What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-08 · 189 added, 279 removed, 267 unchanged (64% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Real estate investments, net $ 1,402,889 $ 1,589,971

15 unchanged sentences

Preferred stock, $ 0.01 par value;

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

100,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021

Common stock, $ 0.01 par value;

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

500,000,000 shares authorized, 96,487,066 and 96,296,673 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,195,586 1,196,839

4 unchanged sentences

CARETRUST REIT, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

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

2021 2020 2021 2020

For the Three Months Ended March 31,

Rental income $ 46,007 $ 45,246

Independent living facilities — 634 — 1,874

Interest and other income 469 505

3 unchanged sentences

Property taxes 1,420 696

Independent living facilities — 568 — 1,660

Impairment of real estate investments 59,683 —

Provision for loan losses, net 3,844 —

Property operating expenses 447 —

General and administrative 5,215 5,142

Total expenses 89,926 25,073

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

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

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

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

Earnings per common share:

Other income (loss):

Gain (loss) on sale of real estate 186 ( 192 )

Net (loss) income $ ( 43,264 ) $ 20,486

(Loss) earnings per common share:

Basic $ ( 0.45 ) $ 0.21

12 unchanged sentences

Balance at January 1, 2022 96,296,673 $ 963 $ 1,196,839 $ ( 282,045 ) $ 915,757

Issuance of common stock, net 702,000 7 16,184 — 16,191

Vesting of restricted common stock, net of shares withheld for employee taxes 190,393 2 ( 2,774 ) — ( 2,772 )

2 unchanged sentences

— — — ( 26,659 ) ( 26,659 )

Net income — — — 20,486 20,486

Net loss — — — ( 43,264 ) ( 43,264 )

Balance at March 31, 2022 96,487,066 $ 965 $ 1,195,586 $ ( 351,968 ) $ 844,583

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

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

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

Common dividends ($ 0.265 per share)

— — — ( 25,714 ) ( 25,714 )

Net income — — — 21,317 21,317

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

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

Common dividends ($ 0.265 per share)

— — — ( 25,714 ) ( 25,714 )

Net income — — — 11,918 11,918

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

See accompanying notes to condensed consolidated financial statements.

14 unchanged sentences

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

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

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

Amortization of stock-based compensation — — 963 — 963

Common dividends ($ 0.25 per share)

— — — ( 23,931 ) ( 23,931 )

Net income — — — 18,935 18,935

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

Amortization of stock-based compensation — — 972 — 972

Common dividends ($ 0.25 per share)

— — — ( 23,934 ) ( 23,934 )

Net income — — — 21,552 21,552

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 53,721 $ 59,812

Adjustments to reconcile net income to net cash provided by operating activities:

Net (loss) income $ ( 43,264 ) $ 20,486

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization (including below-market ground leases) 13,594 13,486

Amortization of deferred financing costs 520 487

Loss on extinguishment of debt 10,827 —

Amortization of stock-based compensation 1,521 1,585

Straight-line rental income ( 6 ) ( 12 )

Loss on sale of real estate 192 56

Interest income distribution from other real estate investment — 1,346

Adjustment for collectibility of rental income 977 —

(Gain) loss on sale of real estate ( 186 ) 192

Impairment of real estate investments 59,683 —

Provision for loan losses, net 3,844 —

Change in operating assets and liabilities:

6 unchanged sentences

Purchases of equipment, furniture and fixtures and improvements to real estate ( 1,918 ) ( 1,319 )

Investment in real estate mortgage and other loans receivable ( 700 ) ( 13,958 )

Investment in other loans receivable ( 2,086 ) ( 700 )

Principal payments received on real estate mortgage and other loans receivable 888 56

Repayment of other real estate investment — 2,327

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

Net proceeds from sales of real estate 959 6,814

Net cash (used in) provided by investing activities ( 181,963 ) 22,062

Net cash used in investing activities ( 24,072 ) ( 133,300 )

Cash flows from financing activities:

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

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

Proceeds from the issuance of common stock, net — 16,191

Borrowings under unsecured revolving credit facility 25,000 120,000

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

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

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

Net-settle adjustment on restricted stock ( 2,772 ) ( 1,330 )

Dividends paid on common stock ( 26,044 ) ( 23,960 )

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

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

Net cash (used in) provided by financing activities ( 3,816 ) 110,901

Net increase in cash and cash equivalents 6,691 11,550

Cash and cash equivalents as of the beginning of period 19,895 18,919

4 unchanged sentences

Increase in dividends payable $ 615 $ 1,673

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

Transfer of pre-acquisition costs to acquired assets $ 7 $ 358

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Description of Business— CareTrust REIT, Inc.’s (“CareTrust REIT” or the “Company”) primary business consists of acquiring, financing, developing and owning real property to be leased to third-party tenants in the healthcare sector.

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

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

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

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

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

As of March 31, 2022, the Company owned and leased to independent ope rators, 228 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 23,834 operational beds and units located in 29 states with the highest concentration of properties by rental income located i n California, Texas, Louisiana, Idaho and Arizona.

A s of March 31, 2022, the Company also had other real estate investments consisting of one mezzanine loan receivable with a carrying value of $ 15.2 million .

COVID-19— The COVID-19 pandemic has had and may continue to have an adverse impact on the economy generally and the Company’s business, results of operations and financial condition.

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.

7 unchanged sentences

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

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

Recent Accounting Pronouncements —In March 2020, the Financial Accounting Standards Board 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 will be discontinued at the end of 2021.

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.

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

CARETRUST REIT, INC.

1 unchanged sentence

REAL ESTATE INVESTMENTS, NET

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

September 30, 2021 December 31, 2020

The following table summarizes the Company’s real estate properties held for investment at March 31, 2022 and December 31, 2021 (dollars in thousands):

March 31, 2022 December 31, 2021

Land $ 236,986 $ 251,787

5 unchanged sentences

Real estate investments, net $ 1,402,889 $ 1,589,971

As of September 30, 2021 , all 225 of the Company’s facilities wer e leased to various operators under triple-net leases.

As of March 31, 2022 , 226 of the Company’s 228 facilities wer e leased to various operators under triple-net leases.

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

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

2021 (three months) $ 47,765

Two of the Company’s 228 facilities are non-operational and are leased under a short term lease with an expected term of less than one year as of March 31, 2022.

As of March 31, 2022, 27 facilities were held for sale.

As of March 31, 2022, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, was (dollars in thousands):

2022 (nine months) $ 146,848

Thereafter 998,873

5 unchanged sentences

Current Cash Rent (2)

ALF 7 October 2034 1/1/2022 A $ 3,282

SNF 11 November 2030 1/1/2022 C 4,944

SNF 1 March 2029 4/1/2022 B / C (3)

SNF / Campus 2 October 2032 1/1/2023 B 998

SNF 4 November 2034 12/1/2024 B 3,789

ALF 2 October 2034 1/1/2026 A 1,565

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

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

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

SNF / Campus 2 October 2032 1/1/2023 (3)

SNF 4 November 2034 12/1/2024 (4)

ALF 2 October 2034 1/1/2026 (3)

(1) Option type includes:

2 unchanged sentences

C - Fixed capitalization rate on lease revenue.

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

(2) Based on annualized cash revenue for contracts in place as of March 31, 2022.

(3) Option window is open for six months.

(4) Option window is open until the expiration of the lease term.

(5) Purchase option reflects two option types.

3 unchanged sentences

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Rental Income 2022 2021

2 unchanged sentences

Straight-line rent 6 12

Recovery of previously reversed rent (2)

— 1,047 — 1,047

Adjustment for collectibility (2)

Lease termination revenue (3)

— 1,106 63 1,106

Total $ 46,007 $ 45,246

1 unchanged sentence

For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received.

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

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

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

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

( 2) During the three months ended March 31, 2022, and in accordance with Accounting Standards Codification 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 four existing and former operators.

As such, the Company reversed $ 0.7 million of operating expense reimbursements, $ 0.2 million of contractual rent and $ 0.1 million of straight-line rent during the three months ended March 31, 2022.

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

(3) During the three months ended March 31, 2021, in connection with the agreement to terminate its lease agreements with Metron Integrated Health Systems (“Metron”) and to sell the facilities to a third party, the Company received approximately $ 0.1 million in lease termination revenue from Metron affiliates.

Recent Real Estate Acquisitions

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

The following table summarizes the Company’s acquisitions for the three months ended March 31, 2022 (dollars in thousands):

Type of Property Purchase Price (1)

5 unchanged sentences

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

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

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Lease Amendments

Amended Noble Master Leases.

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

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

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

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

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

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

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

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

Amended Ensign Master Lease .

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

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

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

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

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

Five Oaks Lease Termination and Amended Ensign Master Lease.

On June 1, 2021, operating affiliates of 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” for additional information regarding the Company’s leases with Noble.

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

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

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

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

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

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

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

Assets Held for Sale and Asset Sales

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

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

Pennant Partial Lease Termination and Amended Ensign Master Lease.

On March 1, 2022, operations at one ALF in Arizona operated by affiliates of The Pennant Group, Inc.

(“Pennant”) were transferred to affiliates of The Ensign Group, Inc.

In connection with the transfer, the Company amended the Pennant master lease to reflect the removal of the ALF and amended an existing triple-net master lease with Ensign to include the one ALF.

The applicable Ensign master lease has a remaining term of approximately 11 years, with two five-year renewal options and CPI-based rent escalators.

Annual cash rent under the applicable Ensign master lease, as amended, increased by approximately $ 0.3 million and annual cash rent under the Pennant master lease, as amended, decreased by the same amount.

Amended Eduro Master Lease.

On February 1, 2022, the Company acquired one SNF.

In conjunction with the acquisition, the Company amended its existing triple-net master lease with affiliates of Eduro Healthcare, LLC (“Eduro”) to include the one SNF and extended the initial lease term.

The Eduro master lease, as amended, has a remaining term of approximately 12 years, wit h two five-year re newal options and CPI-based rent escalators.

Annual cash rent under the Eduro master lease, as amended, increased by approximately $ 0.8 million.

Amended WLC Master Lease.

On March 1, 2022, the Company acquired one multi-service campus.

In conjunction with the acquisition, the Company amended its existing triple-net master lease with affiliates of WLC Management Firm, LLC (“WLC”) to include the one multi-service campus.

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

Annual cash rent under the WLC master lease, as amended, increased by approximately $ 1.2 million.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

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

During the three months ended March 31, 2021, the Company recorded a loss of $ 0.2 million in connection with the sale.

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

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

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

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

In April 2020, the mortgage loan was settled with $ 18.9 million in cash and a new mortgage loan for $ 13.9 million.

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

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

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

During the three and nine months ended September 30, 2021, the Company recognized $ 0.5 million and $ 1.4 million, respectively, of interest income related to its mezzanine loan.

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

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 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 Family of Companies (“CommuniCare”) a $ 26.5 million loan secured by mortgages on the three skilled nursing facilities sold to CommuniCare , which bore a fixed interest rate of 10 %.

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

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

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

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 issued a new mortgage loan for $ 13.9 million.

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

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

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

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

IMPAIRMENT OF REAL ESTATE INVESTMENTS, ASSETS HELD FOR SALE, NET AND ASSET SALES

In connection with the Company’s ongoing review and monitoring of its investment portfolio and the performance of its tenants, the Company determined to pursue the sale of 27 properties and repurposing three properties representing an aggregate of approximately 10 % of contractual cash rent as of March 31, 2022.

As of March 31, 2022, the Company determined that these 27 properties met the criteria to be classified as assets held for sale and, in connection with this determination, the Company recognized an aggregate impairment charge of $ 59.7 million related to 20 of the 27 held for sale properties, which is reported in impairment of real estate investments in the condensed consolidated statements of operations for the three months ended March 31, 2022.

The impairment charge was recognized to write down the properties’ aggregate carrying value to their aggregate fair value, less estimated costs to sell.

As of March 31, 2022, the net book value of these 27 properties was $ 141.7 million, which is comprised of the real estate assets.

The fair value of the assets held for sale was based on estimated sales prices, which are considered to be Level 3 measurements within the fair value hierarchy.

Estimated sales prices were determined using a market approach (comparable sales model), which relies on certain assumptions by management, including:

(i) comparable market transactions, (ii) estimated prices per unit, and (iii) negotiations with prospective buyers.

There are inherent uncertainties in making these assumptions.

For the Company’s impairment calculations, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit rangin g from $ 40,000 to $ 175,000 , with a weighted average price per unit of $ 91,000 .

During the first quarter of 2022, the Company determined that one ALF that was classified as held for sale at December 31, 2021 no longer met the held for sale criteria.

The Company reclassified this ALF’s carrying value of $ 4.8 million out of assets held for sale and recorded catch-up depreciation of approximately $ 0.1 million during the three months ended March 31, 2022.

On February 22, 2022, the Company closed on the sale of one SNF, operated by affiliates of Cascadia Healthcare, LLC (“Cascadia”), consisting of 83 beds located in Washington with a carrying value of $ 0.8 million, for net sales proceeds of $ 1.0 million.

During the three months ended March 31, 2022, the Company recorded a gain of $ 0.2 million in connection with the sale.

There was no rent reduction under the Cascadia master lease in connection with the sale.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

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

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

Dur ing the three and nine months ended September 30, 2020, the Company recognized $ 17,000 and $ 0.2 million of interest income, respectively, related to its other loans receivable.

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

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, the Company 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 co sts.

The Company paid $ 15.0 million after receiving back its initial investment of $ 2.3 million and cumulative contractual preferred return through January 17, 2020, the acquisition date, of $ 1.4 million, of which less than $ 0.1 million was recognized as interest income during the nine months ended September 30, 2020.

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

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

OTHER REAL ESTATE INVESTMENTS

As of March 31, 2022 and December 31, 2021, the Company’s loans receivable and other investments consisted of the following (dollars in thousands):

As of March 31, 2022

Investment Financial Statement Line Item Principal Balance as of March 31, 2022

Book Value as of March 31, 2022

Book Value as of December 31, 2021

Weighted Average Contractual Interest Rate Maturity Date

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

Other loans receivable Prepaid expenses and other assets, net 5,516 5,523 3,161 8.0 % 9/1/2023 - 12/31/2023

Expected credit loss Prepaid expenses and other assets, net ( 4,594 ) ( 4,594 ) —

Total $ 15,922 $ 16,084 $ 18,316

Expected credit losses and recoveries are recorded in provision for loan losses, net in the condensed consolidated statements of operations.

During the three months ended March 31, 2022, the Company recorded a $ 4.6 million expected credit loss related to two other loans receivable that were placed on non-accrual status, including an unfunded loan commitment of $ 0.4 million, net of a loan loss recovery of $ 0.8 million related to a loan previously written-off.

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

The following table summarizes the interest and other income recognized from the Company’s loans receivable and other investments during the quarter ended March 31, 2022 and 2021 (dollars in thousands):

For the Three Months Ended March 31,

Investment 2022 2021

Mezzanine loan receivable $ 450 $ 450

Total $ 469 $ 505

FAIR VALUE MEASUREMENTS

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In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.

The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

liability may be classified differently from quarter to quarter.

Changes in the type of inputs may result in a reclassification for certain assets.

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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 September 30, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

Level 1 Level 2 Level 3 Balance as of September 30, 2021

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

Level 1 Level 2 Level 3 Balance as of March 31, 2022

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

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Mezzanine loan receivable:

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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.

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

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

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

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

As of March 31, 2022 and December 31, 2021, the Company did no t have any loans measured at fair value that were 90 days or more past due.

For the three months ended March 31, 2022, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Disclosed at Fair Value

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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 September 30, 2021 and December 31, 2020 using Level 2 inputs for the Notes and the 2025 Notes (each as defined in Note 6, Debt, below), is as follows (dollars in thousands):

September 30, 2021 December 31, 2020

A summary of the face value, carrying amount and fair value of the Notes (as defined in Note 7, Debt, below) as of March 31, 2022 and December 31, 2021 using Level 2 inputs is as follows (dollars in thousands):

March 31, 2022 December 31, 2021

Value Carrying

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Senior unsecured notes payable 2 $ 400,000 $ 394,484 $ 377,000 $ 400,000 $ 394,262 $ 410,500

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

The carrying value for these instruments approximate their fair values due to the short-term nature of these instruments.

Senior unsecured notes payable:

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.

The fair value of the Notes was determined using third-party quotes derived from orderly trades.

Unsecured revolving credit facility and senior unsecured term loan:

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

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

September 30, 2021 December 31, 2020

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

The following table summarizes the balance of the Company’s indebtedness as of March 31, 2022 and December 31, 2021 (dollars in thousands):

March 31, 2022 December 31, 2021

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

Senior unsecured notes payable $ 400,000 $ ( 5,516 ) $ 394,484 $ 400,000 $ ( 5,738 ) $ 394,262

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

Senior unsecured term loan 200,000 ( 811 ) 199,189 200,000 ( 864 ) 199,136

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2028 Senior Notes.

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

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 “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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

accrued and unpaid interest thereon up to, but not including, the Redemption Date.

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

2028 Senior Notes.

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

(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.

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

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

As of March 31, 2022, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes.

Unsecured Revolving Credit Facility and Term Loan

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 provides for:

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 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 Company’s prior term loan and revolving facility under its 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.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

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

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

As of March 31, 2022, the Operating Partnership had $ 200.0 million of borrowings outstanding under the Term Loan and $ 105.0 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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The Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Amended Credit Facility or other material indebtedness, the failure to satisfy certain covenants (including the financial maintenance covenants), the occurrence of change of control and specified events of bankruptcy and insolvency.

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

As of March 31, 2022, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

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

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

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

For the Nine Months Ended

September 30, 2021

There was no ATM Program activity for the three months ended March 31, 2022.

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

For the Three Months Ended

March 31, 2021

Number of shares 702

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Gross proceeds (1)

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

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

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

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

As of March 31, 2022, 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 for up to $ 150.0 million of outstanding shares of the Company’s common stock (the “Repurchase Program”).

Repurchases under the Repurchase Program, which expires on March 31, 2023, may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by management.

Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act.

Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended.

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

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

Through March 31, 2022, t he Company has no t repurchased any shares of common stock under the Repurchase Program.

As of March 31, 2022 , $ 150.0 million remained available under the Repurchase Program.

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

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

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 the first quarter of 2022 (dollars in thousands, except per share amounts):

For the Three Months Ended

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

March 31, 2022

Dividends declared per share $ 0.275

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

Dividends payment date April 15, 2022

Dividends payable as of record date $ 26,691

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

Dividends record date March 31, 2022

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.

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

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

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

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

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

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

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 (“TSR 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”) granted in fiscal 2022 vest in equal annual installments beginning on the first anniversary of the grant date over a three year period.

The following table summarizes the RSAs and performance award activity for the three months ended March 31, 2022:

Shares Weighted Average Share Price

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

RSAs 9,684 17.56

Vested ( 329,080 ) 20.10

Forfeited ( 1,900 ) 21.50

Unvested balance at March 31, 2022 570,037 $ 21.32

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

Each share had a fair market value on the date of grant of $ 22.48 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 three-year period.

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

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

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

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

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

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

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

The fair value of the TSR-based performance stock 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 2.84 year period ending on the grant date for the Company and the selected TSR peer group, and is calculated on a daily basis.

The following are the key assumptions used in this valuation:

Risk-free interest rate 0.27 %

Expected stock price volatility 52.93 %

Expected service period 2.84 years

Expected dividend yield (assuming full reinvestment) — %

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

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

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

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

2021 2020 2021 2020

As of March 31, 2022, the weighted-average remaining vesting period of such awards was 1.6 years.

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

For the Three Months Ended March 31,

Stock-based compensation expense $ 1,521 $ 1,585

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

EARNINGS PER COMMON SHARE

The following table presents the calculation of basic and diluted earnings per common share (“EPS”) for the Company’s common stock for the three and nine months ended September 30, 2021 and 2020, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS (amounts in thousands, except per share amounts):

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

2021 2020 2021 2020

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

As of March 31, 2022, there was $ 10.0 million of unamortized stock-based compensation expense related to the unvested RSAs, performance stock awards and TSR Awards.

(LOSS) EARNINGS PER COMMON SHARE

The following table presents the calculation of basic and diluted (loss) earnings per common share (“EPS”) for the Company’s common stock for the three months ended March 31, 2022 and 2021, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS (amounts in thousands, except per share amounts):

For the Three Months Ended March 31,

Net (loss) income $ ( 43,264 ) $ 20,486

Net income allocated to participating securities ( 117 ) ( 119 )

1 unchanged sentence

Weighted-average basic common shares outstanding 96,410 95,378

Dilutive market condition stock awards — — 15 —

Dilutive performance stock awards — 7

Weighted-average diluted common shares outstanding 96,410 95,385

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

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

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

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

(Loss) earnings per common share, basic $ ( 0.45 ) $ 0.21

(Loss) earnings per common share, diluted $ ( 0.45 ) $ 0.21

Antidilutive unvested RSAs, performance awards and TSR Awards excluded from the computation 534 446

COMMITMENTS AND CONTINGENCIES

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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.

(“Pennant”), the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of the Company’s 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, subject to approval by the Company, the tenants may request capital expenditure funding that would generally be subject to a corresponding rent increase at the time of funding and which are subject to tenant compliance with the conditions to the Company’s approval and funding of their requests.

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

Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except that, for the facilities leased to subsidiaries of Ensign and Pennant, the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of the Company’s 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.

As of March 31, 2022, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totaling $ 5.5 million, of which $ 4.4 million is su bject to rent increase at the time of funding.

CARETRUST REIT, INC.

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CONCENTRATION OF RISK

Major operator concentrations – As of September 30, 2021, Ensign leased 95 skilled nursing, multi-service campuses, assisted living and independent living facilities which had a total of 10,148 beds and units and are located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Texas, Utah and Washington.

The four states in which Ensign leases the highest concentration of properties by rental revenues as of September 30, 2021 are Texas, California, Arizona and Utah.

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

During the three and nine months ended September 30, 2020, Ensign represente d 30 % and 31 %, respectively, of the Company’s rental income, exclusive of operating expense reimbursements.

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.

Major operator concentration - The Company has operators from which it derived 10% or more of its rental revenue for the three months ended March 31, 2022 and 2021.

The following table sets forth information regarding the Company’s major operators as of March 31, 2022 and 2021:

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

SNF Campus ALF/ILF SNF Campus ALF/ILF

March 31, 2022

Ensign 83 8 5 8,756 997 495 34 %

Priority Management Group 13 2 — 1,742 402 — 16 %

March 31, 2021

Ensign 77 8 4 8,129 1,027 395 32 %

Priority Management Group 13 2 — 1,742 402 — 16 %

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

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

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

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

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

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

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 three months ended March 31, 2022:

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 26 %

TX 38 3 3 4,829 536 242 22 %

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

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

What changed 10-Q

Item 1. Financial Statements