CareTrust REIT, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Statements Certain statements in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding: future financing plans, business strategies, growth prospects and operating and financial performance; expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations. Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to: (i) the COVID-19 pandemic, including the risk of additional surges of COVID-19 infections due to the rate of public acceptance and efficacy of COVID-19 vaccines or to new and more contagious and/or vaccine resistant variants, and the measures taken to prevent the spread of COVID-19 and the related impact on our business or the businesses of our tenants; (ii) the ability and willingness of our tenants to meet and/or perform their obligations under the triple-net leases we have entered into with them, including, without limitation, their respective obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; (iii) the risk that we may have to incur additional impairment charges related to our assets held for sale if we are unable to sell such assets at the prices we expect; (iv) the ability of our tenants to comply with applicable laws, rules and regulations in the operation of the properties we lease to them; (v) the ability and willingness of our tenants to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, as well as any obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant; (vi) the availability of and the ability to identify (a) tenants who meet our credit and operating standards, and (b) suitable acquisition opportunities, and the ability to acquire and lease the respective properties to such tenants on favorable terms; (vii) the ability to generate sufficient cash flows to service our outstanding indebtedness; (viii) access to debt and equity capital markets; (ix) fluctuating interest rates; (x) the ability to retain our key management personnel; (xi) the ability to maintain our status as a real estate investment trust (“REIT”); (xii) changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; (xiii) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and (xiv) any additional factors included under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, including in the section entitled “Risk Factors” in Item 1A of Part I of such report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the “SEC”). Forward-looking statements speak only as of the date of this report. Except in the normal course of our public disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based. Overview CareTrust REIT is a self-administered, publicly-traded REIT engaged in the ownership, acquisition, financing, development and leasing of skilled nursing, senio rs housing and other healthcare-related properties. As of March 31, 2022, we owned and leased to independent operators, 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 wit h the highest concentration of properties by rental revenues located in California, Texas, Louisiana, Idaho and Arizona. As of March 31, 2022, we also had other real estate investments consisting of one mezzanine loan receivable with a carrying value of $15.2 million. We generate revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the tenant is solely responsible for the costs related to the property (including property taxes, insurance, maintenance and repair costs and capital expenditures, subject to certain exceptions in the case of properties leased to Ensign and Pennant). From time to time, we also extend secured mortgage loans to healthcare operators, secured by healthcare-related properties, and secured mezzanine loans to healthcare operators, secured by membership interests in healthcare-related properties. We conduct and manage our business as one operating segment for internal reporting and internal decision-making 17 Table of Contents purposes. We expect to grow our portfolio by pursuing opportunities to acquire additional properties that will be leased to a diverse group of local, regional and national healthcare providers, which may include new or existing skilled nursing operators, as well as seniors housing operators, behavioral health facilities and related businesses. We also anticipate diversifying our portfolio over time, including by acquiring properties in different geographic markets, and in different asset classes. In addition, we actively monitor the clinical, regulatory and financial operating results of our tenants, and work to identify opportunities within their operations and markets that could improve their operating results at our facilities. We communicate such observations to our tenants; however, we have no contractual obligation to do so. Moreover, our tenants have sole discretion with respect to the day-to-day operation of the facilities they lease from us, and how and whether to implement any observation we may share with them. We also actively monitor the overall occupancy, skilled mix, and other operating metrics of our tenants on at least a monthly basis including, beginning in the quarter ended June 30, 2020, any stimulus funds received by each tenant. We have replaced tenants in the past, and may elect to replace tenants in the future, if they fail to meet the terms and conditions of their leases with us. The replacement tenants may include tenants with whom we have had no prior landlord-tenant relationship as well as current tenants with whom we are comfortable expanding our relationships. We have also provided select tenants with strategic capital for facility upkeep and modernization, as well as short-term working capital loans when they are awaiting licensure and certification or conducting turnaround work in one or more of our properties, and we may continue to do so in the future. In addition, we periodically reassess the investments we have made and the tenant relationships we have entered into, and have selectively disposed of facilities or investments, or terminated such relationships, and we expect to continue making such reassessments and, where appropriate, taking such actions. Recent Developments COVID-19 and Market Conditions Update Tenants of our properties operating pursuant to triple-net master leases have been adversely impacted, and we expect that they will continue to be adversely impacted, by the COVID-19 pandemic. Our tenants are experiencing increased operating costs as a result of actions they are taking to prevent or mitigate the outbreak or spread of COVID-19 at their facilities, including in connection with their implementation of safety protocols and procedures and other regulatory requirements. Our tenants are also experiencing labor shortages resulting in limited admissions, reduced occupancy and higher agency expense. At a portfolio wide level, occupancy levels at our seniors housing facilities remained relatively stable from the onset of the COVID-19 pandemic until the beginning of the fourth quarter of 2020, at which time we began to see a decline. This decline in occupancy continued through the first quarter of 2021 then remained flat through the fourth quarter of 2021. Seniors housing occupancy modestly increased during the first quarter of 2022 compared to the fourth quarter of 2021. Occupancy levels at our SNFs, which declined at the onset of the COVID-19 pandemic and continued to decline through January 2021, had been on a slow incline from February through December 2021. SNF occupancy held stable during the first quarter of 2022 compared to the fourth quarter of 2021. Beginning in early 2020, the federal government temporarily suspended the three-day hospital stay requirement for a patient’s Medicare benefits to refresh. Providers can now “skill in place,” eliminating the risk of transferring the patient to the hospital. Because of the temporary waiver of the three-day hospital stay requirement, overall skilled mix remained slightly elevated in the three months ended March 31, 2022 compared to the pre-pandemic skilled mix during the three months ended March 31, 2020. An increase in skilled mix can, but may not necessarily, offset some or all of the adverse financial impact to the operator of the SNF from a decline in occupancy. However, the skilled mix in our SNFs during the three months ended March 31, 2022 was lower than the peak level seen in December 2020, and we anticipate that the skilled mix in our SNFs will continue to decline as cases of COVID-19 decline or if the suspension of the three-day hospital stay requirement is lifted. The U.S. Department of Health and Human Services (“HHS”) recently renewed the COVID-19 Public Health Emergency, which is currently set to be in force through July 2022, and that allows HHS to continue providing temporary regulatory waivers, including the waiver of the three-day hospital stay requirement for a patient’s Medicare benefits to refresh. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) included a temporary suspension of a 2% Medicare sequestration cut through the end of March 2022. Beginning April 1, 2022, a 1% sequestration cut went into effect through June 30, 2022 with the full 2% cut resuming thereafter. A temporary increase in Federal Medical Assistance Percentages, which was approved retroactive to January 1, 2020, is effective through June 30, 2022. The current limited availability or unavailability of grants and other funds being made available to our seniors housing facilities for healthcare related expenses or lost revenues attributable to COVID-19, as well as the tapering of grants and other funds for our SNFs, has also impacted some of our tenants’ ability to continue to meet some of their financial obligations, as they continue to experience lower occupancy levels and higher operating costs. 18 Table of Contents As a result of the foregoing impacts of the COVID-19 pandemic, our tenants’ ability to continue to meet some of their financial obligations to us has been negatively impacted. See “Impairment of Real Estate Assets, Assets Held for Sale and Asset Sales” below. During the three months ended March 31, 2022, we collected 94.9% of contractual rents due from our operators including cash deposits used to offset rent shortfalls, and 91.8% excluding cash deposits. During the three months ended March 31, 2022, we determined that it was not probable that we would collect substantially all of the contractual obligations from four existing and former operators and, accordingly, we reversed $0.7 million of operating expense reimbursements, $0.2 million of contractual rent and $0.1 million of straight-line rent. In addition, we determined that the collectibility of contractual rents from two operators is not reasonably assured and we moved these two operators to a cash basis method of accounting during the three months ended March 31, 2022. Approximately 93.2% of our contractual rent obligations due for April 2022 have been collected and no cash deposits on hand were applied. For more information regarding the potential impact of COVID-19 on our business, see “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021. On April 11, 2022, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule that would decrease the aggregate net payment by 0.7% for fiscal year 2023. CMS estimates that the aggregate impact of the payment policies in the proposed rule would result in a decrease of approximately $320 million in Medicare Part A payments to SNFs in fiscal year 2023 compared to fiscal year 2022. Impairment of Real Estate Assets, Assets Held for Sale and Asset Sales In connection with our ongoing review and monitoring of our investment portfolio and the performance of our tenants, we 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, we determined that these 27 properties met the criteria to be classified as assets held for sale and, in connection with this determination, we 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. During the first quarter of 2022, we determined that one ALF that was classified as held for sale at December 31, 2021 no longer met the held for sale criteria. We 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. During the first quarter of 2022, we closed on the sale of one SNF 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, we recorded a gain of $0.2 million in connection with the sale. Recent Investments From January 1, 2022 through May 5, 2022, we acquired 1 SNF and 1 multi-service campus for approximately $21.9 million, which includes capitalized acquisition costs. These acquisitions are expected to generate initial annual cash revenues of approximately $2.1 million and an initial blended yield of approximately 9.4%. See Note 3, Real Estate Investments, Net in the Notes to condensed consolidated financial statements for additional information. 19 Table of Contents At-The-Market Offering of Common Stock On March 10, 2020, we 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 our common stock through an “at-the-market” equity offering program (the “ATM Program”). 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 Average sales price per share $ 23.62 Gross proceeds (1) $ 16,579 (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, we had $476.5 million available for future issuances under the ATM Program. Results of Operations In the first quarter of 2022, we elected to discuss any material changes in our results of operations by comparing our most recently completed quarter to the immediately preceding sequential quarter, as permitted under the recently amended Item 303 of Regulation S-K. Because our business is not seasonal, we believe this comparison provides a more relevant and informative representation of the changes to our results of operations over time. For purposes of this Quarterly Report on Form 10-Q, we also continue to discuss any material changes in our results of operations for the most recently completed quarter compared to the corresponding prior year period pursuant to Item 303 of Regulation S-K. Operating Results Three Months Ended March 31, 2022 Compared to Three Months Ended December 31, 2021: Three Months Ended Increase (Decrease) Percentage Difference March 31, 2022 December 31, 2021 (dollars in thousands) Revenues: Rental income $ 46,007 $ 49,118 $ (3,111) (6) % Interest and other income 469 619 (150) (24) % Expenses: Depreciation and amortization 13,575 14,056 (481) (3) % Interest expense 5,742 5,689 53 1 % Property taxes 1,420 1,108 312 28 % Impairment of real estate investments 59,683 — 59,683 * Provision for loan losses, net 3,844 — 3,844 * Property operating expenses 447 — 447 * General and administrative 5,215 10,738 (5,523) (51) % Other income: Gain on sale of real estate 186 115 71 62 % • Not meaningful Rental income . The $3.1 million, or 6%, decrease in rental income is primarily due to a $2.6 million decrease in rental income and tenant reimbursements related to moving certain tenants to a cash basis method of accounting, a $1.0 million write-off of uncollectible rent, and a $0.1 million decrease in tenant reimbursements, partially offset by an increase of $0.3 million due to contractual increases in rental rates for our existing tenants and $0.2 million from real estate investments made after October 1, 2021. Interest and other income. The $0.2 million, or 24%, decrease in interest and other income was primarily due to a decrease of $0.1 million related to a forfeited sales deposit recognized in the three months ended December 31, 2021 and a 20 Table of Contents decrease of $0.1 million due to placing one other loan receivable on non-accrual status during the three months ended March 31, 2022. Depreciation and amortization. The $0.5 million, or 3%, decrease in depreciation and amortization was primarily due to a decrease of $0.5 million due to assets reclassified as held for sale and a decrease of $0.2 million due to assets becoming fully depreciated after October 1, 2021, partially offset by an increase of $0.2 million related to new real estate investments and capital improvements made after October 1, 2021. Interest expense. The $0.1 million, or 1%, increase in interest expense was primarily due to a higher weighted average debt balance and a higher interest rate under the Revolving Facility during the three months ended March 31, 2022. Property taxes. The $0.3 million, or 28%, increase in property taxes was primarily due to changes in estimates of property taxes expected to be paid directly by us as a result of certain assets being designated as held for sale during the three months ended March 31, 2022. Impairment of real estate investments. During the three months ended March 31, 2022, we recognized an aggregate impairment charge of $59.7 million related to 20 properties that all met the held for sale criteria during the quarter. See above under “Recent Developments” for additional information. No impairment charges were recognized during the three months ended December 31, 2021. Provision for loan losses, net. During the three months ended March 31, 2022, we recorded a $4.6 million expected credit loss related to two other loans receivable that were placed on a non-accrual status, partially offset by a $0.8 million recovery related to one other loan receivable that was previously written off. Property operating expenses. During the three months ended March 31, 2022, we recognized $0.5 million of property operating expens es related to assets we plan to sell or repurpose. No similar expe nses were incurred during the three months ended December 31, 2021. General and administrative expense. The $5.5 million, or 51%, decrease in general and administrative expense was primarily related to a decrease in stock compensation expense of $4.1 million and a decrease in non-routine transaction costs of $1.4 million during the three months ended March 31, 2022 compared to the three months ended December 31, 2021. Gain on sale of real estate. During the three months ended March 31, 2022, we recorded a $0.2 million gain on sale of real estate related to the sale of one SNF. Durin g the three months ended December 31, 2021, we recorded a $0.1 million gain on sale of real estate related to the sale of one land parcel. 21 Table of Contents Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021: Three Months Ended March 31, Increase (Decrease) Percentage Difference 2022 2021 (dollars in thousands) Revenues: Rental income $ 46,007 $ 45,246 $ 761 2 % Interest and other income 469 505 (36) (7) % Expenses: Depreciation and amortization 13,575 13,473 102 1 % Interest expense 5,742 5,762 (20) — % Property taxes 1,420 696 724 104 % Impairment of real estate investments 59,683 — 59,683 * Provision for loan losses, net 3,844 — 3,844 * Property operating expenses 447 — 447 * General and administrative 5,215 5,142 73 1 % Other income (loss): Gain (loss) on sale of real estate 186 (192) 378 (197) % • Not meaningful Rental income . The $0.8 million, or 2%, increase in rental income is primarily due to a $2.9 million increase in rental income from real estate investments made after January 1, 2021, $0.8 million due to contractual increases in rental rates for our existing tenants and a $0.3 million increase in tenant reimbursements, partially offset by a $2.2 million decrease in rental income and tenant reimbursements related to moving certain tenants to a cash basis method of accounting and a $1.0 million write-off of uncollectible rent. Interest and other income. The $36,000, or 7%, decrease in interest and other income is primarily due to placing one other loan receivable on non-accrual status during the three months ended March 31, 2022. Depreciation and amortization. The $0.1 million, or 1%, increase in depreciation and amortization was primarily due to an increase in depreciation and amortization of $1.2 million related to new real estate investments and capital improvements made after January 1, 2021, partially offset by a decrease in depreciation of $0.6 million due to assets becoming fully depreciated after January 1, 2021 and a $0.5 million decrease from assets reclassified as held for sale Interest expense. Interest expense decreased by $20,000 during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to the redemption in full of our 5.25% Senior Notes due 2025 in July 2021, offset by the issuance in June 2021 of our Notes at a lower interest rate. Property taxes. The $0.7 million, or 104%, increase in property taxes was primarily due to a $0.3 million increase due to changes in estimates of property taxes expected to be paid directly by us as a result of certain assets being designated as held for sale during the three months ended March 31, 2022, a $0.3 million increase due to new real estate investments made after January 1, 2021 and a $0.1 million increase related to the transfer of certain properties to new operators that do not make direct tax payments. Impairment of real estate investments. During the three months ended March 31, 2022, we recognized an aggregate impairment charge of $59.7 million related to 20 properties that all met the held for sale criteria during the quarter. See above under “Recent Developments” for additional information. No impairment charges were recognized during the three months ended March 31, 2021. Provision for loan losses, net. During the three months ended March 31, 2022, we recorded a $4.6 million expected credit loss related to two other loans receivable that were placed on non-accrual status, partially offset by a $0.8 million recovery related to one other loan receivable that was previously written off. 22 Table of Contents Property operating expenses. During the three months ended March 31, 2022, we recognized $0.5 million of property operating expenses related to assets we plan to sell or repurpose. No similar expenses were incurred during the three months ended March 31, 2021. General and administrative expense. The $0.1 million, or 1%, increase in general and administrative expense was primarily related to higher cash wages of $0.3 million, partially offset by lower professional services expense of $0.1 million and lower stock compensation expense of $0.1 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Gain (loss) on sale of real estate. During the three months ended March 31, 2022, we recorded a $0.2 million gain on sale of real estate related to the sale of one SNF. Du ring the three months ended March 31, 2021, we recorded a $0.2 million loss on sale of real estate related to the sale of one SNF. Liquidity and Capital Resources To qualify as a REIT for federal income tax purposes, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, to our stockholders on an annual basis. Accordingly, we intend to make, but are not contractually bound to make, regular quarterly dividends to common stockholders from cash flow from operating activities. All such dividends are at the discretion of our board of directors. Our short-term liquidity requirements consist primarily of operating and interest expenses directly associated with our properties, including: • interest expense and scheduled debt maturities on outstanding indebtedness; • general and administrative expenses; • dividend plans; • operating lease obligations; and • capital expenditures for improvements to our properties. Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, capital expenditures, and scheduled debt maturities. We intend to invest in and/or develop additional healthcare and seniors housing properties as suitable opportunities arise and so long as adequate sources of financing are available. We expect that future investments in and/or development of properties, including any improvements or renovations of current or newly-acquired properties, will depend on and will be financed by, in whole or in part, our existing cash, borrowings available to us under the Amended Credit Facility (as defined below), future borrowings or the proceeds from sales of shares of our common stock pursuant to our ATM Program or additional issuances of common stock or other securities. In addition, we may seek financing from U.S. government agencies, including through Fannie Mae and the U.S. Department of Housing and Urban Development, in appropriate circumstances in connection with acquisitions and refinancing of existing mortgage loans. We believe that our expected operating cash flow from rent collections, interest payments on our other real estate investments, and borrowings under our Amended Credit Facility, together with our cash balance of $26.6 million, available borrowing capacity of $495.0 million under the Revolving Facility (as defined below) and availability under the ATM Program of $476.5 million, each at March 31, 2022, will be sufficient to meet ongoing debt service requirements, dividend plans, operating lease obligations, capital expenditures, working capital requirements and other needs for at least the next 12 months. We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements. While we are currently pursuing the sale, re-tenanting or repurposing of certain of our assets in connection with our ongoing review and monitoring of our investment portfolio as described under “Recent Developments” above, we currently do not expect to sell any of our properties to meet liquidity needs, although we may do so in the future. Our quarterly cash dividend, any share repurchases under our Repurchase Program (as defined below) and any failure of our operators to pay rent may impact our available capital resources. On March 20, 2020, our board of directors authorized a share repurchase program to repurchase up to $150.0 million of outstanding shares of our 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”). We expect to finance any share repurchases under the Repurchase Program using available cash and may also use short-term borrowings under the Revolving Facility. Through March 31, 2022, we have not repurchased any shares of common stock under the Repurchase Program and, as 23 Table of Contents of March 31, 2022, we had $150.0 million of remaining authorization under the Repurchase Program. The Repurchase Program may be modified, discontinued or suspended at any time. We have filed an automatic shelf registration statement with the U.S. Securities and Exchange Commission that expires in March 2023, which will allow us or certain of our subsidiaries, as applicable, to offer and sell shares of common stock, preferred stock, warrants, rights, units and debt securities through underwriters, dealers or agents or directly to purchasers, in one or more offerings on a continuous or delayed basis, in amounts, at prices and on terms we determine at the time of the offering. Although we are subject to restrictions on our ability to incur indebtedness, we expect that we will be able to refinance existing indebtedness or incur additional indebtedness for acquisitions or other purposes, if needed. However, there can be no assurance that we will be able to refinance our indebtedness, incur additional indebtedness or access additional sources of capital, such as by issuing common stock or other debt or equity securities, on terms that are acceptable to us or at all. We currently are in compliance with all debt covenants on our outstanding indebtedness. Cash Flows The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented (dollars in thousands): For the Three Months Ended March 31, 2022 2021 Net cash provided by operating activities $ 34,579 $ 33,949 Net cash used in investing activities (24,072) (133,300) 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 Cash and cash equivalents as of the end of period $ 26,586 $ 30,469 Net cash provided by operating activities increased $0.6 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Operating cash inflows are derived primarily from the rental payments received under our lease agreements, including as a result of new investments, and interest payments on our other real estate investments. Operating cash outflows consist primarily of interest expense on our borrowings and general and administrative expenses. The net increase of $0.6 million in cash provided by operating activities for the three months ended March 31, 2022 is primarily due to increased rental payments as a result of new investments, partially offset by moving certain tenants to a cash basis method of accounting and an increase in cash paid for general and administrative expenses. Cash used in investing activities for the three months ended March 31, 2022 was primarily comprised of $24.0 million in acquisitions of real estate and investments in other loans and $1.9 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $1.0 million in net proceeds from real estate sales and $0.9 million of payments received from other loans receivable. Cash used in investing activities for the three months ended March 31, 2021 was primarily comprised of $138.9 million in acquisitions of real estate and investments in other loans and $1.3 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $6.8 million in net proceeds from real estate sales and $0.1 million of payments received from other loans receivable. Our cash flows used in financing activities for the three months ended March 31, 2022 were primarily comprised of $26.0 million in dividends paid and a $2.8 million net settlement adjustment on restricted stock, partially offset by $25.0 million in borrowings under our Amended Credit Facility (as defined below). Our cash flows provided by financing activities for the three months ended March 31, 2021 were primarily comprised of $120.0 million in borrowings under our Amended Credit Facility and $16.2 million of net proceeds from the issuance of common stock under our ATM Program, partially offset by $24.0 million in dividends paid and a $1.3 million net settlement adjustment on restricted stock. 24 Table of Contents Material Cash Requirements Our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, include: 3.875% Senior Unsecured Notes due 2028 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 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. As of March 31, 2022, we were in compliance with all applicable financial covenants under the indenture governing the Notes. See Note 7, Debt, to our condensed consolidated financial statements included in this report for further information about the Notes. Unsecured Revolving Credit Facility and Term Loan Our 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”) 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. 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. As of March 31, 2022, we had $200.0 million 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 our sole discretion, t wo, six-month extension options. The Term Loan has a maturity date of February 8, 2026. 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 our consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if we obtain certain specified investment grade ratings on our 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 our consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if we obtain certain specified investment grade ratings on our 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 our consolidated subsidiaries (unless we obtain certain specified investment grade ratings on our senior long-term unsecured debt and the Operating Partnership elects to decrease the applicable margin as described above, in which case the Operating Partnership will pay a facility fee on the revolving commitments ranging from 0.125% to 0.30% per annum based off the credit ratings of our senior long-term unsecured debt). Interest payments on the Term Loan and Revolving Facility are due monthly and facility fee payments are due quarterly. As of March 31, 2022, we were in compliance with all applicable financial covenants under the Amended Credit Agreement. See Note 7, Debt, to our condensed consolidated financial statements included in this report for further information about the Amended Credit Agreement. Capital Expenditures As of March 31, 2022 , we 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 subject to rent increase at the time of funding. We expect to fund the capital expenditures in the next one to two years. See Note 11, Commitments and Contingencies, to our condensed consolidated financial statements included in this report for further information regarding our obligation to finance certain capital expenditures under our triple-net leases. Dividend Plans We are required to pay dividends in order to maintain our REIT status and we expect to make quarterly dividend payments in cash with the annual dividend amount no less than 90% of our annual REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. See Note 8, Equity, to our condensed consolidated 25 Table of Contents financial statements included in this report for a summary of the cash dividends per share of our common stock declared by our Board of Directors for the three months ended March 31, 2022 . Critical Accounting Policies and Estimates Our condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information set forth in the Accounting Standards Codification, as published by the Financial Accounting Standards Board. GAAP requires us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base these estimates on our experience and assumptions we believe to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements. We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Please refer to “Critical Accounting Policies and Estimates” in the “Management’s Discussion and Analysis of Financial Condition and Results of Ope rations” section of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 16, 2022, for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no material changes in such critical accounting policies during the three months ended March 31, 2022.