of September 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 nine months ended September 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 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

A summary of the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 2021 and December 31, 2020 using Level 2 inputs for the Notes and the 2025 Notes (each as defined in Note 6, Debt, below), is as follows (dollars in thousands):

September 30, 2021 December 31, 2020

Value Carrying

3 unchanged sentences

2025 Senior unsecured notes payable 2 — — — 300,000 296,669 311,430

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:

Cash and cash equivalents, accounts and other receivables, other loans receivable, 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.

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

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

September 30, 2021 December 31, 2020

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

8 unchanged sentences

(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.

(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”).

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.

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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.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 extinguishment of debt of $ 10.8 million in the condensed consolidated income statements, including a prepayment penalty of $ 7.9 million and a $ 2.9 million write-off of deferred financing costs associated with the redemption of the 2025 Notes.

2028 Senior Notes.

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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 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.

The indenture governing the Notes 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 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.

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

Unsecured Revolving Credit Facility and Term Loan

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

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NOTES TO CONDENSED 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).

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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 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.

As of September 30, 2021, the Operating Partnership had $ 200.0 million outstanding under the Term Loan and $ 80.0 million of borrowings 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.

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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.

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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.

As of September 30, 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 “ATM Program”).

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

There was no ATM Program activity for the three months ended September 30, 2021 and there was no Prior ATM Program or ATM Program activity for the three and nine months ended September 30, 2020.

The following table summarizes the ATM Program activity for the nine months ended September 30, 2021 (in thousands, except per share amounts).

For the Nine Months Ended

September 30, 2021

Number of shares 990

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Gross proceeds (1)

$ 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.

(1) Total gross proceeds is before $ 0.3 million of commissions paid to the sales agents during the nine months ended September 30, 2021 under the ATM Program.

As of September 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 and six months ended June 30, 2021 and 2020 .

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

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

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):

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 nine months of 2021 (dollars in thousands, except per share amounts):

For the Three Months Ended

March 31, 2021 June 30, 2021

March 31, 2021 June 30, 2021 September 30, 2021

Dividends declared per share $ 0.265 $ 0.265 $ 0.265

Dividends payment date April 15, 2021 July 15, 2021

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

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

Dividends record date March 31, 2021 June 30, 2021

Dividends record date March 31, 2021 June 30, 2021 September 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.

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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.

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

At September 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.

Each share had a fair market value on the date of grant of $ 22.48 and $ 22.18 per share, respectively, based on the closing market price of the Company’s common stock on that date, and the shares vest in three equal annual installments beginning on the first anniversary of the grant date.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

In January 2021, the Compensation Committee granted 108,414 performance stock awards to officers.

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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.

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 on the date of grant 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 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.

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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,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

Stock-based compensation expense $ 1,802 $ 972 $ 5,197 $ 2,819

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.

As of September 30, 2021, ther e was $ 11.3 million of unamortized stock-based compensation expense related to unvested awards and the weighted-average remaining vesting period of such awards was 2.1 years.

CARETRUST REIT, INC.

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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 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,

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 nine months ended September 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 September 30, For the Nine Months Ended September 30,

2021 2020 2021 2020

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Earnings per common share, diluted $ 0.12 $ 0.23 $ 0.56 $ 0.63

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.

Antidilutive unvested restricted stock awards and performance awards excluded from the computation 535 300 436 300

The Company’s unvest ed restricted and performance based stock awards associated with its incentive award plan and unvested restricted stock awards 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 nine months ended September 30, 2021 and 2020, as applicable, when their inclusion would have been anti-dilutive.

COMMITMENTS AND CONTINGENCIES

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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 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 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,

As of September 30, 2021, the Company had committed to fund certain capital improvements at certain triple-net leased facilities totaling $ 11.7 million, of which $ 10.4 million is su bject to rent increase at the time of funding.

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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.

CONCENTRATION OF RISK

Major operator concentrations – As of September 30, 2021, Ensign leased 95 skilled nursing, multi-service campuses, assisted living and independent living facilities which had a total of 10,148 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 September 30, 2021 are Texas, California, Arizona and Utah.

During the three and nine months ended September 30, 2021, Ensign represented 33 % and 32 %, respectively, of the Company’s rental income, exclusive of operating expense reimbursements.

During the three and nine months ended September 30, 2020, Ensign represente d 30 % and 31 %, respectively, 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 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

The Company evaluates subsequent events in accordance with ASC 855, Subsequent Events .

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

Senior Unsecured Notes Payable

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.

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.

As of September 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 i n Louisiana and Texas.

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

During both the three and nine months ended September 30, 2020, PMG represented 16 % of the Company’s rental income, exclusive of operating expense reimbursements.

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