What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-08 compared with 2021-08-05 · 101 added, 93 removed, 211 unchanged (48% of the section changed)

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CareTrust REIT is a self-administered, publicly-traded REIT engaged in the ownership, acquisition, development and leasing of senio rs housing and healthcare-related properties.

As of June 30, 2021, we 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 wit h the highest concentration of properties by rental revenues located in California, Texas, Louisiana, Idaho and Arizona.

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

As of September 30, 2021, we owned and leased to independent operators, 225 skilled nursing, multi-service campuses, assisted living and independent living facilities (“ILFs”) consisting of 23,541 operational beds and units located in 28 states wit h the highest concentration of properties by rental revenues located in California, Texas, Louisiana, Idaho and Arizona.

A s of September 30, 2021, we also had other real estate investments consisting of one mezzanine loan receivable with a carrying value of $15.2 million .

We generate revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the tenant is solely responsible for the costs related to the property (including property taxes, insurance, maintenance and repair costs and capital expenditures, subject to certain exceptions in the case of properties leased to Ensign and Pennant).

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Tenants of our properties operating pursuant to triple-net master leases have been adversely impacted, and we expect that they will continue to be adversely impacted, by the COVID-19 pandemic.

Our tenants are experiencing increased operating costs as a result of actions they are taking to prevent or mitigate the outbreak or spread of COVID-19 at their facilities, including in connection with their implementation of safety protocols and procedures and other regulatory requirements.

To help offset these costs as well as occupancy declines, various relief programs have been enacted by federal and state governments, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which have provided, and we expect will continue to provide some benefits to our tenants subject to the programs’ respective terms and conditions (the “Provider Relief Funds”).

The estimated federal and state relief approved, received and retained to date by our operators, as reported by our operators, is approximately $132.2 million.

At June 30, 2021 , two of our ope rators who received Provider Relief Funds have disclosed that they have returned all or a portion of the Provider Relief Funds issued to them.

At a portfolio wide level, occupancy levels at our seniors housing facilities remained relatively stable from the onset of the COVID-19 pandemic until the beginning of the fourth quarter of 2020, during which we began to see a decline, and occupancy levels declined further in the second quarter of 2021.

Occupancy levels at our skilled nursing facilities (“SNFs”), which declined at the onset of the COVID-19 pandemic and continued to decline through January 2021, have been on a steady incline since February 2021 and continued to increase through the second quarter of 2021.

To help offset these costs as well as occupancy declines, various relief programs have been enacted by federal and state governments, which have provided, and we expect will continue to provide, some payments to our tenants, subject to the programs’ respective terms and conditions.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) established a grant program administered by the U.S.

Department of Health and Human Services (“HHS”) under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19 (the “Provider Relief Funds”).

HHS recently closed the application portal for its Phase 4 allocation of approximately $17 billion of Provider Relief Funds and an allocation of approximately $8.5 billion in American Rescue Plan resources for providers serving patients living in rural areas.

We expect that our tenants pursued additional funding from these allocations, and will pursue any future funding that may become available, though there can be no assurance that our tenants will qualify for, or receive, any Phase 4 or American Rescue Plan, or any future, funding.

The estimated federal and state relief approved, received and retained to date by our operators, as reported by our operators, is approximate ly $146.4 million.

At September 30, 2021 , two of our ope rators who received Provider Relief Funds have disclosed that they have returned all or a portion of the Provider Relief Funds issued to them.

This decline in occupancy continued through the first quarter of 2021 and remained flat through the third quarter of 2021.

Beginning in early 2020, the federal government temporarily suspended the three-day hospital stay requirement for a patient’s Medicare benefits to refresh.

Providers can now “skill in place,” eliminating the risk of transferring the patient to the hospital.

Because of this temporary rule change, overall skilled mix remained slightly elevated in the three months ended June 30, 2021 compared to the pre-pandemic skilled mix during the three months ended March 31, 2020.

Because of this temporary rule change, overall skilled mix remained slightly elevated in the three months ended September 30, 2021 compared to the pre-pandemic skilled mix during the three months ended March 31, 2020.

An increase in skilled mix can, but may not necessarily, offset some or all of the adverse financial impact to the operator of the SNF from a decline in occupancy.

However, the skilled mix in our SNFs during the three months ended June 30, 2021 was lower than the peak level seen in December 2020, and we anticipate that skilled mix in our SNFs will continue to decline as cases of COVID-19 decline.

The higher operating costs affecting our tenants, and the impact of lower occupancy levels, have adversely impacted and may continue to adversely impact the ability of our tenants to satisfy their rental obligations to us in full or on a timely basis.

Provider Relief Funds not being made available to our seniors housing facilities has also impacted some of our tenants’ ability to continue to meet some of their financial obligations, as they continue to experience lower occupancy levels and higher operating costs.

Subsequent to the quarter ended June 30, 2021, one seniors housing operator failed to pay rent for July and proposed a rent deferral for the months of July, August and a portion of September under a plan that would bring all rent deferrals current by the end of 2021.

We are currently considering their request.

Approximately 100.0% of our contractual rent obligations due for the second quarter of 2021, and approximately 96.2% due for July 2021, have been collected from our tenants before considering any cash deposits on-hand from which we may offset any shortfalls in rent received.

A number of COVID-19 vaccines were issued emergency use authorization by the United States Food and Drug Administration.

As of August 5, 2021, based on information provided by operators who have reported such information to us, almost three-quarters of our operators’ residents have been fully vaccinated, while almost half of such operators’ staff have received at least one dose.

The duration and extent of the COVID-19 pandemic’s effect on our operational and financial performance, and the operational and financial performance of our 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.

However, the skilled mix in our SNFs during the three months ended September 30, 2021 was lower than the peak level seen in December 2020, and we anticipate that skilled mix in our SNFs will continue to decline as cases of COVID-19 decline.

The higher operating costs affecting our tenants, and the impact of lower occupancy levels and labor shortages, have adversely impacted and may continue to adversely impact the ability of our tenants to satisfy their rental obligations to us in full or on a timely basis.

Provider Relief Funds not previously being made available to our seniors housing facilities has also impacted some of our tenants’ ability to continue to meet some of their financial obligations, as they continue to experience lower occupancy levels and higher operating costs.

During the six months ended June 30, 2021, we collected all contractual rents due from our operators.

During the three months ended September 30, 2021, we agreed to provide affiliates of Noble Senior Services and Noble VA Holdings, LLC (collectively, “Noble”), a deferral of the unpaid portion of contractual rent for

the months of July, August and September, totaling $1.8 million and representing approximately 4% of our total contractual base rent for the three months ended September 30, 2021.

In connection with our agreement to the rent deferral, we also entered into a purchase agreement 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 we pursue other tenants for the long-term.

The deferred rent, as well as all contractual rent for the fourth quarter of 2021, is required to be paid in full upon closing of the acquisition of the two facilities.

During the three months ended September 30, 2021, one facility leased to Noble was designated as held for sale, and we expect to remove the facility from the applicable master lease following the sale.

See Note 3, Real Estate Investments, Net , for additi onal information.

With respect to our other operators, 100.0% of our contractual rent obligations due for the third quarter of 2021 have been collected from our tenants before considering any cash deposits on-hand from which we may offset any shortfalls in rent received.

With respect to our entire portfolio, approximately 96.1% of our contractual rent obligations due for October 2021 have been collected from our tenants before considering any cash deposits on-hand from which we may offset any shortfalls in rent received.

Federal laws and regulations related to COVID-19 vaccine mandates may increase operating costs of our tenants if those mandates make recruiting and retaining qualified nursing and other personnel more difficult.

The Biden-Harris administration issued an Interim Final Rule requiring Medicare and Medicaid-participating facilities and employers with more than 100 employees must mandate their employees to be vaccinated.

Some states have also issued their own orders to employers and healthcare providers that may or may not align with federal directives.

The legality of both federal and state vaccine mandates will likely be decided by the courts.

Until pending laws and regulations related to vaccine mandates are both finalized and adjudicated, our tenants will continue to manage in different ways — from mandating vaccines for all employees to waiting to see how the issue is ultimately resolved.

The mandates, as presently written, may cause disruption to tenants’ operations if employees refuse vaccination and are terminated, and our tenants are not able to replace them in a timely manner or experience increased costs to do so.

The duration and extent of the COVID-19 pandemic’s effect on our operational and financial performance, and the operational and financial performance of our 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, restrictions imposed on unvaccinated individuals and employee vaccine mandates, labor shortages resulting from the foregoing restrictions and mandates and how quickly and to what extent normal economic and operating conditions can resume.

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

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

See Note 12, Subsequent Events, for additional information.

The aggregate net proceeds from the sale of the Notes were approxi mately $393.8 million after deducting underwriting fees and other offering expenses.

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The 2025 Notes were redeemed 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.

Sale of Real Estate and Asset Held for Sale

During the third quarter of 2021, we recorded a loss on extinguishment of debt of $10.8 million in our 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.

Asset Held for Sale and Sale of Real Estate

During the third quarter of 2021, we met the held for sale criteria on one assisted living facility.

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

On February 1, 2021, we closed on the sale of 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.

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

In August 2021, we met the held for sale criteria on one assisted living facility operated by affiliates of Noble Senior Services, and are 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.

Recent Investments

From January 1, 2021 through August 5, 2021, we acquired 4 skilled nursing facilities and 4 multi-service campuses for approximately $183.6 million, which includes capitalized acquisition costs.

From January 1, 2021 through November 8, 2021, we acquired 4 skilled nursing facilities and 4 multi-service campuses for approximately $183.7 million, which includes capitalized acquisition costs.

These acquisitions are expected to generate initial annual cash revenues of approximately $13.1 million and an initial blended yield of approximately 7.3%.

See Note 3, Real Estate Investments, Net and Note 12, Subsequent Events in the Notes to condensed consolidated financial statements for additional information.

See Note 3, Real Estate Investments, Net in the Notes to condensed consolidated financial statements for additional information.

At-The-Market Offering of Common Stock

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In connection with the entry into the equity distribution agreement and the commencement of the ATM Program, our “at-the-market” equity offering program pursuant to our 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

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, we 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, we had $476.5 million available for future issuances under the ATM Program.

Results of Operations

Operating Results

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020:

Three Months Ended June 30, Increase

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020:

Three Months Ended September 30, Increase

(Decrease) Percentage

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General and administrative 5,196 4,105 1,091 27 %

Loss on extinguishment of debt (10,827) — (10,827) 100 %

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Rental income .

The $5.2 million, or 12%, increase in rental income is primarily due to a $4.4 million increase in rental income from real estate investments made after April 1, 2020, $0.9 million from contractual increases in rental rates for our existing tenants and $0.1 million in cash rents due to lease amendments, partially offset by a $0.1 million decrease in rental income due to the disposal of assets in February 2021 and a $0.1 million decrease in tenant reimbursements.

The $3.1 million, or 7%, increase in rental income is primarily due to a $4.1 million increase in rental income from real estate investments made after July 1, 2020, $1.0 million from contractual increases in rental rates for our existing tenants, a $0.1 million increase in tenant reimbursements and $0.1 million in cash rents due to lease amendments, partially offset by a $1.1 million decrease in lease termination revenue, a $1.0 million decrease from the recovery of previously reversed rent and a $0.1 million decrease in rental income due to the disposal of assets in February 2021.

Independent living facilities.

The $0.6 million, or 100%, decrease in revenues from our ILFs was due to the sale of our one remaining ILF to a third party in November 2020.

The $0.5 million, or 100%, decrease in expenses was for the same reason indicated for the decrease in revenues.

The $0.6 million, or 100%, decrease in expenses from our ILFs was for the same reason indicated for the decrease in revenues.

Interest and other income.

The $0.5 million, or 51%, decrease in interest and other income was primarily due to a decrease in interest income of $0.9 million due to the repayment of mortgage loans and other loans receivable primarily by CommuniCare in May 2020 and Cascade in July 2020, partially offset by approximately $0.4 million of interest income related to our mezzanine loan to Next VA Star Realty Holdings, LLC originated in November 2020.

The $0.5 million increase in interest and other income was primarily due to our mezzanine loan to Next VA Star Realty Holdings, LLC originated in November 2020.

See Note 4, Other Real Estate Investments, Net .

Depreciation and amortization.

The $0.6 million, or 5%, increase in depreciation and amortization was primarily due to an increase in depreciation and amortization of $1.4 million related to new real estate investments and capital improvements made after April 1, 2020, partially offset by $0.7 million due to assets becoming fully depreciated after April 1, 2020 and $0.1 million of depreciation related to the disposal of assets.

The $0.9 million, or 7%, increase in depreciation and amortization was primarily due to an increase in depreciation and amortization of $1.7 million related to new real estate investments and capital improvements made after July 1, 2020, partially offset by a decrease in depreciation of $0.7 million due to assets becoming fully depreciated after July 1, 2020 and a decrease in depreciation of $0.1 million related to the disposal of assets in February 2021.

Interest expense.

The $0.7 million, or 12%, increase in interest expense was primarily due to a higher weighted average debt balance of approximately $157.5 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 due to the issuance of the Notes on June 17, 2021 and the redemption of the 2025 Notes on July 1, 2021, partially offset by lower weighted average interest rates.

The $0.2 million, or 3%, increase in interest expense was primarily due to an increase of $0.3 million in interest expense related to a higher weighted average debt balance under the Revolving Facility and a $3.9 million increase in interest expense related to the issuance of the Notes on June 17, 2021, partially offset by a $4.0 million decrease in interest expense due to the redemption of the 2025 Notes on July 1, 2021.

Property taxes.

The $0.1 million, or 8%, decrease in property taxes was primarily due to a $0.2 million decrease due to reassessments and decreased effective tax rates, partially offset by an increase of $0.1 million in property taxes due to the transfer of certain properties to new operators in January 2021 that do not make direct tax payments.

The $0.1 million, or 17%, in crease in property taxes was primarily due to a $0.3 million increase due to new real estate investments made after July 1, 2020, partially offset by a decrease of $0.2 million in property taxes due to reassessments and decreased effective tax rates.

General and administrative expense.

The $1.0 million, or 22%, increase in general and administrative expense was primarily related to higher stock compensation expense of $0.8 million, higher cash wages of $0.3 million and $0.1 million of other general and administrative expense, partially offset by a decrease of $0.2 million in state and business taxes compared to the prior period.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020:

Six Months Ended June 30, Increase

The $1.1 million, or 27%, increase in general and administrative expense was primarily related to higher stock compensation expense of $0.8 million and higher cash wages of $0.3 million.

Loss on extinguishment of debt.

During the three months ended September 30, 2021, we recorded a $10.8 million loss on extinguishment of debt , 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.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020:

Nine Months Ended September 30, Increase

(Decrease) Percentage

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General and administrative 16,136 12,921 3,215 25 %

Loss on extinguishment of debt (10,827) — (10,827) 100 %

Loss on sale of real estate (192) (56) (136) 243 %

Rental income .

The $8.0 million, or 9%, increase in rental income is primarily due to a $6.7 million increase in rental income from real estate investments made after January 1, 2020, $1.6 million from contractual increases in rental rates for our existing tenants and $0.4 million in cash rents due to lease amendments, partially offset by a $0.6 million decrease in rental income due to the disposal of assets in February 2020 and February 2021 and a $0.1 million decrease in tenant reimbursements.

The $11.1 million, or 9%, increase in rental income is primarily due to a $10.8 million increase in rental income from real estate investments made after January 1, 2020, $2.6 million from contractual increases in rental rates for our existing tenants and $0.5 million in cash rents due to lease amendments, partially offset by a $1.1 million decrease in lease termination revenue, a $1.0 million decrease from the recovery of previously reversed rent and a $0.7 million decrease in rental income due to the disposal of assets in February 2020 and February 2021.

Independent living facilities.

The $1.9 million, or 100%, decrease in revenues from our ILFs was due to the sale of our one remaining ILF to a third party in November 2020.

The $1.1 million, or 100%, decrease in expenses was for the same reason indicated for the decrease in revenues.

The $1.7 million, or 100%, decrease in expenses from our ILFs was for the same reason indicated for the decrease in revenues.

Interest and other income.

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Depreciation and amortization.

The $0.9 million, or 3%, increase in depreciation and amortization was primarily due to an increase in depreciation and amortization of $2.3 million related to new real estate investments and capital improvements made after January 1, 2020, partially offset by $1.2 million due to assets becoming fully depreciated after January 1, 2020 and $0.2 million of depreciation related to the disposal of assets.

The $1.8 million, or 5%, increase in depreciation and amortization was primarily due to an increase in depreciation and amortization of $4.0 million related to new real estate investments and capital improvements made after January 1, 2020, partially offset by a decrease in depreciation of $1.9 million due to assets becoming fully depreciated after January 1, 2020 and a decrease in depreciation of $0.3 million related to the disposal of assets in February 2020 and February 2021.

Interest expense.

The $0.3 million, or 2%, decrease in interest expense was primarily due to lower weighted average interest rates, partially offset by a higher weighted average debt balance of approximately $90.9 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The $0.1 million, or 1%, decrease in interest expense was primarily due a $1.0 million decrease in interest expense related to a lower weighted average interest rate on the term loan, a $3.9 million decrease in interest expense due to the redemption of the 2025 Notes on July 1, 2021 and a lower weighted average interest rate, partially offset by a $4.5 million increase in interest expense related to the issuance of the Notes on June 17, 2021, a $0.3 million increase in interest expense related to a higher weighted average debt balance under the Revolving Facility and an increase of $0.1 million in interest expense related to the amortization of deferred financing fees.

Property taxes.

The $0.1 million, or 11%, increase in property taxes was primarily due to a $0.4 million increase in property taxes realized upon the disposition of assets in February 2020 and the transfer of certain properties to new operators in January 2021 that make direct tax payments, partially offset by a decrease of $0.3 million of property taxes due to reassessments and decreased effective tax rates.

The $0.3 million, or 13%, increase in property taxes was primarily due to a $0.4 million increase in pro perty taxes due to closing credits realized upon the disposition of assets in February 2020 and the transfer of certain properties to new operators in January 2021 th at do not make direct tax payments and a $0.4 million increase due to new real

estate investments made after January 1, 2020, partially offset by a decrease of $0.5 million of property taxes due to reassessments and decreased effective tax rates.

General and administrative expense.

The $2.1 million, or 24%, increase in general and administrative expense was primarily related to higher stock compensation expense of $1.5 million, higher cash wages of $0.5 million, increased professional service fees of $0.2 million and $0.1 million of other general and administrative expense, partially offset by a decrease of $0.2 million in state and business taxes compared to the prior period.

The $3.2 million, or 25%, increase in general and administrative expense was primarily related to higher stock compensation expense of $2.4 million and higher cash wages of $0.8 million compared to the prior period.

Loss on extinguishment of debt.

During the nine months ended September 30, 2021, we recorded a $10.8 million loss on extinguishment of debt , 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.

Loss on sale of real estate .

During the six months ended June 30, 2021, we recorded a $0.2 million loss on sale of real estate related to the sale of one skilled nursing facility.

During the six months ended June 30, 2020, we recorded a $0.1 million loss on sale of real estate related to the sale of six skilled nursing facilities.

During the nine months ended September 30, 2021, we recorded a $0.2 million loss on sale of real estate related to the sale of one skilled nursing facility.

During the nine months ended September 30, 2020, we recorded a $0.1 million loss on sale of real estate related to the sale of six skilled nursing facilities.

Liquidity and Capital Resources

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All such dividends are at the discretion of our board of directors.

As of June 30, 2021, we had cash, cash equivalen ts and restricted cash of $311.0 million .

The $309.2 million in restricted cash as of June 30, 2021 related to the cash deposited with the trustee to pay the redemption price of the 2025 Notes.

The 2025 Notes were redeemed on July 1, 2021.

See above under “Recent Developments” and Note 12, Subsequent Events, for additional information.

During the three and six months ended June 30, 2021, we sold 288,000 and 990,000 shares of common stock under our ATM Program for gross proceeds of $6.9 million and $23.5 million, respectively.

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

As of June 30, 2021, we also had $50.0 million in borrowings outstanding and $550.0 million of availability remaining under the Revolving Facility (as defined below).

As of September 30, 2021, we had cash and cash equivalents of $17.7 million.

During the nine months ended September 30, 2021, we sold 990,000 shares of common stock under our ATM Program for gross proceeds of $23.5 million.

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

As of September 30, 2021, we also had $80.0 million in borrowings outstanding and $520.0 million of availability remaining under the Revolving Facility.

We believe that our available cash, expected operating cash flows, and the availability under the ATM Program and Amended Credit Facility (as defined below) will provide sufficient funds for our operations, anticipated scheduled debt service payments and projected dividend payments for at least the next twelve months.

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The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented (dollars in thousands):

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

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

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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 cash provided by operating activities increased $2.6 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

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

Net cash provided by operating activities increased $10.0 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Operating cash inflows are derived primarily from the rental payments received under our lease agreements, including as a result of new investments, and interest payments on our other real estate investments.

Operating cash outflows consist primarily of interest expense on our borrowings and general and administrative expenses.

The net increase of $2.6 million in cash provided by operating activities for the six months ended June 30, 2021 is primarily due to increased rental payments as a result of new investments and a decrease in cash paid for interest on outstanding indebtedness due to lower weighted average interest rates, partially offset by a decrease in interest and other income due to the repayments of our other real estate investments and an increase in cash paid for general and administrative expenses.

Cash used in investing activities for the six months ended June 30, 2021 was primarily comprised of $148.5 million in acquisitions of real estate and investments in other loans and $3.5 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $6.8 million in net proceeds from real estate sales and $0.1 million of payments received from other loans receivable.

Cash provided by investing activities for the six months ended June 30, 2020 was primarily comprised of $69.3 million of payments received from our preferred equity investment and mortgage and other loans receivable and $2.1 million in net proceeds from real estate sales, partially offset by $39.9 million in acquisitions of real estate and investments in real estate mortgage loans and $6.2 million of purchases of furniture, fixtures and equipment and improvements to real estate.

Our cash flows provided by financing activities for the six months ended June 30, 2021 were primarily comprised of $400.0 million of proceeds from the issuance of the Notes, $22.9 million of net proceeds from the issuance of common stock under the ATM Program, partially offset by $49.5 million in dividends paid, $5.6 million in payments of deferred financing costs and a $1.3 million net settlement adjustment on restricted stock.

Our cash flows used in financing activities for the six months ended June 30, 2020 were primarily comprised of $45.4 million in dividends paid, a $2.0 million net settlement adjustment on restricted stock, $0.4 million paid for common stock offering related costs and $60.0 million in net repayments under our Amended Credit Facility.

The net increase of $10.0 million in cash provided by operating activities for the nine months ended September 30, 2021 is primarily due to increased rental payments as a result of new investments, partially offset by an increase in cash paid for interest on outstanding indebtedness due to the timing of interest payments, a decrease in interest and other income due to the repayments of our other real estate investments and an increase in cash paid for general and administrative expenses.

Cash used in investing activities for the nine months ended September 30, 2021 was primarily comprised of $184.1 million in acquisitions of real estate and investments in other loans and $4.8 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $6.8 million in net proceeds from real estate sales and $0.2 million of payments received from other loans receivable.

Cash provided by investing activities for the nine months ended September 30, 2020 was primarily comprised of $83.2 million of payments received from our preferred equity investment and mortgage and other loans receivable and $2.2 million in net proceeds from real estate sales, partially offset by $57.0 million in acquisitions of real estate and investments in real estate mortgage loans and $6.3 million of purchases of equipment, furniture and fixtures and improvements to real estate.

Our cash flows provided by financing activities for the nine months ended September 30, 2021 were primarily comprised of $400.0 million of proceeds from the issuance of the Notes, $30.0 million in net borrowings under our Amended Credit Facility and $22.9 million of net proceeds from the issuance of common stock under the ATM Program, partially offset by $300.0 million of payments to redeem the 2025 Notes, $75.1 million in dividends paid, $14.1 million in payments on debt extinguishment and deferred financing costs and a $1.3 million net settlement adjustment on restricted stock.

Our cash flows used in financing activities for the nine months ended September 30, 2020 were primarily comprised of $69.3 million in dividends paid, a $2.0 million net settlement adjustment on restricted stock, $0.4 million paid for common stock offering related costs and $60.0 million in net repayments under our Amended Credit Facility.

3.875% Senior Unsecured Notes due 2028

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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 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.

See above under “Recent Developments” and Note 6, Debt , for additional information.

S ee No te 6, Debt , for additional information.

The indenture governing the Notes requires CareTrust REIT and its restricted subsidiaries to maintain a specified ratio of unencumbered assets to unsecured indebtedness.

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The indenture also contains customary events of default.

As of June 30, 2021, we were in compliance with all applicable financial covenants under the indenture governing the Notes.

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

5.25% Senior Unsecured Notes due 2025 and Issuer and Guarantor Financial Information

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

See above under “Recent Developments” and Note 12, Subsequent Events, for additional information.

See above under “Recent Developments” and Note 6, Debt, for additional information.

The obligations under the 2025 Notes were fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by CareTrust REIT (the “Parent Guarantor”) and all of CareTrust REIT’s existing and future subsidiaries (other than the Issuers) that guaranteed obligations under the Amended Credit Facility;

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(i) there was no default or event of default under the indenture;

Issuers were in compliance with specified limitations on indebtedness under the indenture;

and (iii) the payments did not exceed a specified restricted payment basket.

(ii) the Issuers were in compliance with specified limitations on indebtedness under the indenture;

and (iii) the payments did not exceed

a specified restricted payment basket.

Dividends or distributions were also permitted if the Parent Guarantor’s board of directors believed in good faith they were necessary to maintain Parent Guarantor’s REIT status or to avoid any excise tax or income tax imposed on Parent Guarantor, provided there was no default or event of default under the indenture.

Further, the Issuers and their restricted subsidiaries were not permitted to create or cause to become effective any encumbrance or restriction on the ability of the Issuers to, among other things, pay dividends or make distributions, pay indebtedness, make loans or advances to the Issuers or their restricted subsidiaries or transfer property or assets to the Issuers or their restricted subsidiaries, other than in connection with certain customary exceptions such as in respect of the indenture or the Amended Credit Facility.

As of June 30, 2021, we were in compliance with all applicable financial covenants under the indenture governing the 2025 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 off the credit ratings of the Company’s senior long-term unsecured debt).

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

Subsequent to June 30, 2021, we borrowed an additional $50.0 million under our Revolving Facility to fund the acquisition of two SNFs in August 2021.

See Note 12, Subsequent Events for additional information.

As of September 30, 2021, we had $200.0 million outstanding under the Term Loan and $80.0 million outstanding under the Revolving Facility.

The Revolving Facility has a maturity date of February 8, 2023, and includes, at our sole discretion, t wo, six-month extension options.

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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 June 30, 2021, we were in compliance with all applicable financial covenants under the Amended Credit Agreement.

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 September 30, 2021, we were in compliance with all applicable financial covenants under the Amended Credit Agreement.

Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of June 30, 2021 (in thousands):

The following table summarizes our contractual obligations and commitments as of September 30, 2021 (in thousands):

Payments Due by Period

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2028 Senior unsecured notes payable (1) $ 509,103 $ 16,103 $ 31,000 $ 31,000 $ 431,000

2025 Senior unsecured notes payable (2) 309,187 309,187 — — —

Senior unsecured term loan (2) 214,020 3,221 6,433 204,366 —

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(1) Amounts include interest payments of $109.1 million.

(2) Amount includes the redemption price of the 2025 Notes.

The 2025 Notes were redeemed on July 1, 2021.

See above under “Recent Developments” and Note 12, Subsequent Events for additional information.

(2) Amounts include interest payments of $14.0 million .

(3) Amounts include payments related to the credit facility f ee of $1.3 million and interest payments of $1.3 million.

Amounts do not include $50.0 million in additional borrowings under the Revolving Facility made in August 2021.

See Note 12, Subsequent Events for additional information.

Capital Expenditures

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For our other triple-net master leases, subject to approval by us, 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 our approval and funding of their requests.

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

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

We expect the majority of the funding of these commitments to be completed over the next one to two years.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance with GAAP for interim financial information set forth in the Accounting Standards Codification, as published by the Financial Accounting Standards Board.

Our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information set forth in the Accounting Standards Codification, as published by the Financial Accounting Standards Board.

GAAP requires us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

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We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain.

on February 10, 2021, for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no material changes in such critical accounting policies during the six months ended June 30, 2021.

Please refer to “Critical Accounting Policies and Estimates” in the “Management’s Discussion and Analysis of Financial Condition and Results of Ope rations” section of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 10, 2021, for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no material changes in such critical accounting policies during the nine months ended 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 2. Management’s Discussion and Analysis