What changed in this filing

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Item 1. Business

2022-02-16 compared with 2021-02-10 · 129 added, 109 removed, 371 unchanged (39% of the section changed)

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

As of December 31, 2020, CareTrust REIT’s real estate portfolio consisted of 218 skilled nursing facilities (“SNFs”), multi-service campuses and assisted living facilities (“ALFs”) consisting of 22,466 operational beds and units located in 28 states with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

As of December 31, 2021, CareTrust REIT’s real estate portfolio consisted of 227 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 23,650 operational beds and units located in 29 sta tes with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

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

From January 1, 2020 through February 10, 2021, we acquired six skilled nursing facilities, one multi-service campus and one assisted living facility for approximately $89.8 million, which includes capitalized acquisition costs.

From January 1, 2021 through February 16, 2022, we acquired five SNFs and four multi-service campuses for approximate ly $192.5 million, which includes capitalized acquisition costs.

These acquisitions are expected to generate initial annual cash revenues of approximately $13.9 million and an initial blended yield of approximately 7.4%.

We also made one mezzanine loan with a carrying value of $15.0 million with a fixed interest rate of 12.0%.

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).

In addition, we acquired two ALFs for approximately $12.4 million, which includes capitalized acquisition costs.

We are in the process of identifying an operator for the two ALFs, which are currently not operational.

From January 1, 2021 through February 16, 2022, we sold one SNF and one land parcel, resulting in a net loss on sale of property of $0.1 million.

From time to time, we also extend secured mortgage loans to healthcare operators, secured by healthcare-related properties, and secured mezzanine loans to healthcare operators, secured by membership interests in healthcare-related properties.

We conduct and manage our business as one operating segment for internal reporting and internal decision making purposes.

We expect to grow our portfolio by pursuing opportunities to acquire additional properties that will be leased to a diverse group of local, regional and national healthcare providers, which may include other skilled nursing operators, as well as seniors housing operators and related businesses.

We expect to grow our portfolio by pursuing opportunities to acquire additional properties that will be leased to a diverse group of local, regional and national healthcare providers, which may include new or existing skilled nursing operators, as well as seniors housing operators and related businesses.

We also anticipate diversifying our portfolio over time, including by acquiring properties in different geographic markets, and in different asset classes.

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According to the American Health Care Association, the nursing home industry was comprised of approximately 15,700 facilities as of December 2016, as compared with over 16,700 facilities as of December 2000.

We expect that the supply/demand imbalance in the skilled nursing industry will increasingly favor skilled nursing and assisted living providers due to the shift of patient care to lower cost settings, an aging population and increasing life expectancies.

• Increased Demand Driven by Aging Populations and Increased Life Expectancy .

As life expectancy continues to increase in the United States and seniors account for a higher percentage of the total U.S.

• Increased Demand Driven by Aging Populations .

As seniors account for a higher percentage of the total U.S.

population, we believe the overall demand for skilled nursing services will increase.

At present, the primary market demographic for skilled nursing services is individuals age 75 and older.

The 2020 U.S.

Census reported that there were over 56 million people in the United States in 2020 over the age of 65.

Census estimates this group to be one of the fastest growing segments of the United States population, projecting that it will almost double between 2020 and 2060.

According to the Centers for Medicare & Medicaid Services, nursing home care facilities and continuing care retirement expenditures are projected to grow from approximately $169 billion in 2018 to approximately $266 billion in 2028, representing a compounded annual growth rate of 5.0%.

We believe that these trends will support an increasing demand for skilled nursing services, which in turn will likely support an increasing demand for the services provided within our properties.

According to the Centers for Medicare & Medicaid Services, nursing home care facilities and continuing care retirement expenditures are projected to grow from approximately $196.8 billion in 2020, which includes federal expenditures in response to the COVID-19 pandemic, to approximately $266 billion in 2028.

Although skilled nursing and seniors housing occupancy rates have declined during the COVID-19 pandemic, we believe that these trends in population will support an increasing demand for skilled nursing services in the long-term, which in turn will likely support an increasing demand for the services provided within our properties.

Portfolio Summary

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Charges for these services are generally paid from a combination of government reimbursement and private sources.

As of December 31, 2020, our portfolio include d 177 SNFs, 20 of w hich are located on campuses that also have assisted or independent living facilities, which we refer to as multi-service campuses (see below under “Multi-Service Campuses”).

As of December 31, 2021, our portfolio include d 184 SNFs, 24 of w hich are located on campuses that also have ALFs or ILFs, which we refer to as multi-service campuses (see below under “Multi-Service Campuses”).

• Assisted Living Facilities .

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As of December 31, 2021, our portfolio included 41 ALFs, some of which also contain independent living and memory care units.

Included in the 41 ALFs is one ALF classified as held for sale as of December 31, 2021 .

• Independent Living Facilities .

ILFs, also known as retirement communities or senior apartments, are not healthcare facilities and are not licensed to provide healthcare services to residents.

The facilities typically consist of entirely

self contained apartments, complete with their own kitchens, baths and individual living spaces, as well as parking for tenant vehicles.

The facilities typically consist of entirely self-contained apartments, complete with their own kitchens, baths and individual living spaces, as well as parking

for tenant vehicles.

They are most often rented unfurnished, and generally can be personalized by the tenants, typically an individual or a couple over the age of 55.

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Multi-service campuses generally include some combination of co-located SNFs, ALFs, ILFs, and/or memory care units all housed at a single location and operated as a continuum of care.

We also refer to continuing care retirement communities as multi-service campuses.

These facilities are often marketed as an opportunity for residents to “age in place,” and tend to attract couples where the individuals may require or benefit from differing levels of care.

As of December 31, 2021, our portfolio included 24 facilities that we classify as multi-service campuses.

Our portfolio of SNFs, ALFs, ILFs and multi-service campuses is broadly diversified by geographic location throughout the United States, with concentrations in California, Texas, Louisiana, Idaho and Arizona based on rental income.

Our portfolio of SNFs, ALFs, ILFs and multi-service campuses is broadly diversified by geographic location throughout the United States, with concentrations i n California, Texas, Louisiana, Idaho and Arizona ba sed on rental income.

Significant Master Leases

As of December 31, 2021, we leased 95 facilities to subsidiaries of Ensign, which have a total of 10,148 operational beds.

We have leased a significant number of our properties to subsidiaries of Ensign on a triple-net basis under eight long-term leases, each with its own pool of properties, that have varying maturities and diversity in both property type and geography (each an “Ensign Master Lease” and collectively, the “Ensign Master Leases” ).

The Ensign Master Leases provide for initial terms in excess of ten years with staggered expiration dates and no purchase options.

T he Ensign Master Leases provide for initial terms in excess of ten years with staggered expiration dates and no purchase options.

At Ensign’s option, each Ensign Master Lease may be extended for up to three five-year renewal terms beyond the initial term and, if elected, the renewal will be effective for all of the leased property then subject to the applicable Ensign Master Lease.

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

As of December 31, 2020, the annualized contractual rental income from the Ensign Master Leases was $53.4 million, or 31%, and annualized contractual rental income from all Ensign leases was $57.2 million, or 33.0%, of total annualized contractual rental income.

During the year ended December 31, 2020, the Company acquired four additional facilities leased to subsidiaries of Ensign on a triple-net basis under two separate master lease agreements, each of which contains a purchase option.

As of December 31, 2021, annualized contractual rental income from the Ensign Master Leas es was $59.7 million, and annualized contractual rental income from all Ensign leases was $63.5 million , representing 31% and 33% of total annualized contractual rental income, respectively.

Rent is escalated annually in June under the Ensign Master Leases, and in December for the four additional facilities leased to Ensign, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero) or 2.5%, and (2) the prior year’s rent .

The Ensign Master Leases are guaranteed by Ensign and contain cross-default provisions.

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

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

As a result of the Pennant Spin, on October 1, 2019, the Company amended the Ensign Master Leases to reduce the number of facilities covered by the Ensign Master Leases and entered into one long-term triple-net lease (the “Pennant Master Lease”) to lease those facilities to Pennant.

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

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

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

Ensign has guaranteed the Pennant Master Lease.

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

As of December 31, 2020, the Company leased 89 facilities to subsidiaries of Ensign, which have a total of 9,546 operational beds and 11 facilities to Pennant, which have a total of 1,193 operational beds and Ensign and Pennant represented 33% and 5%, respectively, of the Company’s contractual rental income, exclusive of operating expense reimbursements, on an annualized run-rate basis.

The obligations under the lease agreements for the four additional facilities are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases.

As of December 31, 2021 , 15 of our properties were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”), and have a total of 2,144 operational beds.

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

As of December 31, 2020, PMG represented 16% of the Company’s contractual rental income, exclusive of operating expense reimbursements, on an annualized run-rate basis.

The Ensign Master Leases account for a substantial portion of our revenues, and Ensign’s financial condition and ability and willingness to (i) satisfy its obligations under the Ensign Master Leases, (ii) renew the Ensign Master Leases upon expiration of the initial base terms thereof, and (iii) satisfy its guaranty obligations under the Pennant Master Lease, significantly impacts our revenues and our ability to service our indebtedness and to make distributions to our stockholders.

There can be no assurance that Ensign has sufficient assets, income and access to financing to enable it to satisfy its obligations under the Ensign Master Leases or its guaranty of the Pennant Master Lease, and any inability or unwillingness on its part to do so would have a material adverse effect on our business, financial condition, results of operations and liquidity, on our ability to service our indebtedness and other obligations and on our ability to pay dividends to our stockholders, as required for us to qualify, and maintain our status, as a REIT.

We also cannot assure you that Ensign will elect to renew the Ensign Master Leases

with us upon expiration of the initial base terms or any renewal terms thereof or, if such leases are not renewed, that we can reposition the affected properties on the same or better terms.

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

As of December 31, 2021, annualized contractual rental income from the PMG Master Lease wa s $28.9 million, representing 15% of total annualized contractual rental income.

See “Risk Factors - Risks Related to Our Business - We are dependent on the healthcare operators that lease our properties to successfully operate their business and make contractual lease payments, and an event that materially and adversely affects their business, financial position or results of operations could materially and adversely affect our business, financial position or results of operations.”

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We obtain various financial and operational information from our tenants each month.

We regularly review this information to calculate the above-described coverage metrics, to identify operational trends, to assess the operational and financial impact of the changes in the broader industry environment (including the potential impact of government reimbursement and regulatory changes), and to evaluate the management and performance of the tenant’s operations.

These metrics help us identify potential areas of concern relative to our tenants’ credit quality and ultimately the tenants’ ability to generate sufficient liquidity to meet their ongoing obligations, including their obligations to continue paying contractual rents due to us and satisfying other financial obligations to third parties, as prescribed by our triple-net leases.

Properties by Type:

The following table displays the geographic distribution of our facilities by property type and the related number of beds and units available for occupancy by asset class, as of December 31, 2020.

The following table displays the geographic distribution of our facilities and the related number of beds and units available for occupancy by property type, as of December 31, 2021.

The number of beds or units that are operational may be less than the official licensed capacity.

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IA 15 970 13 801 2 169 — —

OH 13 1,284 9 734 4 550 — —

UT 13 1,374 9 913 1 272 3 189

WA 12 1,082 11 980 — — 1 102

OH 13 1,320 9 736 4 584 — —

AZ 11 1,352 8 986 — — 3 366

IL 8 772 7 644 1 128 — —

WA 11 1,024 10 922 — — 1 102

LA 8 1,164 7 949 1 215 — —

IL 8 768 7 640 1 128 — —

CO 7 779 5 511 — — 2 268

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MI 4 189 — — — — 4 189

MT 3 260 3 260 — — — —

NV 3 304 1 92 — — 2 212

MT 3 259 3 259 — — — —

WI 3 206 — — — — 3 206

MN 2 62 — — — — 2 62

NC 2 104 — — — — 2 104

GA 1 105 1 105 — — — —

NJ 2 98 — — — — 2 98

MN 2 62 — — — — 2 62

IN 1 162 — — — — 1 162

MD 1 120 — — — — 1 120

ND 1 110 1 110 — — — —

NM 1 116 1 116 — — — —

OR 1 53 1 53 — — — —

GA 1 105 1 105 — — — —

ND 1 83 1 83 — — — —

SD 1 81 1 81 — — — —

WV 1 67 — — 1 67 — —

OR 1 53 1 53 — — — —

Total 227 23,650 160 16,614 24 3,545 43 3,491

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The following table displays occupancy by property type for each of the years ended December 31, 2021 and 2020.

Percentage occupancy in the below table is computed by dividing the average daily number of beds occupied by the total number of beds available for use during the periods indicated (beds of acquired facilities are included in the computation following the date of acquisition only).

Percentage occupancy in the below table is computed by dividing the average daily number of beds occupied by the total number of beds available for use during the periods indicated (beds are included in the computation following the date of acquisition, or through the date of disposition, only).

In addition, the following table excludes the two non-operational ALFs while we identify an operator.

Year Ended December 31,

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The leased facility financial performance data is presented one quarter in arrears.

(2) As of December 31, 2019, we owned and operated one ILF.

Occupancy data for the year ended December 31, 2020 and December 31, 2019 includes the one ILF owned and operated.

We sold the one remaining ILF during the three months ended December 31, 2020.

(2) As of December 31, 2021, we did not own and operate any ILFs.

Occupancy data for the year ended December 31, 2020 includes the one ILF we owned and operated that was sold in November 2020.

Property Type - Rental Income:

The following tables display the annual rental income and total beds/units for each property type leased to third-party tenants for the years ended December 31, 2020 and 2019.

For the Year Ended December 31, 2020

The following tables display the annual rental income for each property type leased to third-party tenants for the years ended December 31, 2021 and 2020 and total beds/units for each property type as of December 31, 2021 and 2020.

For the Year Ended December 31, 2021 As of December 31, 2021

Property Type Rental Income

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Total $ 190,195 100 % 23,650

For the Year Ended December 31, 2019

For the Year Ended December 31, 2020 As of December 31, 2020

Property Type Rental Income

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Geographic Concentration - Rental Income:

The following table displays the geographic distribution of annual rental income for properties leased to third-party tenants for the years ended December 31, 2020 and 2019 (in thousands, except percentages).

The following table displays the geographic distribution of annual rental income for properties leased to third-party tenants for the years ended December 31, 2021 and 2020 (dollars in thousands).

For the Year Ended December 31, 2021 For the Year Ended December 31, 2020

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UT 7,453 4 % 7,289 4 %

MI 5,729 3 % 6,007 4 %

CO 5,642 3 % 5,561 3 %

IA 5,322 3 % 4,672 3 %

WA 4,936 3 % 5,201 3 %

IL 4,893 3 % 4,824 3 %

IA 4,672 3 % 2,815 2 %

VA 3,449 2 % 3,248 2 %

MI 3,081 2 % 5,729 3 %

WI 3,045 2 % 2,937 2 %

MT 2,128 1 % 1,079 1 %

NV 2,123 1 % 2,092 1 %

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NC 1,135 1 % 1,107 1 %

MT 1,079 1 % 550 — %

MN 1,038 1 % 366 *

NM 1,023 * 1,008 1 %

NE 970 * 956 1 %

GA 949 * 810 *

SD 917 * 905 1 %

IN 855 * 829 1 %

GA 810 — % 485 — %

WV 727 * 714 *

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OR 399 * 380 *

MN 366 — % 577 — %

Total $ 190,195 100 % $ 173,612 100 %

• Represents less than 1%

ILFs Operated by CareTrust REIT:

As of December 31, 2019, we owned and operated one ILF, Lakeland Hills Independent Living, located in Dallas, Texas, with 168 units.

During the quarter ended December 31, 2020, we sold the one remaining ILF to a third party leaving us with no remaining owned and operated ILFs at December 31, 2020.

In November 2020, we sold our one remaining owned and operated ILF to a third party leaving us with no remaining owned and operated ILFs at December 31, 2020 or December 31, 2021.

Investment and Financing Policies

Our investment objectives are to increase cash flow, provide quarterly cash dividends, maximize the value of our properties and acquire properties with cash flow growth potential.

We intend to invest primarily in SNFs and seniors housing, including AL Fs and ILFs, a lthough we may determine in the future to expand our investments to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.

We intend to invest primarily in SNFs and seniors housing, including AL Fs and ILFs.

We are currently looking at expanding our investments into behavioral health facilities in 2022, and we may determine in the future to expand our investments to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.

Our properties are located in 29 s tates and we intend to continue to acquire properties in other states throughout the United States.

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Ability to Identify Talented Operators .

We have purchase d 138 properties since June 1, 2014, the date we became a separate and independent publicly-traded company, through December 31, 2020 and have increased total rental income from $41.2 million for the year ended December 31, 2013, the last full fiscal year prior to becoming a separate and independent publicly-traded company, to $173.6 million for the year ended December 31, 2020.

We have grown to 22 operators including local, regional and national operators, including Ensign and PMG, which account for 32% and 16% of our total rental income, in each case exclusive of operating expense reimbursements, for the year ended December 31, 2020, respectively.

As a result of our management team’s operating experience and network of relationships and insight, we believe that we are able to identify and pursue working relationships with qualified local, regional and national healthcare providers and seniors housing operators.

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Experienced Management Team.

Stapley, our Chief Executive Officer, has extensive experience in the real estate and healthcare industries.

Stapley has more than 30 years of experience in the acquisition, development, financing and disposition of real estate including healthcare facilities and office, retail and industrial properties, including nearly 15 years at Ensign where he was a co-founder, and was instrumental in assembling the portfolio that we now lease back to Ensign and Pennant.

Sedgwick, our President and Chief Operating Officer, has more than 20 years of experience in the skilled nursing and seniors housing industry.

Sedgwick served as our Vice President-Operations from 2014 to 2018, as our Chief Operating Officer from 2018 to the present, and was appointed President in February 2021.

Sedgwick’s duties involve him in matters related to new investments, asset management, portfolio management, portfolio optimization, investor relations and capital markets for the Company.

Sedgwick was appointed as our Chief Executive Officer effective January 1, 2022, succeeding Gregory K.

Stapley in that role.

At the time of his appointment, Mr.

Sedgwick was serving as our President, a role he had filled since February 2021, and he continues to hold that title.

He previously served as our Chief Operating Officer from August 2018 through 2021, and as our Vice President-Operations from CareTrust’s launch as an independent public company in 2014 to 2018.

Sedgwick has more than 20 years of experience in the skilled nursing and seniors housing industry.

Sedgwick’s President, Chief Operating Officer and Vice President duties regularly involved him in matters related to new investments, asset management, tenant relations, portfolio management, portfolio optimization, investor relations and capital markets activities for the Company.

Prior to joining CareTrust, Mr.

Sedgwick served as the Chief Human Capital Officer and President of Corporate Services at Ensign.

Sedgwick served as the Chief Human Capital Officer and President of Facility Services at Ensign.

Sedgwick has been a licensed nursing home administrator since 2001.

Stapley was named as our Executive Chairman effective January 1, 2022, a role that we expect he will fulfill during an approximately six-month transition period, following which he and his wife Deborah will commence a three-year, full-time volunteer leadership assignment overseeing one of the approximately 400 worldwide missions of The Church of Jesus Christ of Latter-day Saints.

He served as our President and Chief Executive Officer from 2013 to 2021, and as Chairman of the Board from 2014 to the present.

Stapley has more than 30 years of experience in the acquisition, development, financing and disposition of real estate including healthcare facilities and office, retail and industrial properties, including nearly 15 years at Ensign where he was a co-founder and was instrumental in assembling the portfolio that we now lease to Ensign and Pennant.

Our Chief Financial Officer, William M.

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We operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held through the Operating Partnership.

Conducting business through the Operating Partnership will allow us flexibility in the manner in which we structure the acquisition of properties.

In particular, an UPREIT structure enables us to acquire additional properties from sellers in exchange for limited

partnership units, which provides property owners the opportunity to defer the tax consequences that would otherwise arise from a sale of their real properties and other assets to us.

Conducting business through the Operating Partnership allows us flexibility in the manner in which we structure the acquisition of properties.

In particular, an UPREIT structure enables us to acquire additional properties from sellers in exchange for limited partnership units, which provides property owners the opportunity to defer the tax consequences that would otherwise arise from a sale of their real properties and other assets to us.

As a result, this structure allows us to acquire assets in a more efficient manner and may allow us to acquire assets that the owner would otherwise be unwilling to sell because of tax considerations.

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We diversify through the acquisition of new and existing facilities from third parties and the expansion and upgrade of current facilities and strategically investing in new developments with options to acquire the developments at stabilization.

We employ what we believe to be a disciplined, opportunistic acquisition strategy with a focus on the acquisition of SNFs, ALFs and ILFs, and we may determine in the future to expand our acquisitions to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.

We employ what we believe to be a disciplined, opportunistic acquisition strategy with a focus on the acquisition of SNFs, ALFs and ILFs.

We are currently looking at expanding our investments into behavioral health facilities in 2022, and we may determine in the future to expand our acquisitions to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.

As we acquire additional properties, we expect to further diversify by geography, asset class and tenant within the healthcare and healthcare-related sectors.

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Increased competition will make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives.

Our ability to compete is also impacted by national and local economic trends, availability of investment alternatives, availability and cost of capital, construction and renovation costs, existing laws and regulations, new legislation and population trends.

Our ability to compete is also impacted by national and local economic trends, availability of investment

alternatives, availability and cost of capital, construction and renovation costs, existing laws and regulations, new legislation and population trends.

In addition, revenues from our properties are dependent on the ability of our tenants and operators to compete with other healthcare operators.

the types of services available, the quality of care, reputation, age and appearance of each facility and the cost of care in each locality.

Healthcare operators compete on a local and regional basis for residents and patients and their ability to successfully attract and retain residents and patients depends on key factors such as the number of facilities in the local market, the types of services available, the quality of care, reputation, age and appearance of each facility and the cost of care in each locality.

Private, federal and state payment programs and the effect of other laws and regulations may also have a significant impact on the ability of our tenants and operators to compete successfully for residents and patients at the properties.

Sustainability

As a healthcare-focused real estate investment trust, our assets are an integral part of the overall healthcare continuum in the communities that our tenants serve.

Sustainability and Corporate Social Responsibility

As a healthcare-focused REIT, our assets are an integral part of the overall healthcare continuum in the communities that our tenants serve.

We believe that environmental sustainability is an important part of our commitment to helping people live and age well in those communities.

We are working to implement sustainable practices and providing tenant education, support and incentives to avoid or reduce practices in our corporate offices and by our tenants at our net-leased properties that may have negative environmental impacts.

In addition, as a landlord and capital supplier to a key segment of the healthcare industry, we seek opportunities to use our influence to encourage and incentivize fair and healthy work environments for healthcare workers and suitable living conditions for patients and residents, and to promote diversity, inclusion and the ethical treatment of employees, residents, patients and others wherever our activities and influence can be felt.

We are working to implement sustainable practices in our corporate offices and to provide tenant education, support and incentives to make sustainable improvements at our net-leased properties.

In 2020, we published our inaugural annual Corporate Responsibility Report (our “ESG Report”) as part of our ongoing commitment to provide regular reporting on our environmental, social and governance (“ESG”) priorities.

Our ESG Report outlines our high priority ESG initiatives and goals for our company and our property portfolio.

Also in 2020, we published our Tenant Code of Conduct & Corporate Responsibility (our “Tenant ESG Program”).

The Tenant ESG Program provides our eligible triple-net tenants with monetary inducements to make sustainable improvements to our properties.

Incentive options include a wide variety of opportunities for tenants to upgrade everything from energy and environmental systems to water-saving landscaping and more.

During 2020, with the assistance of Goby, our ESG consultant, we designed a monitoring plan to collect key environmental data from a pilot group of 50 of our net-leased properties.

The plan’s objective was to begin benchmarking energy and water usage and the impact of our facilities on greenhouse gas emissions and climate change.

During 2021, we implemented the plan’s monitoring systems and began collecting data for this pilot group.

We expect the data to help us identify the most promising opportunities for improvement in our portfolio, set informed ESG goals and measure progress over time.

In addition, as a landlord and capital supplier to a key segment of the healthcare industry, we will seek further opportunities to encourage and incentivize fair and healthy work environments for healthcare workers and suitable living conditions for patients and residents, and to promote diversity, inclusion and the ethical treatment of employees, residents, patients and others wherever our activities and influence can be felt.

The foregoing principles and additional ESG initiatives are reflected in our Environmental, Social and Governance policy adopted on October 29, 2021, and previously published Policy on Human Capital, Policy on Human Rights and Responsibilities, Policy on Environmental Sustainability and our proprietary Tenant ESG Program.

All of these policies are located on the Investor Relations section of our website at www.caretrustreit.com.

The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this report or any other document that we file with the SEC.

Our corporate governance structure was carefully crafted to align with the interests of our investors and other stakeholders with a core leadership team that has over 65 years of collective experience as operators and investors.

The members of our board of directors each bring deep expertise in healthcare, real estate, investing, accounting, and/or business development.

In this oversight role, our board of directors serves as the ultimate decision-making body of our company, except for those matters reserved to or shared with our stockholders.

Human Capital Resources

Supporting our people is a foundational value for us.

Our employees are the heart of our company.

Our Policy on Human Capital reflects our commitment to the dignity and rights of all people, especially our employees and others whose professional lives may be impacted by our properties and business activities.

It represents a critical commitment to, and investment in, the current and long-term health and well-being of our organization and its people.

We believe our success depends on our ability to attract, develop and retain key personnel.

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The skills, experience and industry knowledge of key employees significantly benefit our performance.

Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.

As of December 31, 2020, we employed approximately 15 full-time em ployees (including our executive officers), none of whom is subject to a collective bargaining agreement.

Prior to the COVID-19 pandemic, all of our employees were based out of our corporate office in San Clemente, California, other than three full-time employees who worked remotely.

With the COVID-19 pandemic, we have temporarily closed our corporate office and most of our employees are currently working remotely.

To address the dynamic nature of COVID-19 and remote work, the Company has offered workforce flexibility for all employees.

We believe we offer competitive compensation (including salary, incentive bonus and equity) and benefits packages (including a 401(k) plan with a fixed employer contribution, Flexible Spending Accounts (FSAs), employer-funded employee assistance program (EAP), a generous vacation, holiday and personal time off policy, and an array of voluntary benefits options and other benefits for employees and their families).

Our compensation program is designed to attract and

reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.

As of December 31, 2021, we employed 16 full-time employees (including our executive officers), none of whom is subject to a collective bargaining agreement.

At the onset of the COVID-19 pandemic, we temporarily closed our corporate office and most of our employees were working remotely;

however, we have since reopened our corporate office with continued workforce flexibility to promote employee safety.

Retention and Turnover.

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These activities carry real and substantial costs, which we regard as a meaningful investment in our workforce and our company.

We believe that employee turnover is costly both in direct and indirect ways, and we are committed to employee retention and satisfaction.

During the year ended December 31, 2020, and excluding the ILF that we sold during 2020, we experienced turnover of two full-time employees, neither of whom were executive officers.

Sphere of Influence.

We believe that the creation of an engaging and mutually supportive corporate culture that acknowledges and celebrates the value and contributions of all stakeholders is core to our long-term success.

As an extension of our commitment to the many peop le who contribute to our success, we encourage and incentivize our triple-net tenants through subsidies and other economic incentives to reflect a similar commitment to integrity and corporate responsibility by voluntarily particip ating in our Tenant Code of Conduct and Corporate Responsibility Program (the “Tenant ESG Program”), and particularly by valuing the healthcare workers in their employ who deliver care in our facilities every day.

These principles are reflected in our Policy on Human Capital, our Policy on Human Rights and Responsibilities and our proprietary Tenant ESG Program.

We believe that employee turnover is costly in direct and indirect ways, and we are committed to employee retention and satisfaction.

During the year ended December 31, 2021, we experienced turnover of two full-time employees, excluding our executive officers.

In addition, during the year ended December 31, 2021, we announced plans to transition the role of our Chief Executive Officer from Mr.

Stapley to Mr.

Sedgwick, effective January 1, 2022.

Training and Education.

CareTrust’s culture values continuous learning, improvement and professional development.

This helps our employees to keep their skills current and to adapt to new responsibilities and emerging market needs.

CareTrust provides financial support for professional associate dues and memberships, continuing education credits, and fees and travel expenses to attend relevant conferences and seminars.

Government Regulation, Licensing and Enforcement

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When a violation occurs, the government may proceed criminally or civilly.

If the government proceeds criminally, a violation is a felony and may result in imprisonment for up to five years, fines of up to $25,000 and mandatory exclusion from participation in all federal health care programs.

If the government proceeds criminally, a violation is a felony and

may result in imprisonment for up to five years, fines of up to $25,000 and mandatory exclusion from participation in all federal health care programs.

If the government proceeds civilly, it may impose a civil monetary penalty of $50,000 per violation and an assessment of not more than three times the total amount of remuneration involved, and it may exclude the parties from participation in all federal health care programs.

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The scope of prohibited payments in the Anti-Kickback Law is broad.

Department of Health and Human Services has promulgated regulations which describe certain “safe harbor” arrangements that will not be deemed to constitute violations of the Anti-Kickback Law.

Department of Health and Human Services (“HHS”) has promulgated regulations which describe certain “safe harbor” arrangements that will not be deemed to constitute violations of the Anti-Kickback Law.

An arrangement that fits squarely into a safe harbor is immune from prosecution under the Anti-Kickback Statute.

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Because the regulations describe safe harbors and do not purport to describe comprehensively all lawful and unlawful economic arrangements or other relationships between health care providers and referral sources, health care providers entering into these arrangements or relationships may be required to alter them in order to ensure compliance with the Anti-Kickback Law and may be subject to significant liability should an arrangement that does not fully satisfy a safe harbor be determined to be illegal.

On November 20, 2020, the US Department of Health and Human Services (“HHS”) promulgated significant new Anti-Kickback Law regulations, including changes to existing safe harbors and the creation of new safe harbors, in an effort to reduce regulatory burden and incentivize coordinated care, including value-based arrangements.

On November 20, 2020, HHS promulgated significant new Anti-Kickback Law regulations, including changes to existing safe harbors and the creation of new safe harbors, in an effort to reduce regulatory burden and incentivize coordinated care, including value-based arrangements.

The False Claims Act provides that any person who “knowingly presents, or causes to be presented” a “false or fraudulent claim for payment or approval” to the U.S.

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The qui tam relator’s share of the recovery can be between 15% and 25% in cases in which the government intervenes, and 25% to 30% in cases in which the government does not intervene.

disclosed information if the whistleblower is the original source of that publicly disclosed information), thus potentially broadening the field of potential whistleblowers.

Notably, the Affordable Care Act amended certain jurisdictional bars to the False Claims Act, effectively narrowing the “public disclosure bar” (which generally requires that a whistleblower suit not be based on publicly disclosed information) and expanding the “original source” exception (which generally permits a whistleblower suit based on publicly disclosed information if the whistleblower is the original source of that publicly disclosed information), thus potentially broadening the field of potential whistleblowers.

• Restrictions on Referrals .

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The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”) serves as the primary vehicle for comprehensive healthcare reform in the United States.

Efforts by the Trump administration and certain members of Congress to repeal or make significant changes to the Affordable Care Act, its implementation and/or its interpretation including the successful repeal of the penalty associated with the individual mandate of the Affordable Care Act, continue to cast uncertainty on the future of the Affordable Care Act.

Efforts initiated by the previous administration and certain members of Congress to repeal or make significant changes to the Affordable Care Act, its implementation and/or its interpretation including the successful repeal of the penalty associated with the individual mandate of the Affordable Care Act, continue to cast uncertainty on the future of the Affordable Care Act.

For example, on December 14, 2018, a U.S.

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This decision was appealed, and on December 18, 2019, the Fifth Circuit Court of Appeals ruled that the Affordable Care Act’s individual mandate was unconstitutional but remanded the case for further analysis.

On November 10, 2020, the Supreme Court of the United States heard oral arguments, but a decision has not yet been issued.

This and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

Given the change in control of Congress, we anticipate Congress will renew efforts to expand health insurance coverage and to assess alternative health care delivery and payment systems.

Congress may in the future propose and adopt legislation effecting additional fundamental changes in the health care system.

For example, some members of Congress have suggested expanding the coverage of government-funded programs, including single-payor models.

The Biden administration supports building on PPACA to expand health insurance coverage to more citizens, including through the addition of a Medicare-like public option, increasing the value of certain tax credits to lower premiums, and expanding access to Medicaid;

it has not yet publicly supported a single-payor model.

In addition, although the Democratic Party now controls the United States House of Representatives (by a slim majority) and Senate (by virtue of the Vice President casting the tie-breaking vote), legislation would likely require at least some support from both Republican and Democratic lawmakers to become law.

The decision was appealed, and on June 17, 2021, the Supreme Court of the United States ruled that the plaintiffs lacked standing to challenge the Affordable Care Act’s minimum essential coverage provision.

These types of challenges may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

Given the divided nature of Congress, it is unclear whether Congress will successfully expand health insurance coverage and assess alternative health care delivery and payment systems.

For example, on November 19, 2021, the United States House of Representatives passed the Build Back Better Act, H.R.

5376, 117th Cong.

(2021) (“BBB”), which, among other things, would extend the subsidies available to certain individuals who purchase marketplace coverage pursuant to the Affordable Care Act, expand access to the Affordable Care Act marketplace healthcare plans for individuals living in certain states, and increase the federal Medicaid matching funds for certain home and community-based services.

Though the Democratic Party currently controls the United States House of Representatives (by a slim majority) and Senate (by virtue of the Vice President casting the tie-breaking vote), it is unclear whether BBB will ultimately become law because BBB, which the Democrats have attempted to pass via Congress’s budget reconciliation process, may not have the support of enough Democratic senators.

Other healthcare reform legislation would likely require at least some support from both Republican and Democratic lawmakers to become law.

At this time, it is uncertain whether any additional healthcare reform legislation will ultimately become law and we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on our business.

tenants’ residents do not have insurance, it could adversely impact the tenants’ ability to satisfy their obligations to us.

If our tenants’ residents do not have insurance, it could adversely impact the tenants’ ability to satisfy their obligations to us.

Expansion of health insurance coverage to more citizens could have a positive financial impact on our tenants and their ability to satisfy their obligations to us.

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Those reports must be submitted to at least one law enforcement agency and the applicable Centers for Medicare & Medicaid Services (“CMS”) Survey Agency.

Covered individuals who fail to report under Section 1150B are subject to various penalties, including civil monetary penalties of up to $300,000 and possible exclusion from participation in any Federal health care program.

Covered individuals who fail to report under Section 1150B are subject to various penalties, including civil monetary penalties

of up to $300,000 and possible exclusion from participation in any Federal health care program.

Medicare regulations require SNFs to establish and implement written policies to ensure the reporting of crimes that occur in federally funded SNFs in accordance with Section 1150B.

In August 2017, the U.S.

Department of Health & Human Services (“HHS”) Office of Inspector General (“OIG”) issued a preliminary report regarding quality of care concerns by operators of SNFs.

In August 2017, the HHS Office of Inspector General (“OIG”) issued a preliminary report regarding quality of care concerns by operators of SNFs.

In its report, the OIG determined that CMS has inadequate procedures in place to ensure that incidents of potential abuse or neglect of Medicare beneficiaries residing in SNFs are identified and reported.

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Some of these federal and state statutes may directly impact us.

Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property, such as us, may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property).

connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property).

The cost of any required remediation, removal, fines or personal or property damages and the owner’s liability therefore could exceed or impair the value of the property and/or the assets of the owner.

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

What changed 10-K

Item 1. Business