What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-16 compared with 2021-02-10 · 353 added, 404 removed, 1022 unchanged (43% of the section changed)

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We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In designing and evaluating the disclosure

controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of December 31, 2021, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures.

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Management’s Annual Report on Internal Control over Financial Reporting

financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

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Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of CareTrust REIT, Inc.

and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

We have audited the internal control over financial reporting of CareTrust REIT, Inc., and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

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Other Information

Appointment of New President

On February 9, 2021, our board of directors appointed David Sedgwick, who has served as our Chief Operating Officer since August 2018, to serve as our President, effective immediately.

Sedgwick will continue to serve as Chief Operating Officer.

Sedgwick’s biographical information is described in our definitive proxy statement on Schedule 14A, filed with the SEC on March 20, 2020.

In connection with his appointment to President, Mr.

Sedgwick’s annual base salary has been increased t o $495,000 effective as of January 1, 2021.

There are no arrangements or understandings between Mr.

Sedgwick and any other person pursuant to which Mr.

Sedgwick was appointed as President and Chief Operating Officer and there are no transactions in which Mr.

Sedgwick has an interest that would require disclosure under Item 404(a) of Regulation S-K.

Other than as disclosed in our definitive proxy statement on Schedule 14A filed with the SEC on March 20, 2020, no family relationship exists between Mr.

Sedgwick and any director or other executive officer of the Company.

Concurrently with Mr.

Sedgwick’s appointment as President and Chief Operating Officer, Mr.

Greg Stapley relinquished the position of President.

Stapley will continue to serve as Chief Executive Officer and Chairman of the Board of Directors.

Not applicable.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

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The information required under Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2021 in connection with our 2022 Annual Meeting of Stockholders.

Exhibits, Financial Statements and Financial Statement Schedules

Exhibit and Financial Statement Schedules

(a)(1) Financial Statements

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(incorporated by reference to Exhibit 3.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K filed on March 7, 2019).

Indenture, dated as of May 24, 2017, among CTR Partnership, L.P.

and CareTrust Capital Corp., as Issuers, the guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on May 24, 2017).

First Supplemental Indenture, dated as of May 24, 2017, to the Indenture dated as of May 24, 2017, among CTR Partnership, L.P.

and CareTrust Capital Corp., as Issuers, the guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the CareTrust REIT, Inc.’s Current Report on Form 8-K filed on May 24, 2017).

Indenture, dated as of June 17, 2021, among CTR Partnership, L.P.

and CareTrust Capital Corp., as Issuers, CareTrust REIT, Inc., the other guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 17, 2021).

Form of 3.875% Senior Note due 2028 (included in Exhibit 4.1).

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Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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+ Management contract or compensatory plan or arrangement.

Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CARETRUST REIT, INC.

/ S / GREGORY K.

Chief Executive Officer

/ S / DAVID M.

President and Chief Executive Officer

February 16, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ GREGORY K.

STAPLEY Director and Chief Executive Officer (Principal Executive Officer) February 10, 2021

SEDGWICK President and Chief Executive Officer (Principal Executive Officer) February 16, 2022

/s/ WILLIAM M.

WAGNER Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) February 16, 2022

/s/ GREGORY K.

STAPLEY Director February 16, 2022

BARBIERI Director February 16, 2022

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms with respect to CareTrust REIT, Inc.

Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 5

Consolidated Income Statements for the years ended December 31, 2020, 2019 and 2018 F- 6

Consolidated Statements of Equity for the years ended December 31, 2020, 2019 and 2018 F- 7

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 F- 8

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

34 ) with respect to CareTrust REIT, Inc.

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Income Statements for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Equity for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019

Notes to Consolidated Financial Statements F-8

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We have audited the accompanying consolidated balance sheets of CareTrust REIT, Inc.

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated income statements and statements of equity and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated income statements and statements of equity and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

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• We developed independent estimates of the lease coverage ratio and a terminal capitalization rate, focusing on property type, historical transactions of the Company and external market sources and compared our independent estimates to the estimates and assumptions used by the Company.

• In addition, we tested the mathematical accuracy of the undiscounted cash flow analyses.

• We evaluated whether the assumptions were consistent with evidence obtained in other areas of the audit.

• In addition, we tested the mathematical accuracy of the Company’s undiscounted cash flow analyses.

• We evaluated whether the Company’s assumptions were consistent with evidence obtained in other areas of the audit.

/s/ DELOITTE & TOUCHE LLP

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We have served as the Company's auditor since 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of CareTrust REIT, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated income statement, statement of equity and cash flows of CareTrust REIT, Inc.

(the Company) for the year ended December 31, 2018, and the related notes and the financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2018, and the consolidated results of its operations and its cash flows for the year ended December 31, 2018, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ ERNST & YOUNG LLP

We served as the Company’s auditor from 2014 to 2019.

Irvine, California

February 13, 2019

CARETRUST REIT, INC.

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Real estate investments, net $ 1,589,971 $ 1,448,099

Other real estate investments, net 15,000 33,300

Other real estate investments 15,155 15,000

Assets held for sale, net 4,835 7,226

Cash and cash equivalents 19,895 18,919

Accounts and other receivables, net 1,823 2,571

Accounts and other receivables 2,418 1,823

Prepaid expenses and other assets, net 7,512 10,450

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Unsecured revolving credit facility 80,000 50,000

Accounts payable and accrued liabilities 19,572 14,962

Accounts payable, accrued liabilities and deferred rent liabilities 25,408 19,572

Dividends payable 26,285 24,251

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Rental income $ 190,195 $ 173,612 $ 155,667

Tenant reimbursements — — 11,924

Independent living facilities — 2,077 3,389

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Other (loss) income:

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

(Loss) gain on sale of real estate ( 77 ) ( 37 ) 1,777

Total other (loss) income ( 10,904 ) ( 37 ) 1,777

Net income $ 71,982 $ 80,867 $ 46,359

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Amortization of deferred financing costs 2,052 1,950 2,003

Loss on extinguishment of debt 10,827 — —

Amortization of stock-based compensation 10,832 3,790 4,104

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Change in operating assets and liabilities:

Accounts and other receivables, net 825 ( 6,283 ) ( 3,800 )

Accounts and other receivables ( 562 ) 825 ( 6,283 )

Prepaid expenses and other assets, net 399 387 ( 495 )

Accounts payable and accrued liabilities 3,791 2,695 ( 1,443 )

Accounts payable, accrued liabilities and deferred rent liabilities 6,057 3,791 2,695

Net cash provided by operating activities 156,871 145,735 126,295

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Acquisitions of real estate, net of deposits applied ( 192,718 ) ( 89,650 ) ( 321,458 )

Purchases of, and improvements to, equipment, furniture and fixtures and real estate ( 8,297 ) ( 6,289 ) ( 9,012 )

Purchases of equipment, furniture and fixtures and improvements to real estate ( 6,013 ) ( 8,297 ) ( 6,289 )

Investment in real estate mortgage and other loans receivable ( 1,253 ) ( 30,498 ) ( 18,246 )

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Proceeds from (costs paid for) the issuance of common stock, net 22,946 ( 404 ) 195,924

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

Proceeds from the issuance of senior unsecured term loan — — 200,000

Borrowings under unsecured revolving credit facility 220,000 65,000 243,000

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

Payments on senior unsecured term loan — — ( 100,000 )

Payments on unsecured revolving credit facility ( 190,000 ) ( 75,000 ) ( 278,000 )

Payments of deferred financing costs — ( 4,534 ) —

Payments on debt extinguishment and deferred financing costs ( 14,095 ) — ( 4,534 )

Net-settle adjustment on restricted stock ( 1,331 ) ( 1,996 ) ( 2,524 )

Dividends paid on common stock ( 100,782 ) ( 93,161 ) ( 80,619 )

Net cash (used in) provided by financing activities ( 105,561 ) 173,247 45,595

Net (decrease) increase in cash and cash equivalents ( 1,408 ) ( 16,465 ) 29,883

Cash and cash equivalents, beginning of period 20,327 36,792 6,909

Cash and cash equivalents, end of period $ 18,919 $ 20,327 $ 36,792

Net cash provided by (used in) financing activities 36,738 ( 105,561 ) 173,247

Net increase (decrease) in cash and cash equivalents 976 ( 1,408 ) ( 16,465 )

Cash and cash equivalents as of the beginning of period 18,919 20,327 36,792

Cash and cash equivalents as of the end of period $ 19,895 $ 18,919 $ 20,327

Supplemental disclosures of cash flow information:

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As of December 31, 2021, the Company owned and leased to independent operators, 227 skilled nursing, multi-service campuses, assisted living and independent living facilities consisting of 23,650 operational beds and units located in 29 states with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

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

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

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

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

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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Recent Accounting Standards Adopted by the Company —In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Loses on Financial Instruments (“ASU 2016-13”) , that changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected credit losses, rather than incurred losses as previously required by the other-than-temporary impairment model.

ASU 2016-13 applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans receivable, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures (e.g., loan commitments).

In November 2018, the FASB released ASU No.

2018-19, Codification Improvements to Topic 326 Financial Instruments - Credit Losses (“ASU 2018-19”).

ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of ASU 2016-13.

Instead, impairment of receivables arising from operating leases should be accounted for under Subtopic 842-30 “Leases - Lessor.” Additionally, the FASB issued ASU No.

2019-05, Targeted Transition Relief (“ASU 2019-05”), to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments.

The fair value option election does not apply to held-to-maturity debt securities.

Entities are required to make this election on an instrument-by-instrument basis.

ASU 2016-13 became effective for reporting periods beginning after December 15, 2019, and was applied as a cumulative adjustment to retained earnings as of the effective date.

The Company adopted ASU 2016-13 on January 1, 2020.

With the Company’s primary business being leasing real property to third-party tenants, the majority of receivables that arise in the ordinary course of business qualify as operating leases and are not in the scope of ASU 2016-13.

However, based on the instruments held upon adoption on January 1, 2020, the standard applied to the Company’s then outstanding mortgage loans receivable, for which the Company elected the fair value option as provided for by ASU 2019-05.

Instruments for which the fair value option has been elected are measured at fair value on a recurring basis with changes in fair value recognized in other (loss) income on the Company’s consolidated income statements.

Interest income is recognized as earned within interest and other income in the consolidated income statements.

As of December 31, 2020, the Company had one mezzanine loan receivable for which the fair value option had been elected.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”) , which modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures.

ASU 2018-13 was effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods, with early adoption permitted.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

The Company adopted ASU 2018-13 on January 1, 2020.

Adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU No.

2020-09, Debt (Topic 470) (“ASU 2020-09”), which amends and supersedes the SEC paragraphs in the Accounting Standards Codification (“ASC”) to reflect the issuance of SEC Release No.

In March 2020, the SEC adopted amendments to reduce and simplify the financial disclosure requirements for guarantors and issuers of guaranteed registered securities.

The amendments were effective January 4, 2021, but voluntary compliance with the amendments in advance of January 4, 2021 was permitted.

The Company elected to comply with these amendments effective in the first quarter of 2020.

As a result, the Company will no longer include in the financial statement footnotes of its Quarterly and Annual Reports on Form 10-Q and Form 10-K separate condensed consolidating financial

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

information for its wholly owned subsidiaries that issued or guaranteed the Notes (See Note 6, Debt, for further detail) .

In addition, in accordance with the amendments adopted by the SEC and FASB, because the assets, liabilities and results of operations of the combined issuers and guarantors of the Notes are not materially different than the corresponding amounts presented in the Company’s consolidated financial statements, it is also not required to present combined summary financial information regarding such subsidiary issuers and guarantors.

Lessor Accounting —The Company recognizes lease revenue in accordance with ASC 842, Leases .

Lessor Accounting —The Company recognizes lease revenue in accordance with Accounting Standards Codification (“ASC”) 842, Leases .

The Company’s lease agreements typically contain annual escalators based on the percentage change in the Consumer Price Index which are accounted for as variable lease payments in the period in which the change occurs.

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The Company generates revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the tenant is solely responsible for the costs related to the property.

Tenant reimbursements related to property taxes and insurance paid by lessee directly to a third-party on behalf of a lessor are required to be excluded from variable payments and from recognition in the lessor’s income statements.

Tenant reimbursements related to property taxes and insurance paid by the lessee directly to a third party on behalf of a lessor are required to be excluded from variable payments and from recognition in the lessor’s income statements.

Otherwise, tenant recoveries for taxes and insurance are classified as additional rental revenues recognized by the lessor on a gross basis in its income statements.

For the year ended December 31, 2018, the Company recognized tenant recoveries for real estate taxes of $ 11.9 million which was classified as tenant reimbursements on the Company’s consolidated income statements.

Prior to the adoption of ASC 842, the Company recognized tenant recoveries as tenant reimbursement revenues regardless of whether the third party was paid by the lessor or lessee.

Effective January 1, 2019, such tenant recoveries are recognized to the extent that the Company pays the third party directly and classified as rental income on the Company’s consolidated income statements.

Due to the application of ASC 842, the Company recognized, on a gross basis, tenant recoveries related to real estate taxes of $ 3.1 million and $ 2.9 million, for the years ended December 31, 2020 and December 31, 2019, respectively.

The Company’s assessment of collectibility of its tenant receivables includes a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement are probable of collection.

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For such leases that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectibility determination.

Such write-offs and recoveries are recorded as decreases or increases through rental income on the Company’s consolidated income statements.

Such write-offs and recoveries are recorded as decreases

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

or increases through rental income on the Company’s consolidated income statements.

For the year ended December 31, 2021, the Company did not record any recovery adjustments or write-off adjustments to rental income.

For the year ended December 31, 2020, the Company recorded recovery adjustments of $ 1.0 million and did no t recognize any write-off adjustments to rental income.

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Typically, when the contingent payments are funded, cash rent is increased by the amount funded multiplied by a rate stipulated in the agreement.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Generally, if the contingent payment is an earn-out provided to the seller, the payment is capitalized to the property’s basis when earn-out becomes probable and estimable.

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All impairments are taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset.

For the year ended December 31, 2019, the Company recorded an impairment expense of $ 16.7 million.

See Note 3, Real Estate Investments, Net , for additional information.

The Company classifies its real estate investments as held for sale when the applicable criteria have been met, which entails a formal plan to sell the properties that is expected to be completed within one year, among other criteria.

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While the Company believes its assumptions are reasonable, changes in these assumptions may have a material impact on financial results.

Other Real Estate Investments —Included in other real estate investments, net, on the Company’s consolidated balance sheets at December 31, 2020, is one mezzanine loan receivable.

At December 31, 2019, included in other real estate investments, net is one preferred equity investment and two mortgage loans receivable.

The preferred equity investment was accounted for at unpaid principal balance, plus accrued return, net of reserves.

The Company recognizes return income on a quarterly basis based on the outstanding investment including any accrued and unpaid return, to the extent there is outside contributed equity or cumulative earnings from operations.

As the preferred member of the joint venture, the Company is not entitled to share in the joint venture’s earnings or losses.

Rather, the Company is entitled to receive a preferred return, which is deferred if the cash flow of the joint venture is insufficient to pay all of the accrued preferred return.

The unpaid accrued preferred return is added to the balance of the preferred equity investment up to the estimated economic outcome assuming a hypothetical liquidation of the book value of the joint venture.

Any unpaid accrued preferred return, whether recorded or unrecorded by the Company, will be repaid upon redemption or as available cash flow is distributed from the joint venture.

Prior to the adoption of ASU 2016-13, mortgage and mezzanine loans receivable were recorded at amortized cost, which consists of the outstanding unpaid principal balance, net of unamortized costs and fees directly associated with the origination of the loan.

Interest income on the Company’s mortgage and mezzanine loans receivable was recognized over the life of the applicable investment using the interest method.

Origination costs and fees directly related to loans receivable were amortized over the term of the loan as an adjustment to interest income.

For instruments recorded at amortized cost, the Company evaluates at each reporting period each of its other real estate investments for indicators of impairment.

An investment is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms.

A reserve is established for the excess of the carrying value of the investment over its fair value.

The Company adopted ASU 2016-13 on January 1, 2020.

Fair value was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements.

Instruments for which the fair value option has been elected are measured at fair value on a

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recurring basis with changes in fair value recognized in other (loss) income on our consolidated income statements.

Other Real Estate Investments —Included in other real estate investments on the Company’s consolidated balance sheets at December 31, 2021 and 2020, is one mezzanine loan receivable for which the Company elected the fair value option.

Instruments for which the fair value option has been elected are measured at fair value on a recurring basis with changes in fair value recognized in other income (loss) on the consolidated income statements.

Interest income is recognized as earned within interest and other income in the consolidated income statements.

As of December 31, 2020, the Company had one mezzanine loan receivable for which the fair value option had been elected.

Prepaid expenses and other assets —Prepaid expenses and other assets consist of prepaid expenses, deposits, pre-acquisition costs and other loans receivable .

Included in other loans receivable at December 31, 2019 is a bridge loan to Priority Life Care, LLC (“Priority”) under which the Company agreed to fund up to $ 1.4 million until the earlier of (i) October 31, 2019, (ii) the date that a new credit facility is established such that the borrower may submit draw requests to the applicable lender, or (iii) the date on which Priority’s lease is terminated with respect to any facility.

Borrowings under the bridge loan accrue interest at an annual base rate of 8.0 %.

During the year ended December 31, 2019, the Company determined that the remaining contractual obligations under the bridge loan agreement to Priority were not collectible and recorded a $ 1.1 million provision for loan losses in the Company’s consolidated income statements.

During the year ended December 31, 2019, the Company determined that the remaining contractual obligations under one other loan receivable were not collectible and recorded a $ 1.1 million provision for loan losses in the Company’s consolidated income statements.

The Company’s other loans receivable are reflected at amortized cost, net of an allowance for credit loss, on the accompanying consolidated balance sheets.

The amortized cost of a loan receivable is the outstanding unpaid principal balance, net of unamortized discounts, costs and fees directly associated with the origination of the loan.

Income Taxes —The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).

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Deferred Financing Costs —External costs incurred from placement of the Company’s debt are capitalized and amortized on a straight-line basis over the terms of the related borrowings, which approximates the effective interest method.

For senior unsecured notes payable and the senior unsecured term loan, deferred financing costs are netted against the outstanding debt amounts on the balance sheet.

For the unsecured revolving credit facility, deferred financing costs are included in assets on the Company’s balance sheet.

Amortization of deferred financing costs is classified as interest expense in

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the consolidated income statements.

Accumulated amortization of deferred financing costs was $ 9.0 million and $ 7.1 million at December 31, 2020 and December 31, 2019, respectively.

For senior unsecured notes payable and the senior unsecured term loan, deferred financing costs are netted against the outstanding debt amounts on the balance sheet.

For the unsecured revolving credit facility, deferred financing costs are included in assets on the Company’s balance sheet.

Amortization of deferred financing costs is classified as interest expense in the consolidated income statements.

Accumulated amortization of deferred financing costs was $ 8.0 million and $ 9.0 million at December 31, 2021 and 2020, respectively.

When financings are terminated, unamortized deferred financing costs, as well as charges incurred for the termination, are expensed at the time the termination is made.

Gains and losses from the extinguishment of debt are presented within income from continuing operations in the Company’s consolidated income statements.

Gains and losses from the extinguishment of debt are presented within other income (loss) in the Company’s consolidated income statements.

During the year ended December 31, 2021, the Company recorded a loss on extinguishment of debt of $ 10.8 million.

See Note 6, Debt, for further detail.

Stock-Based Compensation —The Company accounts for share-based payment awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”).

ASC 718 requires all entities to apply a fair value-based measurement method in accounting for share-based payment transactions with directors, officers and employees.

The Company measures and recognizes compensation expense for all share-based payment awards made to directors, officers and employees based on the grant date fair value, amortized over the requisite service period of the award.

Compensation expense for awards with performance-based vesting conditions is recognized based upon the probability that the performance target will be met.

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

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

Net income reflects stock-based compensation expense of $ 10.8 million, $ 3.8 million and $ 4.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Beds, Units, Occupancy and Other Measures —Beds, units, occupancy and other non-financial measures used to describe real estate investments included in these Notes to the consolidated financial statements are presented on an unaudited basis and are not subject to audit by the independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board.

Recent Accounting Pronouncements — In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), that provides optional relief to applying reference rate reform to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”), which will be discontinued by the end of 2021.

Recent Accounting Pronouncemen ts — In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2020-04 , Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), that provides optional relief to applying reference rate reform to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”).

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

Dollar LIBOR rates were discontinued at the end of 2021.

The amendments in this update are effective immediately and may be applied through December 31, 202 2.

The Company is still evaluating the impact of ASU 2020-04 and expects to take full advantage of the offered optional expedients and exceptions, but does not expect the adoption of the standard to have a material impact on the Company’s consolidated financial statements.

The Company does not expect the adoption of the standard to have a material impact on the Company’s consolidated financial statements.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REAL ESTATE INVESTMENTS, NET

The following table summarizes the Company’s investment in owned properties at December 31, 2020 and December 31, 2019 (dollars in thousands):

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

December 31, 2021 December 31, 2020

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Real estate investments, net $ 1,589,971 $ 1,448,099

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, 85 of the Company’s 218 facilities were leased to subsidiaries of Ensign on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease” and, collectively, the “Ensign Master Leases”) which commenced on June 1, 2014 and were subsequently modified (see “Pennant Spin” below for further information).

As of December 31, 2021, 91 of the Company’s 227 facilities were leased to subsidiaries of The Ensign Group, Inc.

(“Ensign”) on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease” and, collectively, the “Ensign Master Leases”) which commenced on June 1, 2014 and were subsequently modified (see “Pennant Spin” below for further information).

The obligations under the Ensign Master Leases are guaranteed by Ensign.

A default by any subsidiary of Ensign with regard to any facility leased pursuant to an Ensign Master Lease will result in a default under all of the Ensign Master Leases.

As of December 31, 2020, annualized contractual rental income from the Ensign Master leases was $ 53.4 million and are escalated annually, in June, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero ) or 2.5 %, and (2) the prior year’s rent.

As of December 31, 2021, annualized contractual rental income from the Ensign Master leases was $ 59.7 million and is escalated annually, in June, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero ) or 2.5 %, and (2) the prior year’s rent.

In addition to rent, the subsidiaries of Ensign that are tenants under the Ensign Master Leases are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).

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

As of December 31, 2020, annualized contractual rental income from the four additional Ensign facilities was $ 3.8 million and are escalated annually, in December, by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 2.5 %, and (2) the prior year’s rent.

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 four additional Ensign facilities was $ 3.8 million and is escalated annually, in December, by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 2.5 %, and (2) the prior year’s rent.

In addition to rent, the subsidiaries of Ensign that are tenants under the four additional facilities are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).

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

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.

See below under “Lease Amendments” for further detail on Ensign lease amendments.

As of December 31, 2021, 15 of the Company’s facilities were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”).

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

As of December 31, 2020, annualized contractual rental income from the PMG Master Lease were $ 27.9 million and are escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 3.0 %, and (2) the prior year’s rent.

As of December 31, 2021, annualized contractual rental income from the PMG Master Lease was $ 28.9 million and is escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 3.0 %, and (2) the prior year’s rent.

In addition to rent, the subsidiaries of PMG that are tenants under the PMG Master Lease are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).

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

As of December 31, 2020, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands):

2021 $ 174,400

Thereafter 1,026,675

Two of the Company’s 227 facilities are leased under a short-term lease with an expected term of less than one year as of December 31, 2021, as the Company is currently identifying a long-term operator for these properties.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2022 $ 192,897

Thereafter 1,138,179

Tenant Purchase Options

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

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

ALF 7 October 2034 1/1/2021 A $ 3,207

SNF 11 January 2031 1/1/2022 C $ 4,800

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

Current Cash Rent (2)

ALF 7 October 2034 1/1/2022 (3)

SNF 11 November 2030 1/1/2022 (3)

SNF 1 March 2029 4/1/2022 B / C (4)

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ALF 2 October 2034 1/1/2026 A 1,598

(1) Option type includes:

A - Fixed base price plus a specified share on any appreciation.

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

(3) Option window is open for six months.

(4) Purchase option reflects two option types.

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For the Year Ended December 31,

2021 2020 2019

Rental Income

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Adjustment for collectibility (2)

— — ( 11,774 )

Recovery of previously reversed rent (3)

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(2) During the year ended December 31, 2019, and in accordance with ASC 842, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from five operators through maturity.

As such, the Company reversed $ 7.8 million of contractual rent, $ 3.5 million of straight-line rent and $ 0.5 million of property tax reimbursements during the year ended December 31, 2019.

If lease payments are subsequently deemed probable of collection, the Company increases rental income for such recoveries.

(3) During the year ended December 31, 2020, the Company recovered $ 1.0 million in rental income that was previously written off related to one operator.

(4) During the year ended December 31, 2020, in connection with the agreement to terminate its lease agreements with affiliates of Metron Integrated Health Systems (“Metron”) and to sell the facilities to a third-party, the Company received $ 1.2 million from Metron affiliates.

As such, the Company reversed

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ 7.8 million of contractual rent, $ 3.5 million of straight-line rent and $ 0.5 million of property tax reimbursements during the year ended December 31, 2019.

(3) During the year ended December 31, 2020, the Company recovered $ 1.0 million in rental income related to affiliates of Metron Integrated Health Systems (“Metron”) that was previously written off.

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

During the years ended December 31, 2021 and 2020, the Company recognized approximately $ 0.1 million and $ 1.2 million in lease termination revenue, respectively.

Recent Real Estate Acquisitions

The following table summarizes the Company’s acquisitions for the year ended December 31, 2020 (dollar amounts in thousands):

The following table summarizes the Company’s acquisitions for the years ended December 31, 2021, 2020 and 2019 (dollar amounts in thousands):

Type of Property Purchase Price (1)

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Number of Properties Number of Beds/Units (3)

December 31, 2021

Skilled nursing $ 57,973 $ 4,499 (4) 4 509

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Total $ 196,076 $ 13,103 10 1,247

The following table summarizes the Company’s acquisitions for the year ended December 31, 2019 (dollar amounts in thousands):

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

December 31, 2020

Skilled nursing $ 75,545 $ 6,453 6 715

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Total $ 89,817 $ 7,598 8 961

The following table summarizes the Company’s acquisitions for the year ended December 31, 2018 (dollar amounts in thousands):

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

December 31, 2019

Skilled nursing $ 254,760 $ 22,909 17 2,099

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

(4) The Company committed to fund approximately $ 1.4 million in revenue-producing capital expenditures over 24 months based on the in-place yield, which was included in the purchase price.

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

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

(6) Initial annual cash rent is zero until transfer of operations upon receipt of licensing approval.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease Amendments

Twenty/20 Lease Termination and New Noble Master Lease .

Amended Noble Master Leases and New Noble NJ Master Lease.

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

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

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

In connection with its agreement to the rent deferral, the Company also entered into a purchase agreement with Noble to acquire two assisted living facilities owned by Noble.

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

The Company closed on the acquisition of the two facilities in December 2021 and the deferred rent, as well as all contractual rent for the fourth quarter of 2021, was paid in full.

The two facilities are currently leased back to Noble under a short-term lease agreement while the Company pursues other tenants for the long-term.

Amended Ensign Master Lease .

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

The facilities were leased to affiliates of Ensign.

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

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

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

Five Oaks Lease Termination and Amended Ensign Master Lease.

On June 1, 2021, operating affiliates of Ensign acquired certain operations and assets of Five Oaks Healthcare, LLC (“Five Oaks”) under an agreement with Five Oaks.

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

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

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

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

Premier Partial Lease Termination and Amended Noble VA Master Lease .

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

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

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

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

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

Twenty/20 Lease Termination and New Noble VA Master Lease .

On December 1, 2020, five assisted living facilities in Virginia operated by Twenty/20 Management, Inc.

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

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

The new lease has a remaining initial term of approximately 14 years, with two five-year renewal options and CPI-based rent escalators.

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

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

The lease had an initial term of approximately 14 years as of December 1, 2020, with two five-year renewal options and CPI-based rent escalators.

Initial annual cash rent under the new lease is approximately $ 3.2 million .

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

Pennant Spin .

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

As a result of the Pennant Spin, as of October 1, 2019, the Company amended the Ensign Master Leases to lease 85 facilities to subsidiaries of Ensign, which had a total of 8,908 operational beds, and entered into a new triple-net master lease with subsidiaries of Pennant (the “Pennant Master Lease”) to lease 11 facilities, which had a total of 1,151 operational beds.

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

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

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

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

Ensign continues to guarantee obligations under the Ensign Master Leases and the Pennant Master Lease.

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

The contractual annual cash rent under the amended Ensign

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Master Leases was reduced by approximately $ 7.8 million.

Ensign continues to guarantee obligations under the Ensign Master Leases and the Pennant Master Lease.

Trillium Lease Termination and New Master Lease.

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(“Trio”), which covered seven facilities based in Dayton, Ohio.

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

The annual base rent due under the amended lease with Trio is approximately $ 4.7 million and provides for payment of percentage rent if Trio achieves certain increases in portfolio revenue.

Pristine Lease Termination.

On February 27, 2018, the Company announced that it entered into a Lease Termination Agreement (the “LTA”) with Pristine for its nine remaining properties, with a target completion date of April 30, 2018.

Under the LTA, Pristine agreed to continue to operate the facilities until possession could be surrendered, and the operations therein transitioned, to operator(s) designated by the Company.

Among other things, Pristine also agreed to amend certain pending agreements to sell the rights to certain Ohio Medicaid beds (the “Bed Sales Agreements”) and cooperate with the Company to turn over any claim or control it might have had with respect to the sale process and the proceeds thereof, if any, to the Company.

The transactions were timely completed, and on May 1, 2018, Trio took over operations in the seven facilities based primarily in the Dayton, Ohio area under a new 15 -year master lease, while Hillstone Healthcare, Inc.

(“Hillstone”) assumed the operation of the two facilities in Willard and Toledo, Ohio under a new 12 -year master lease.

In addition, amendments to the Bed Sales Agreements were subsequently executed, confirming the Company as the sole seller of the bed rights and the sole recipient of any proceeds therefrom.

The aggregate annual base rent due under the new master leases with Trio and Hillstone is approximately $ 10.0 million, subject to CPI-based or fixed escalators.

Under the LTA, the Company agreed, upon Pristine’s full performance of the terms thereof, to terminate Pristine’s master lease and all future obligations of the tenant thereunder;

however, under the terms of the master lease the Company’s security interest in Pristine’s accounts receivable has survived any such termination.

Such security interest was subject to the prior lien and security interest of Pristine’s working capital lender, Capital One, National Association (“CONA”), with whom the Company has an existing intercreditor agreement that defines the relative rights and responsibilities of CONA and with its respect to the loan and lease collateral represented by Pristine’s accounts receivable and the Company’s respective security interests therein.

The amended lease had a remaining initial term of approximately 13 years as of November 4, 2019, with two five-year renewal options and CPI-based rent escalators.

The annual base rent due under the amended lease with Trio was approximately $ 4.7 million and provides for payment of percentage rent if Trio achieves certain increases in portfolio revenue.

Impairment of Real Estate Investments, Asset Sales and Assets Held for Sale

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In connection with the sale, the Company provided affiliates of CommuniCare Family of Companies (“CommuniCare”), the purchaser of the three Ohio properties, with a mortgage loan secured by the three Ohio properties for approximately $ 26.5 million.

See Note 4, Other Real Estate Investments, Net for additional information.

As of September 30, 2019, the Company met the criteria to classify six skilled nursing facilities operated by affiliates of Metron as held for sale, which resulted in an impairment expense of approximately $ 8.8 million to reduce the carrying value to fair value less costs to sell the properties.

The fair values of the assets impaired during the three months ended September 30, 2019 were based on contractual sales prices, which are considered to be Level 2 measurements within the fair value hierarchy.

As of December 31, 2019, the properties continued to be held for sale and the carrying value of $ 34.6 million was primarily comprised of real estate assets.

In February 2020, the six skilled nursing facilities were sold.

In connection with

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the sale for $ 36.0 million, the Company received $ 3.5 million in cash and provided subsidiaries of Cascade Capital Group, LLC (“Cascade”), the purchaser of the properties, with a short-term mortgage loan secured by these properties for $ 32.4 million.

See Note 4, Other Real Estate Investments, for additional information.

On February 14, 2020, the Company sold six skilled nursing properties in Michigan operated by affiliates of Metron for a purchase price of $ 36.0 million.

During the three months ended September 30, 2019 and prior to the disposition, the Company recorded an impairment expense of approximately $ 8.8 million related to these properties.

In connection with the sale for $ 36.0 million, the Company received $ 3.5 million in cash and provided subsidiaries of Cascade Capital Group, LLC (“Cascade”), the purchaser of the properties, with a short-term mortgage loan secured by these properties for $ 32.4 million.

The mortgage loan bore interest at 7.5 % and initially had a maturity date of March 31, 2020.

In connection with the sale, the Company recognized a loss of approximately $ 0.1 million during the three months ended March 31, 2020.

In April 2020, the mortgage loan was settled in connection with a new mortgage loan transaction between the Company and a third-party institutional lender as co-lenders, pursuant to which we received $ 18.9 million in cash and a new mortgage loan for $ 13.9 million.

In April 2020, the mortgage loan was settled in connection with a new mortgage loan transaction between the Company and a third-party institutional lender as co-lenders, pursuant to which the Company received $ 18.9 million in cash and a new mortgage loan for $ 13.9 million.

In July 2020, the Company received prepayment in full, including accrued interest, for the new $ 13.9 million mortgage loan.

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

On November 1, 2020, the Company sold the one remaining owned and operated independent living facility consisting of 168 units located in Texas with an aggregate carrying value of $ 4.2 million for gross proceeds of $ 4.5 million.

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

On February 1, 2021, the Company 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.

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

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

On November 1, 2020, the Company sold its one remaining owned and operated independent living facility consisting of 168 units located in Texas with an aggregate carrying value of $ 4.2 million for net sales proceeds of $ 4.2 million.

In connection with the sale, the Company recognized a gain of $ 20,000 .

During the year ended December 31, 2019, the Company sold one of its owned and operated independent living facilities consisting of 38 units located in Texas with an aggregate carrying value of $ 1.7 million for net proceeds of $ 3.3 million.

In connection with the sale, the Company recognized a gain of $ 1.6 million.

During the year ended December 31, 2018, the Company sold three assisted living facilities consisting of 102 units located in Idaho with an aggregate carrying value of $ 10.9 million for an aggregate price of $ 13.0 million.

On December 23, 2019, the Company sold one of its owned and operated independent living facilities consisting of 38 units located in Texas with an aggregate carrying value of $ 1.7 million for net proceeds of $ 3.3 million.

In connection with the sale, the Company recognized a gain of $ 1.6 million.

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

Assets held for sale includes the net book value of property the Company plans to sell within the next year.

If the determination is made that the Company no longer expects to sell an asset within the next year, the asset is reclassified out of assets held for sale.

As of December 31, 2020, the property continued to be held for sale and the carrying value of $ 7.2 million is primarily comprised of real estate assets.

In February 2021, the property was sold.

See Note 13, Subsequent Events, for additional information.

OTHER REAL ESTATE INVESTMENTS, NET

Mezzanine Loan Receivable —In November 2020, the Company provided Next VA Star Realty Holdings, LLC a mezzanine loan for nine skilled nursing facilities secured by membership interests in affiliates of Next VA Star Realty Holdings, LLC for approximately $ 15.0 million, at an annual interest rate of 12 %.

The loan requires monthly interest payments, is set to mature on November 30, 2025, and may (subject to certain restrictions) be prepaid before the maturity date if paid in full and for an exit fee ranging from 1 % to 3 % of the loan plus unpaid interest payments equal to 24 months (less the amount of monthly interest payments made by the borrower through the date of prepayment).

Mortgage Loans Receivable —In October 2017, the Company provided an affiliate of Providence a mortgage loan secured by a skilled nursing facility for approximately $ 12.5 million inclusive of transaction costs, which bore a fixed interest rate of 9 %.

The mortgage loan, which required Providence to make monthly principal and interest payments, was set to mature on October 26, 2020 and had an option to be prepaid before the maturity date.

During the three months ended December 31, 2019, Providence exercised its option to prepay the loan in full, and prepayment was received by the Company.

In February 2019, the Company provided affiliates of Covenant Care a mortgage loan secured by first mortgages on five skilled nursing facilities for approximately $ 11.4 million, at an annual interest rate of 9 %.

The loan required monthly interest payments, was set to mature on February 11, 2020, and included two , six-month extension options.

During the three months ended September 30, 2019, Covenant Care exercised its option to prepay the loan in full, and prepayment was received by the Company.

In July 2019, the Company provided MCRC, LLC a real estate loan secured by a 176 bed skilled nursing facility in Manteca, California for $ 3.0 million, which bore a fixed interest rate of 8 % and required monthly interest payments.

Concurrently, the Company entered into a purchase and sale agreement to purchase the Manteca facility from MCRC, LLC for approximately $ 16.4 million subject to normal diligence and other contingencies.

The loan documents provided for a maturity date of the earlier to occur of the closing date of the acquisition, or five business days following the termination of the purchase and sale agreement.

MCRC, LLC breached its obligation to sell the Manteca facility to the Company on the terms outlined in the purchase and sale agreement and to repay the real estate loan upon its stated maturity.

As a result, the Company commenced non-judicial foreclosure proceedings with respect to the Manteca facility.

In January 2020, the borrower further collateralized the loan by causing one of its affiliates to grant the Company a deed of trust in the real estate and improvements that constitute

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Palm Gardens Assisted Living Facility in Yolo County, California.

During the three months ended June 30, 2020, payment for the loan principal and accrued interest, including default interest, as well as reimbursement for attorney’s fees and certain other costs of suit, were received in full by the Company and, as a result, the Company withdrew all foreclosure-related proceedings related to the Manteca facility loan.

In September 2019, the Company provided affiliates of CommuniCare a $ 26.5 million loan secured by mortgages on the three skilled nursing facilities sold to CommuniCare, which bore a fixed interest rate of 10 %.

The mortgage loan, which required CommuniCare to make monthly interest payments, was set to mature on February 29, 2020, and included an option to be prepaid before the maturity date.

In January 2020, the Company amended the mortgage loan’s maturity date to April 30, 2020.

In April 2020, the Company amended the mortgage loan’s maturity date to May 29, 2020.

During the three months ended June 30, 2020, payment for the mortgage loan and accrued interest was received in full by the Company.

In February 2020, the Company provided provided subsidiaries of Cascade a $ 32.4 million loan secured by mortgages on the six skilled nursing facilities formerly operated by affiliates of Metron sold to Cascade in February 2020, as discussed in Note 3, Real Estate investments, Net .

The mortgage loan bore interest at 7.5 % and initially had a maturity date of March 31, 2020.

In April 2020, the mortgage loan was settled in connection with a new mortgage loan transaction between the Company and a third-party institutional lender as co-lenders, pursuant to which the Company received $ 18.9 million in cash and a new mortgage loan for $ 13.9 million.

The new mortgage loan with Cascade was secured by the same six skilled nursing facilities purchased by Cascade and was for a combined principal amount of $ 33.9 million, with the Company’s $ 13.9 million portion of the indebtedness initially bearing interest at a variable rate equal to LIBOR plus 4.00 %, subject to a LIBOR floor of 1.75 %.

The new mortgage loan had a maturity date of April 29, 2022 and included two six-month extension options.

In July 2020, prepayment for the mortgage loan of $ 13.9 million and accrued interest was received in full by the Company.

As of December 31, 2020, the Company had no remaining mortgage loan receivables.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 2.3 million, $ 2.8 million and $ 1.2 million, respectively, of interest income related to the mortgage and mezzanine loans.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 0.3 million, $ 0.2 million and $ 0.2 million, respectively, of interest income related to its other loans receivable.

Preferred Equity Investments —In July 2016, the Company completed a $ 2.2 million preferred equity investment with an affiliate of Cascadia Development, LLC.

The preferred equity investment yielded a return equal to prime plus 9.5 % but in no event less than 12.0 % calculated on a quarterly basis on the outstanding carrying value of the investment.

The investment was used to develop a 99 -bed skilled nursing facility in Nampa, Idaho.

In connection with its investment, CareTrust REIT obtained an option to purchase the development at a fixed-formula price upon stabilization, with an initial lease yield of at least 9.0 %.

The project was completed in the fourth quarter of 2017 and began lease-up during the first quarter of 2018.

In June 2019, the Company purchased the skilled nursing facility for approximately $ 16.2 million, inclusive of transaction costs.

The Company paid $ 12.9 million after receiving back its initial investment of $ 2.2 million and cumulative contractual preferred return through June 18, 2019, the acquisition date, of $ 1.1 million.

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

The preferred equity investment yielded a return equal to prime plus 9.5 % but in no event less than 12.0 % calculated on a quarterly basis on the outstanding carrying value of the investment.

The investment was used to develop a 99 -bed skilled nursing facility in Boise, Idaho.

In connection with its investment, CareTrust REIT obtained an option to purchase the development at a fixed-formula price upon stabilization, with an initial lease yield of at least 9.0 %.

The project was completed in the first quarter of 2018 and began lease-up during the second quarter of 2018.

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

The Company paid $ 15.0 million after receiving back its initial investment of $ 2.3 million and cumulative contractual preferred return through January 17, 2020, the acquisition date, of $ 1.4 million.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized less than $ 0.1 million, $ 1.3 million (including $ 0.6 million for unrecognized preferred return related to prior periods) and $ 0.2 million, respectively, of interest income related to these preferred equity investments.

As of December 31, 2020, the Company had no remaining preferred equity investments.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, one assisted living facility was classified as held for sale, with a carrying value of $ 4.8 million, primarily comprised of real estate assets.

OTHER REAL ESTATE INVESTMENTS

As of December 31, 2021 and 2020, the Company’s loans receivable and other investments consisted of the following (dollar amounts in thousands):

As of December 31, 2021

Investment Financial Statement Line Item Principal Balance as of December 31, 2021 Book Value as of December 31, 2021 Book Value as of December 31, 2020 Weighted Average Contractual Interest Rate Maturity Date

Mezzanine loan receivable Other real estate investments $ 15,000 $ 15,155 $ 15,000 12.0 % 11/30/2025

Other loans receivable Prepaid expenses and other assets, net 3,154 3,161 2,308 8.0 % 9/1/2023 - 12/31/2023

Total $ 18,154 $ 18,316 $ 17,308

2020 Loans Receivable Transactions —In November 2020, the Company provided Next VA Star Realty Holdings, LLC a mezzanine loan for nine skilled nursing facilities secured by membership interests in affiliates of Next VA Star Realty Holdings, LLC for approximately $ 15.0 million, at an annual interest rate of 12 %.

The following table summarizes the interest and other income recognized during the years ended December 31, 2021, 2020 and 2019 ( dollar amounts in thousands):

For Year Ended December 31,

Investment 2021 2020 2019

Mezzanine loan receivable $ 1,825 $ 305 $ —

Mortgage loans receivable (1)

— 2,044 2,838

Preferred equity investments (1)

Other 331 270 164

Total $ 2,156 $ 2,643 $ 4,345

(1) As of December 31, 2021 and 2020, the Company had no mortgage loans receivable or preferred equity investments.

As of December 31, 2021 and 2020, the Company had no loan loss reserve and did not consider any loans receivable investments to be impaired.

FAIR VALUE MEASUREMENTS

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Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

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Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2020, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

Level 1 Level 2 Level 3 Balance as of December 31, 2021

Mezzanine loan receivable $ — $ — $ 15,155 $ 15,155

Level 1 Level 2 Level 3 Balance as of December 31, 2020

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

Mezzanine loan receiv able:

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As such, the Company classifies the instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms.

However, the fair value is not sensitive to changes in market interest rates due to the recent issuance of the loan at market interest rates.

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

As of December 31, 2020, the Company did not have any loans that were 90 days or more past due.

For the year ended December 31, 2020, there were no changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

As of December 31, 2021 and 2020, the Company did not have any loans that were 90 days or more past due.

For the year ended December 31, 2021, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Measured at Fair Value on a Non-Recurring Basis

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The Company estimates fair values using Level 3 inputs and uses a combined income and market approach.

Specifically, t he fair value of the real estate investment is based on current market conditions and considers matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, comparable sales data, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers.

For the year ended December 31, 2020, there were no real estate assets deemed to be impa ired.

Specifically, the fair value of the real estate investment is based on current market conditions and considers matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, comparable sales data, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers.

For the year ended December 31, 2021 and 2020, there were no real estate assets deemed to be impaired.

For the year ended December 31, 2019, the Company recorded an impairment expense of $ 16.7 million.

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The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments.

A summary of the face values, carrying amounts and fair values of the Company’s financial instruments as of December 31, 2020 and December 31, 2019 using Level 2 inputs for the Notes (as defined in Note 6, Debt, below), and Level 3 inputs, for all other financial instruments, is as follows (dollars in thousands):

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

December 31, 2021 December 31, 2020

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Value Carrying

Financial assets:

Preferred equity investments $ — $ — $ — $ 2,327 $ 3,800 $ 3,674

Mortgage loans receivable — — — 29,500 29,500 29,500

Financial liabilities:

2028 Senior unsecured notes payable $ 400,000 $ 394,262 $ 410,500 $ — $ — $ —

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

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

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

These balances approximate their fair values due to the short-term nature of these instruments.

Preferred equity investments :

The fair values of the preferred equity investments were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements.

Mortgage loans receivable :

The fair values of the mortgage loans receivable were estimated using an internal valuation model that considered the expected future cash flows of the investments, the underlying collateral value, market interest rates and other credit enhancements.

Senior unsecured notes payable :

The fair value of the Notes (as defined in Note 6, Debt, below) was determined using third-party quotes derived from orderly trades.

The fair value of the Notes and the 2025 Notes ( as defined in Note 6, Debt, below) were determined using third-party quotes derived from orderly trades.

Unsecured revolving credit facility and senior unsecured term loan:

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Principal Deferred Carrying Principal Deferred Carrying

Amount Loan Fees Value Amount Loan Fees Value

Amount Loan Fees Amount Amount Loan Fees Amount

2028 Senior unsecured notes payable $ 400,000 $ ( 5,738 ) $ 394,262 $ — $ — $ —

2025 Senior unsecured notes payable — — — 300,000 ( 3,331 ) 296,669

Senior unsecured term loan 200,000 ( 864 ) 199,136 200,000 ( 1,075 ) 198,925

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Senior Unsecured Notes Payable

On May 10, 2017, the Company’s wholly owned subsidiary, CTR Partnership, L.P.

2028 Senior Notes.

On June 17, 2021, the Company’s wholly owned subsidiary, CTR Partnership, L.P.

(the “Operating Partnership”), and its wholly owned subsidiary, CareTrust Capital Corp.

(together with the Operating Partnership, the “Issuers”), completed an underwritten public offering of $ 300.0 million aggregate principal amount of 5.25 % Senior Notes due 2025 (the “Notes”).

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

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

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

The Company used the net proceeds from the offering of the Notes to redeem all $ 260.0 million aggregate principal amount outstanding of its 5.875 % Senior Notes due 2021, including payment of

The Notes mature on June 30, 2028.

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

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

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

In addition, at any time on or prior to June 30, 2024, up to 40 % of the

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the redemption price at 102.938 % and all accrued and unpaid interest thereon.

The Company used the remaining portion of the net proceeds of the Notes offering to pay borrowings outstanding under its senior unsecured revolving credit facility.

The Notes mature on June 1, 2025 and bear interest at a rate of 5.25 % per year.

Interest on the Notes is payable on June 1 and December 1 of each year, beginning on December 1, 2017.

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

As of December 31, 2020, the Issuers have not elected to redeem any of the Notes.

If certain changes of control of the Company occur, holders of the Notes will have the right to require the Issuers to repurchase their Notes at 101 % of the principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by the Company and certain of the Company’s wholly owned existing and, subject to certain exceptions, future material subsidiaries (other than the Issuers);

provided, however, that such guarantees are subject to automatic release under certain customary circumstanc es, including if the subsidiary guarantor is sold or sells all or substantially all of its assets, the subsidiary guarantor is designated “unrestricted” for covenant purposes under the indenture, the subsidiary guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied.

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

aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings at a redemption price of 103.875 % of the aggregate principal amount of Notes to be redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date.

If certain changes of control of the Company occur, the Issuers will be required to make an offer to holders of the Notes to repurchase their Notes at a price of 101 % of their principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by the Company and all of CareTrust’s existing and future subsidiaries (other than the Issuers) that guarantee obligations under the Amended Credit Facility (as defined below);

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

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

incur or guarantee additional indebtedness;

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and create restrictions on the ability of the Issuers and their restricted subsidiaries to pay dividends or other amounts to the Issuers.

The indenture also requires the Company and its restricted subsidiaries to maintain a specified ratio of unencumbered assets to unsecured indebtedness.

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

These covenants are subject to a number of important and significant limitations, qualifications and exceptions.

The indenture also contains customary events of default.

As of December 31, 2020, the Company was in compliance with all applicable financial covenants under the indenture.

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

As of December 31, 2021, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes.

2025 Senior Notes.

On May 10, 2017, the Issuers completed an underwritten public offering of $ 300.0 million aggregate principal amount of 5.25 % Senior Notes due 2025 (the “2025 Notes”).

The 2025 Notes were issued at par, resulting in gross proceeds of $ 300.0 million and net proceeds of approximately $ 294.0 million after deducting underwriting fees and other offering expenses.

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

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

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

During the year ended December 31 2021, the Company recorded a loss on extinguishment of debt of $ 10.8 million in the 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.

Unsecured Revolving Credit Facility and Term Loan

On August 5, 2015, the Company, CareTrust GP, LLC, the Operating Partnership, as the borrower, and certain of its wholly owned subsidiaries entered into a credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender, and the lenders party thereto (the “Prior Credit Agreement”).

As later amended on February 1, 2016, the Prior Credit Agreement provided the following:

(i) a $ 400.0 million unsecured asset based revolving credit facility (the “Prior Revolving Facility”), (ii) a $ 100.0 million non-amortizing unsecured term loan (the “Prior Term Loan” and, together with the Prior Revolving Facility, the “Prior Credit Facility”), and (iii) a $ 250.0 million uncommitted incremental facility.

The Prior Revolving Facility was scheduled to mature on August 5, 2019, subject to two , six-month extension options.

The Prior Term Loan was scheduled to mature on February 1, 2023 and could be prepaid at any time subject to a 2 % premium in the first year after issuance and a 1 % premium in the second year after issuance.

On February 8, 2019, the Operating Partnership, as the borrower, the Company, as guarantor, CareTrust GP, LLC, and certain of the Operating Partnership’s wholly owned subsidiaries entered into an amended and restated credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender, and the lenders party thereto (the “Amended Credit Agreement”).

The Amended Credit Agreement, which amended and restated the Prior Credit Agreement, provides for:

The Amended Credit Agreement, which amended and restated the Company’s prior credit agreement, provides for:

(i) an unsecured revolving credit facility (the “Revolving Facility”) with revolving commitments in an aggregate principal amount of $ 600.0 million, including a letter of credit subfacility for 10 % of the then available revolving commitments and a swingline loan subfacility for 10 % of the then available revolving commitments and (ii) an unsecured term loan credit facility (the “Term Loan” and, together with the Revolving Facility, the “Amended Credit Facility”) in an aggregate principal amount of $ 200.0 million.

Borrowing availability under the Revolving Facility is subject to no default or event of default under the Amended Credit Agreement having occurred at the time of borrowing.

The proceeds of the Term Loan were used, in part, to repay in full all outstanding borrowings under the Prior Term Loan and Prior Revolving Facility under the Prior Credit Agreement.

The proceeds of the Term Loan were used, in part, to repay in full all outstanding borrowings under the Company’s prior credit agreement.

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

The interest rates applicable to loans under the Revolving Facility are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.10 % to 0.55 % per annum or LIBOR plus a margin ranging from 1.10 % to 1.55 % per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt).

The interest rates applicable to loans under the Term Loan are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.50 % to 1.20 % per annum or LIBOR plus a margin ranging from 1.50 % to 2.20 % per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt).

In addition, the Operating Partnership will pay a facility fee on the revolving commitments under the Revolving Facility ranging from 0.15 % to 0.35 % per annum, based on the debt to asset value ratio of the Company and its consolidated subsidiaries (unless the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt and the Operating Partnership elects to decrease the applicable margin as described above, in which case the Operating Partnership will pay a facility fee on the revolving commitments ranging from 0.125 % to 0.30 % per annum based on the credit ratings of the Company’s senior long-term unsecured debt).

As of December 31, 2020, the Operating Partnership had $ 200.0 million outstanding under the Term Loan and $ 50.0 million outstanding under the Revolving Facility.

As of December 31, 2021, the Operating Partnership had $ 200.0 million of borrowings 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 the sole discretion of the Operating Partnership, two , six-month extension options.

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Thereafter 400,000

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Public Offering of Common Stock —On April 15, 2019, the Company completed an underwritten public offering of 6,641,250 shares of its common stock, par value $ 0.01 per share, at an initial price to the public of $ 23.35 , including 866,250 shares of common stock sold pursuant to the full exercise of an option to purchase additional shares of common stock granted to the underwriters, resulting in approximately $ 149.0 million in net proceeds, after deducting the underwriting discount and offering expenses.

The Company used the proceeds from the offering to repay a portion of the outstanding borrowings on its Revolving Facility, which had been used to fund a portion of the purchase price of acquisitions in the second quarter of 2019.

At-The-Market Offering —On March 10, 2020, the Company entered into a new equity distribution agreement to issue and sell, from time to time, up to $ 500.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “New ATM Program”).

In connection with the entry into the equity distribution agreement and the commencement of the New ATM Program, the Company’s “at-the-market” equity offering program pursuant to the Company’s prior equity distribution agreement, dated as of March 4, 2019, was terminated (the “Prior ATM Program”).

There was no New ATM Program or Prior ATM Program activity (or activity under any predecessor at-the-market equity offering programs) for 2020.

The following table summarizes predecessor at-the-market equity offering program activity for the year ended 2019 (in thousands, except per share amounts):

In connection with the entry into the equity distribution agreement and

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the commencement of the ATM Program, the Company’s “at-the-market” equity offering program pursuant to the Company’s prior equity distribution agreement, dated as of March 4, 2019, was terminated.

There was no ATM Program activity (or activity under any predecessor at-the-market equity offering programs) for the year ended December 31, 2020.

The following table summarizes ATM Program activity and predecessor at-the-market equity offering program activity for the years ended December 31, 2021 and 2019 (in thousands, except per share amounts):

For the Year Ended December 31,

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Gross proceeds (1)

(1) Total gross proceeds is before $ 0.6 million of commissions paid to the sales agents during the year ended December 31, 2019 under the predecessor ATM Program.

As of December 31, 2020, the Company had $ 500.0 million available for future issuances under the New ATM Program.

$ 23,505 $ 47,893

(1) Total gross proceeds is before $ 0.3 million and $ 0.6 million of commissions paid to the sales agents during the year ended December 31, 2021 and December 31, 2019 under the ATM Program and a predecessor at-the-market equity offering program.

As of December 31, 2021, the Company had $ 476.5 million available for future issuances under the ATM Program.

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

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The Company expects to finance any share repurchases under the Repurchase Program using available cash and may also use short-term borrowings under the Revolving Facility.

The Company did no t repurchase any shares of common stock under the Repurchase Program during the year ended December 31, 2020.

The Company did no t repurchase any shares of common stock under the Repurchase Program during the years ended December 31, 2021, and 2020.

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

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dividends on Common Stock — The following table summarizes the cash dividends per share of common stock declared by the Company’s Board of Directors for 2021, 2020 and 2019 (dollars in thousands, except per share amounts):

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Dividends record date March 29, 2019 June 28, 2019 September 30, 2019 December 31, 2019

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION

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Incentive Award Plan (the “Plan”).

The Plan provides for the granting of stock-based compensation, including stock options, restricted stock, performance awards, restricted stock units and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company.

The following table summarizes restricted stock award and performance award activity for the years ended December 31, 2020 and 2019:

The Plan provides for the granting of stock-based compensation, including stock options, restricted stock, performance awards, restricted stock units, relative total stockholder return-based stock awards and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company.

Under the Plan, 5,000,000 shares have been authorized for awards.

Under the Plan, restricted stock awards (“RSAs”) vest in equal annual installments beginning on the first anniversary of the grant date over a three year period for the RSAs granted in 2021 and a four year period for the RSAs granted in 2020 and 2019.

RSAs granted to non-employee members of the Board of Directors (“Board Awards”) vest in full on the earlier to occur of the Company’s next Annual Meeting of Stockholders or one year.

Performance stock awards (“PSA”) granted are subject to both time and performance based conditions and vest over a one -to three year period for PSAs granted in 2021 and over a one -to- four year period for PSAs granted in 2020 and 2019.

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

Relative total shareholder return awards (“TSR Awards”) granted in 2021 are subject to both time and market based conditions and cliff vest after a three-year period.

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

The RSAs, PSAs, and Board Awards are valued on the date of grant based on the closing price of the Company’s common stock, while the TSR Awards are valued on the date of grant using a Monte Carlo valuation model.

The vesting of certain awards may accelerate, as defined in the grant agreement, upon retirement, a change in control or other events.

The following table summarizes the status of the restricted stock award and performance award activity for the year ended December 31, 2021:

Shares Weighted Average Share Price

Unvested balance at December 31, 2020 517,686 $ 18.71

Granted 180,629 22.22

Vested ( 247,534 ) 14.50

Forfeited ( 134 ) 15.21

Unvested balance at December 31, 2019 452,233 17.90

Granted 270,191 19.11

RSAs 394,863 21.92

PSAs 108,414 22.48

Board Awards 20,266 24.18

Vested ( 147,646 ) 17.43

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Unvested balance at December 31, 2021 891,333 $ 20.91

As of December 31, 2021, the weighted-average remaining vesting period of such awards was 2.0 years.

The following table summarizes the Company’s RSA, PSA and Board Award grants during the year ended December 31, 2021 (dollars in thousands, except per share amounts):

Grants Vested

Shares Weighted Average Share Price Grant Date Fair Value Shares Vest Date Fair Value

During year ended December 31, 2021 (1)

RSAs 394,863 $ 21.92 $ 8,654 89,921 $ 2,105

PSAs 108,414 22.48 2,437 30,114 707

Board Awards 20,266 24.18 490 27,611 668

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) In 2021, the Compensation Committee changed the structure of the grants that resulted in two long-term equity incentive awards being granted to the Company’s named executive officers in 2021.

The Compensation Committee also granted annual awards for 2022 in December 2021.

The following table summarizes the Company’s RSA, PSA and Board Award grants during the years ended December 31, 2020 and 2019 (dollars in thousands, except per share amounts):

Shares Weighted Average Share Price Grant Date Fair Value

During year ended December 31, 2020

RSAs 134,790 19.68 2,653

PSAs 107,790 19.06 2,054

Board Awards 27,611 16.48 455

During year ended December 31, 2019

RSAs 91,440 22.00 2,012

PSAs 71,440 22.00 1,572

Board Awards 17,749 24.23 430

The fair value of the TSR Awards is estimated on the date of the grant using a Monte Carlo valuation model.

The risk-free rate is based on the U.S.

Treasury yield curve in effect at the grant date for the expected performance period.

Expected volatility is based on historical volatility for the most recent 2.93 year weighted average period ending on the grant date for the Company and the selected TSR peer group, and is calculated on a daily basis.

The following table reflects the weighted-average key assumptions used in this valuation for awards granted during the year ended December 31, 2021 :

Risk-free interest rate 0.60 %

Expected stock price volatility 52.42 %

Expected service period 2.93 years

Expected dividend yield (assuming full reinvestment) — %

Fair value per share at date of grant $ 29.10

The total fair value of the TSR Awards granted during the year ended December 31, 2021 was $ 5.3 million.

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

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Stock-based compensation expense $ 10,832 $ 3,790 $ 4,104

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, there was $ 5.5 million of unamortized stock-based compensation expense related to these unvested awards and the weighted-average remaining vesting period of such awards was 2.3 years.

In connection with the separation of Ensign’s healthcare business and its real estate business into two separate and independently publicly traded companies (the “Spin-Off”) on June 1, 2014, employees of Ensign who had unvested shares of restricted stock were given one share of CareTrust REIT unvested restricted stock totaling 207,580 shares at the Spin-Off.

These restricted shares were subject to a time vesting provision only and the Company did not recognize any stock compensation expense associated with these awards.

During the year ended December 31, 2020, 1,760 shares were forfeited.

At December 31, 2020, there were no unvested restricted stock awards outstanding.

In January 2020 and March 2020, the Compensation Committee of the Company’s Board of Directors granted 27,000 and 107,790 shares of restricted stock, respectively, to officers and employees.

Each share had a fair market value on the date of grant of $ 22.18 and $ 19.06 per share, respectively, based on the closing market price of the Company’s common stock on that date, and the shares vest in four equal installments beginning on the first anniversary of the grant date.

Additionally, in March 2020, the Compensation Committee granted 107,790 performance stock awards to officers.

Each share had a fair market value on the date of grant of $ 19.06 per share, based on the closing market price of the Company’s common stock on that date.

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

The amount of performance awards that will ultimately vest is dependent on the Company’s Normalized Funds from Operations (“NFFO”) per share, as defined by the Compensation Committee, meeting or exceeding a fixed per share amount.

In April 2020, the Compensation Committee of the Company’s Board of Directors granted 27,611 shares of restricted stock to members of the Board of Directors.

Each share had a fair market value on the date of grant of $ 16.48 per share, based on the closing market price of the Company’s common stock on that date, and the shares vest in full on the earlier to occur of April 29, 2021 or the Company’s 2021 Annual Meeting of Stockholders.

In February 2019, the Compensation Committee of the Company’s Board of Directors granted 91,440 shares of restricted stock to officers and employees.

Each share had a fair market value on the date of grant of $ 22.00 per share, based on the closing market price of the Company’s common stock on that date, and the shares vest in four equal annual installments beginning on the first anniversary of the grant date.

Additionally, in February 2019, the Compensation Committee granted 71,440 performance stock awards to officers.

Each share had a fair market value on the date of grant of $ 22.00 per share, based on the closing market price of the Company’s common stock on that date.

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

In May 2019, the Compensation Committee of the Company's Board of Directors granted 17,749 shares of restricted stock to members of the Board of Directors.

Each share had a fair market value on the date of grant of $ 24.23 per share, based on the closing market price of the Company's common stock on that date, and the shares vested in full on April 30, 2020.

The Company recorded a cumulative out of period adjustment in the fourth quarter of 2021 related to stock compensatio n of $ 3.5 million, of which $ 2.6 million related to the quarters of 2021 and $ 0.9 million related to earlier periods.

The adjustment was not material to the previously issued financial sta tements.

As of December 31, 2021, there wa s $ 11.5 million o f unamortized stock-based compensation expense related to the unvested RSAs, PSAs, Board Awards, and TSR Awards.

CARETRUST REIT, INC.

12 unchanged sentences

Earnings per common share, diluted $ 0.74 $ 0.85 $ 0.49

The Company’s unvested restricted shares associated with its incentive award plan and unvested restricted shares issued to employees of Ensign at the Spin-Off have been excluded from the above calculation of earnings per share for the years ended December 31, 2020, 2019 and 2018, when their inclusion would have been anti-dilutive.

Antidilutive unvested restricted stock awards and performance awards excluded from the computation 591 296 292

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

Claims and lawsuits may include matters involving general or professional liability asserted against the Company’s tenants, which are the responsibility of the Company’s tenants and for which the Company is entitled to be indemnified by its tenants under the insurance and indemnification provisions in the applicable leases.

Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except that, for the facilities leased to subsidiaries of Ensign, under the Ensign Master Leases, and The Pennant Group, Inc., the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of its initial investment in such property, subject to a corresponding rent increase at the time of funding.

Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except that, for the facilities leased to subsidiaries of Ensign, under the Ensign Master Leases, and Pennant, the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of its initial investment in such property, subject to a corresponding rent increase at the time of funding.

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

1 unchanged sentence

CONCENTRATION OF RISK

Major operator concentration – As of December 31, 2020, Ensign leased 89 skilled nursing, assisted living and independent living facilities which had a total of 9,546 beds and units and are located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Texas, Utah and Washington.

The four states in which Ensign leases the highest concentration of properties are Texas, California, Arizona and Utah.

During the years ended December 31, 2020, 2019 and 2018, Ensign represented 32 %, 38 % and 42 %, respectively, of the Company’s rental income, exclusive of operating expense reimbursements.

On October 1, 2019, Ensign completed the Pennant Spin.

See Note 3, Real Estate Investments, Net, for additional information regarding the Company’s facilities leased to Ensign subsequent to the Pennant Spin.

Concentrations of credit risk arise when one or more tenants, operators, or obligors related to the Company’s investments are engaged in similar business activities or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Major operator concentration – The Company has operators from which it derived 10% or more of its rental revenue for the years ended December 31, 2021, 2020 and 2019.

The following table sets forth information regarding the Company’s major operators as of December 31, 2021, 2020 and 2019:

Number of Facilities Number of Beds/Units Percentage of Total Revenue (1)

SNF Campus ALF/ILF SNF Campus ALF/ILF

December 31, 2021

Ensign 83 8 4 8,756 997 395 32 %

PMG 13 2 — 1,742 402 — 15 %

December 31, 2020

Ensign 77 8 4 8,129 1,027 390 32 %

PMG 13 2 — 1,742 403 — 16 %

December 31, 2019

Ensign 75 6 4 7,945 573 390 38 %

PMG 13 2 — 1,742 403 — 15 %

(1) The Company’s rental income, exclusive of operating expense reimburseme nts.

(2) See Note 3, Real Estate Investments, Net , for further information regarding Ensign and PMG.

Ensign is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information.

1 unchanged sentence

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

As of December 31, 2020, PMG leased 15 skilled nursing facilities which had a total of 2,145 beds and units and are located in Louisiana and Texas.

During the years ended December 31, 2020, 2019 and 2018, PMG represented 16 %, 15 % and 8 %, respectively, of the Company’s rental income, exclusive of operating expense reimbursements.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents selected quarterly financial data for the Company.

This information has been prepared on a basis consistent with that of the Company’s audited consolidated financial statements.

The Company’s quarterly results of operations for the periods presented are not necessarily indicative of future results of operations.

This unaudited quarterly data should be read together with the accompanying consolidated financial statements and related notes thereto (in thousands, except per share amounts):

For the Year Ended December 31, 2020

Quarter Second

Quarter Third

Quarter Fourth

Operating data:

Total revenues $ 44,340 $ 44,168 $ 45,687 $ 44,137

Net income $ 19,325 $ 18,935 $ 21,552 $ 21,055

Earnings per common share, basic $ 0.20 $ 0.20 $ 0.23 $ 0.22

Earnings per common share, diluted $ 0.20 $ 0.20 $ 0.23 $ 0.22

Weighted-average number of common shares outstanding, basic 95,161 95,208 95,214 95,215

Weighted-average number of common shares outstanding, diluted 95,161 95,208 95,214 95,244

For the Year Ended December 31, 2019

Quarter Second

Quarter Third

Quarter Fourth

Operating data:

Total revenues $ 39,658 $ 46,201 $ 33,314 $ 44,228

Net income (loss) $ 16,053 $ 19,698 $ ( 10,054 ) $ 20,662

Earnings per common share, basic $ 0.18 $ 0.21 $ ( 0.11 ) $ 0.22

Earnings per common share, diluted $ 0.18 $ 0.21 $ ( 0.11 ) $ 0.22

Weighted-average number of common shares outstanding, basic 88,010 94,036 95,103 95,103

Weighted-average number of common shares outstanding, diluted 88,010 94,036 95,103 95,144

Major geographic concentration – The following table provides information regarding the Company’s concentrations with respect to certain states, from which the Company derived 10% or more of its rental revenue for the year ended December 31, 2021:

Number of Facilities Number of Beds/Units Percentage of Total Revenue (1)

State SNF Campus ALF/ILF SNF Campus ALF/ILF

CA 27 8 5 3,048 1,359 449 25 %

TX 37 3 3 4,694 536 242 20 %

(1) The Company’s rental income, exclusive of operating expense reimburseme nts.

SUBSEQUENT EVENTS

1 unchanged sentence

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

On February 1, 2021, the Company closed on the sale of one skilled nursing facility consisting of 90 units located in Washington with a carrying value of $ 7.2 million, for gross sales proceeds of $ 7.3 million.

The Company does not expect to record a material gain or loss in connection with the sale.

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

Recent Acquisition and Amended Lease Agreement

In February 2022, the Company acquired one skilled nursing facility for approximately $ 8.9 million, which includes estimated capitalized acquisition costs.

The facilities were leased to affiliates of Eduro Healthcare, LLC (“Eduro”).

In conjunction with the acquisition of the facility, the Company amended its existing triple-net master lease with Eduro to include the skilled nursing facility and extended the initial term of the lease.

The Eduro lease, as amended, has a remaining initial term of approximately 12 years, with two five-year renewal options and CPI-based rent escalators.

Annual cash rent under the amended lease increased by approximately $ 0.8 million.

The acquisition was funded using cash on hand.

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

39 unchanged sentences

Lafayette Health Holdings LLC Julia Temple Englewood, CO — 1,607 4,222 6,195 1,607 10,417 12,024 ( 5,530 ) 2012 2009

Hillendahl Health Holdings LLC Golden Acres Dallas, TX — 2,133 11,977 1,421 2,133 13,398 15,531 ( 6,037 ) 1984 2009

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

1 unchanged sentence

(dollars in thousands)

Hillendahl Health Holdings LLC Golden Acres Dallas, TX — 2,133 11,977 1,421 2,133 13,398 15,531 ( 5,530 ) 1984 2009

Price Health Holdings LLC Pinnacle Price, UT — 193 2,209 849 193 3,058 3,251 ( 1,209 ) 2012 2009

36 unchanged sentences

49th Street Health Holdings LLC Omaha Omaha, NE — 129 2,418 24 129 2,442 2,571 ( 711 ) 1960 2013

Willows Health Holdings LLC Cascade Vista Redmond, WA — 1,388 2,982 202 1,388 3,184 4,572 ( 1,021 ) 1970 2013

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

1 unchanged sentence

(dollars in thousands)

Willows Health Holdings LLC Cascade Vista Redmond, WA — 1,388 2,982 202 1,388 3,184 4,572 ( 909 ) 1970 2013

Tulalip Bay Health Holdings LLC Mountain View Marysville, WA — 1,722 2,642 ( 980 ) 742 2,642 3,384 ( 748 ) 1966 2013

163 unchanged sentences

Rowlett Health and Rehabilitation Center Rowlett, TX — 1,036 10,516 — 1,036 10,516 11,552 ( 326 ) 1990 2020

160 North Patterson Avenue, LLC Buena Vista Care Center Goleta, CA — 7,987 7,237 — 7,987 7,237 15,224 ( 160 ) 1967 2021

CTR Partnership, L.P.

El Centro Post-Acute Care El Centro, CA — 1,283 8,133 76 1,283 8,209 9,492 ( 143 ) 1962 2021

CTR Partnership, L.P.

Sedona Trace Health and Wellness Austin, TX — 3,282 12,763 — 3,282 12,763 16,045 ( 149 ) 2017 2021

CTR Partnership, L.P.

Cedar Pointe Health and Wellness Suites Cedar Park, TX — 3,325 11,738 — 3,325 11,738 15,063 ( 135 ) 2017 2021

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

— 161,032 1,003,798 94,187 159,993 1,099,024 1,259,016 ( 225,820 )

4 unchanged sentences

Wayne Health Holdings LLC Careage of Wayne Wayne, NE — 130 3,061 122 130 3,183 3,313 ( 1,100 ) 1978 2011

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

4th Street Holdings LLC West Bend Care Center West Bend, IA — 180 3,352 — 180 3,352 3,532 ( 1,095 ) 2006 2011

27 unchanged sentences

Crestwood Health and Rehabilitation Center Wills Point, TX — 143 6,075 — 143 6,075 6,218 ( 198 ) 1980 2020

Northshore Healthcare Holdings LLC San Juan Capistrano Senior Living San Juan Capistrano, CA — 11,176 25,298 — 11,176 25,298 36,474 ( 548 ) 1999 2021

Northshore Healthcare Holdings LLC Camarillo Senior Living Camarillo, CA — 7,516 30,552 — 7,516 30,552 38,068 ( 655 ) 2000 2021

Northshore Healthcare Holdings LLC Bayshire Carlsbad Carlsbad, CA — 7,398 19,714 — 7,398 19,714 27,112 ( 429 ) 1999 2021

Northshore Healthcare Holdings LLC Bayshire Rancho Mirage Rancho Mirage, CA — 4,024 16,790 — 4,024 16,790 20,814 ( 373 ) 2000 2021

— 59,450 291,345 10,329 59,319 301,805 361,124 ( 35,527 )

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

Assisted and Independent Living Properties:

10 unchanged sentences

Lockwood Health Holdings LLC Santa Maria Santa Maria, CA — 1,792 2,253 585 1,792 2,838 4,630 ( 1,410 ) 1967 2013

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2020

(dollars in thousands)

Saratoga Health Holdings LLC Lake Ridge Orem, UT — 444 2,265 176 444 2,441 2,885 ( 520 ) 1995 2013

18 unchanged sentences

CTR Partnership, L.P.

Lamplight Inn of Baltimore Baltimore, MD — — 3,697 267 — 3,919 3,919 ( 447 ) 2014 2016

CTR Partnership, L.P.

Fort Myers Assisted Living Fort Myers, FL — 1,489 3,531 786 1,489 4,317 5,806 ( 556 ) 1980 2016

21 unchanged sentences

Tangerine Cove of Brooksville Brooksville, FL — 995 927 493 995 1,420 2,415 ( 151 ) 1984 2017

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

CTR Partnership, L.P.

10 unchanged sentences

Inn at Barton Creek Bountiful, UT — 2,479 4,804 15 2,479 4,819 7,298 ( 249 ) 1999 2020

CTR Partnership, L.P.

Bridgeton Essentia Neighborhood Bridgeton, NJ — 245 5,795 — 245 5,795 6,040 ( 14 ) 2021 2021

CTR Partnership, L.P.

Rio Grande Essentia Neighborhood Rio Grande, NJ — 224 5,652 — 224 5,652 5,876 ( 13 ) 2021 2021

— 32,475 209,343 11,847 32,475 221,190 253,666 ( 43,438 )

36 unchanged sentences

New mortgage loans — 61,258 40,889

Interest income added to principal 155 — —

Deductions during period:

2 unchanged sentences

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 9A. Controls and Procedures