What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 232 added, 122 removed, 334 unchanged (51% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Real estate investments, net $ 1,390,286 $ 1,589,971

15 unchanged sentences

Preferred stock, $ 0.01 par value;

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

100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value;

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

500,000,000 shares authorized, 96,605,112 and 96,296,673 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,195,282 1,196,839

6 unchanged sentences

(in thousands, except per share amounts)

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2022 2021 2022 2021

Rental income $ 46,806 $ 47,744 $ 92,813 $ 92,990

11 unchanged sentences

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

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

(Loss) earnings per common share:

Net income (loss) $ 20,669 $ 21,317 $ ( 22,595 ) $ 41,803

Earnings (loss) per common share:

Basic $ 0.21 $ 0.22 $ ( 0.24 ) $ 0.43

18 unchanged sentences

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

Vesting of restricted common stock, net of shares withheld for employee taxes 118,046 1 ( 1,698 ) — ( 1,697 )

Amortization of stock-based compensation — — 1,394 — 1,394

Common dividends ($ 0.275 per share)

— — — ( 26,681 ) ( 26,681 )

Net income — — — 20,669 20,669

Balance at June 30, 2022 96,605,112 $ 966 $ 1,195,282 $ ( 357,980 ) $ 838,268

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 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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

6 unchanged sentences

Adjustment for collectibility of rental income 977 —

Noncash interest income ( 13 ) —

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

9 unchanged sentences

Purchases of equipment, furniture and fixtures and improvements to real estate ( 3,628 ) ( 3,463 )

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

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

Investment in real estate related and other loans receivable ( 102,086 ) ( 700 )

Principal payments received on real estate related and other loans receivable 1,026 113

Net proceeds from sales of real estate 959 6,814

2 unchanged sentences

Proceeds from the issuance of common stock, net — 22,946

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

Borrowings under unsecured revolving credit facility 125,000 170,000

Payments on unsecured revolving credit facility — ( 170,000 )

Payments on debt extinguishment and deferred financing costs — ( 5,577 )

Net-settle adjustment on restricted stock ( 4,469 ) ( 1,331 )

Dividends paid on common stock ( 52,817 ) ( 49,513 )

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

Net cash provided by financing activities 67,714 366,525

Net increase in cash and cash equivalents 10,372 292,039

5 unchanged sentences

Increase in dividends payable $ 522 $ 1,834

Increase in deferred financing costs payable $ — $ 618

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

3 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 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 .

As of June 30, 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 23,876 operational beds and un its located in 29 states with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

A s of June 30, 2022, the Company also had other r eal estate investments consisting of one senior secured loan receivable and two mezzanine loans receivable with an aggregate carrying value of $ 115.2 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.

8 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 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”).

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

2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which 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.

5 unchanged sentences

REAL ESTATE INVESTMENTS, NET

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

The following table summarizes the Company’s real estate properties held for investment at June 30, 2022 and December 31, 2021 (dollars in thousands):

June 30, 2022 December 31, 2021

Land $ 236,682 $ 251,787

5 unchanged sentences

Real estate investments, net $ 1,390,286 $ 1,589,971

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

As of June 30, 2022 , 226 of the Company’s 228 fac ilities 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.

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

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 June 30, 2022.

As of June 30, 2022, 27 facilities were held for sale.

As of June 30, 2022, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, was as follows (dollars in thousands):

2022 (six months) $ 98,897

Thereafter 1,011,035

5 unchanged sentences

Current Cash Rent (2)

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

October 2034 1/1/2023 (3)

SNF 11 November 2030 1/1/2023 (3)

2 unchanged sentences

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

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

October 2034 1/1/2026 (3)

(1) Option type includes:

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C - Fixed capitalization rate on lease revenue.

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

(2) Based on annualized cash revenue for contracts in place as of June 30, 2022.

(3) Option window is open for six months.

1 unchanged sentence

(5) Purchase option reflects two option types.

(6) Includes properties classified as held for sale as of June 30, 2022.

CARETRUST REIT, INC.

2 unchanged sentences

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Rental Income 2022 2021 2022 2021

3 unchanged sentences

Adjustment for collectibility (2)

— — ( 977 ) —

Lease termination revenue (3)

Total $ 46,806 $ 47,744 $ 92,813 $ 92,990

(1) Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company.

(1) Includes initial contractual cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company.

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 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.

Tenant operating expense reimbursements for the three months ended June 30, 2022 and 2021 were $ 0.7 million and $ 0.8 million, respectively.

Tenant operating expense reimbursements for the six months ended June 30, 2022 and 2021 were $ 1.3 million and $ 1.5 million, respectively.

( 2) During the six months ended June 30, 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 six months ended June 30, 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.

(3) During the six months ended June 30, 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 from Metron affiliates.

Recent Real Estate Acquisitions

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

The following table summarizes the Company’s acquisitions for the six months ended June 30, 2022 (dollars in thousands):

Type of Property Purchase Price (1)

6 unchanged sentences

Lease Amendments

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.

Noble Partial Lease Termination and New Landmark Lease.

On June 16, 2022, one ALF in Florida was removed from a master lease with affiliates of Noble Senior Services (“Noble”) and the Company amended the applicable Noble master lease to reflect the removal of the ALF.

Annual cash rent under the applicable Noble master lease decreased by approximately $ 0.6 million.

In connection with the partial lease termination, the Company entered into a lease with Landmark Recovery of Florida, LLC (“Landmark”) to repurpose the facility as a behavioral health treatment center.

Rent under the lease will commence one year following commencement of the lease term or, if earlier, upon Landmark obtaining all licensure, permits, and other required regulatory authorizations with respect to operating the facility.

The lease will expire on the 20th anniversary of the rent commencement date and contains one 10-year renewal option and CPI-based rent escalators.

Pennant Partial Lease Termination and Amended Ensign Master Leases.

On April 1, 2022, operations at two ALFs in California and Washington operated by affiliates of The Pennant Group, Inc.

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

In connection with the transfers, the Company amended the Pennant master lease to reflect the removal of the two ALFs and amended two existing triple-net master leases with Ensign to include the two ALFs.

The applicable Ensign master leases have remaining terms of approximately five years and 16 years, respectively, both with three five-year renewal options and CPI-based rent escalators.

Annual cash rent under each of the two applicable Ensign master leases, as amended, increased by approximately $ 0.4 million and annual cash rent under the Pennant master lease, as amended, decreased by $ 0.8 million.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

On March 1, 2022, operations at one ALF in Arizona operated by affiliates of Pennant were transferred to affiliates of Ensign.

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.

The applicable Ensign master lease had a remaining term at the date of amendment 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.

2 unchanged sentences

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.

The Eduro master lease, as amended, had a remaining term at the date of amendment 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.

2 unchanged sentences

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.

The WLC master lease, as amended, had a remaining term at the date of amendment 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 —

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.

In connection with the Company’s ongoing review and monitoring of its investment portfolio and the performance of its tenants, during the first quarter of 2022, the Company determined to pursue the sale of 27 properties and the repurposing of three properties representing an aggregate of approximately 9 % of contractual cash rent as of June 30, 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.

As of June 30, 2022, the net book value of the 27 properties classified as held for sale was $ 141.8 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.

3 unchanged sentences

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 second quarter of 2022, the Company recognized an impairment charge of $ 1.7 million related to one SNF.

The Company wrote down its carrying value of $ 2.8 million to its estimated fair value of $ 1.1 million, which is included in real estate investments, net on the Company’s condensed consolidated balance sheets.

The fair value of the asset was based on comparable market transactions.

For the Company’s impairment calculation, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit of $ 20,000 .

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.

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 six months ended June 30, 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.

During the six months ended June 30, 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.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

OTHER REAL ESTATE INVESTMENTS AND OTHER LOANS RECEIVABLE

As of June 30, 2022 and December 31, 2021, the Company’s other real estate investments consisted of the following (dollars in thousands):

As of June 30, 2022

Investment Facility Count and Type Principal Balance as of June 30, 2022

Book Value as of June 30, 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 ) —

Senior secured loan receivable 18 SNF/Campus

$ 75,000 $ 75,018 $ — 8.5 % 6/30/2027

Mezzanine loan receivable 9 SNF

15,000 15,150 15,155 12.0 % 11/30/2025

Mezzanine loan receivable 18 SNF/Campus

25,000 25,000 — 11.0 % 6/30/2032

$ 115,000 $ 115,168 $ 15,155

The following table summarizes the Company’s other real estate investments activity for the six months ended June 30, 2022 and 2021 (dollars in thousands):

Six Months Ended June 30,

Origination of other real estate investments $ 100,000 $ —

Accrued interest, net 13 150

Net increase in other real estate investments $ 100,013 $ 150

In June 2022, the Company extended a $ 75.0 million term loan to a skilled nursing real estate owner as part of a larger, multi-tranche, senior secured term loan facility.

The senior secured term loan was structured with an “A” tranche, a “B” tranche, and a “C” tranche (with the “C” tranche being the most subordinate).

The Company’s $ 75.0 million term loan constituted the entirety of the “C” tranche with its payments subordinated accordingly.

The senior secured term loan facility is secured by an 18 -facility skilled nursing portfolio in the Mid-Atlantic region, to be operated by a large, regional skilled nursing operator.

In connection with the senior secured term loan facility and the borrower’s acquisition of the skilled nursing portfolio, the Company also extended to the borrower group a $ 25.0 million mezzanine loan.

The “C” tranche of the senior secured term loan bears interest at 8.5 %, less a servicing fee equal to the positive difference, if any, between the lesser of the contractual interest payment and actual payment of interest made by the borrower and a hypothetical interest payment at a rate of 8.25 %, resulting in an effective interest rate of 8.375 %.

The “C” tranche term loan is set to mature on June 30, 2027 and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1 % to 3 % of the loan plus unpaid interest payments through the end of the month of prepayment;

provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority.

The mezzanine loan bears interest at 11 % and is secured by a pledge of membership interests in an up-tier affiliate of the borrower group.

The mezzanine loan is set to mature on June 30, 2032, and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date, commencing on June 30, 2029, for an exit fee ranging from 1 % to 3 % of the loan plus unpaid interest payments through the date of prepayment.

The “C” tranche term loan and mezzanine loan both require monthly interest payments.

The Company elected the fair value option for both the “C” tranche term loan and the mezzanine loan.

The fair value option is elected on an instrument by instrument basis and must be applied to an entire instrument and is irrevocable once elected.

The Company’s primary purpose in electing the fair value option for these instruments was to align with management’s view of the underlying economics of the loans and the manner in which they are managed.

See Note 12, Subsequent Events for information regarding a $ 22.3 million “B” tranche term loan extended by the Company to a borrower in August 2022.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

As of June 30, 2022 and December 31, 2021, the Company’s other loans receivable, included in prepaid expenses and other assets, net on the Company’s condensed consolidated balance sheets, consisted of the following (dollars in thousands):

As of June 30, 2022

Investment Principal Balance as of June 30, 2022

Book Value as of June 30, 2022

Book Value as of December 31, 2021

Weighted Average Contractual Interest Rate Maturity Date

Other loans receivable $ 5,377 $ 5,383 $ 3,161 8.0 % 9/1/2023 - 12/31/2023

Expected credit loss ( 4,594 ) ( 4,594 ) —

Total $ 783 $ 789 $ 3,161

The following table summarizes the Company’s other loans receivable activity for the six months ended June 30, 2022 and 2021 (dollars in thousands):

Six Months Ended June 30,

Origination of loans receivable $ 2,500 $ 700

Principal payments ( 276 ) ( 113 )

Accrued interest ( 2 ) 5

Expected credit loss ( 5,344 ) —

Loan loss recovery 750 —

Net change in other loans receivable $ ( 2,372 ) $ 592

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.

During the six months ended June 30, 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,

The following table summarizes the interest and other income recognized from the Company’s loans receivable and other investments during the three and six months ended June 30, 2022 and 2021 (dollars in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Investment 2022 2021 2022 2021

Mezzanine loan receivable $ 450 $ 450

Senior secured loan receivable $ 17 $ — $ 17 $ —

Mezzanine loans receivable 713 455 1,163 905

Other 17 59 36 114

Total $ 747 $ 514 $ 1,216 $ 1,019

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GAAP guidance defines three levels of inputs that may be used to measure fair value:

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

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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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 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 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

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 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 June 30, 2022

Senior secured loan receivable $ — $ — $ 75,018 $ 75,018

Mezzanine loans receivable — — 40,150 40,150

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

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

Mezzanine loan receivable:

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

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.

The following table details the Company’s assets measured at fair value on a recurring basis using Level 3 inputs (dollars in thousands):

Investments in Senior Secured Loan Investments in Mezzanine Loans

Balance at December 31, 2021

Loan originations 75,000 25,000

Accrued interest, net 18 ( 5 )

Balance as of June 30, 2022

$ 75,018 $ 40,150

Senior secured and mezzanine loans receivables:

The fair value of the senior secured and mezzanine loans receivables were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements.

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

As of June 30, 2022, the fair values of the senior secured loan receivable and the mezzanine loan receivable originated in June 2022 are not sensitive to market interest rates due to the recent issuance of the loans at market interest rates.

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.

As of June 30, 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 and six months ended June 30, 2022, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 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

A summary of the face value, carrying amount and fair value of the Notes (as defined in Note 7, Debt, below) as of June 30, 2022 and December 31, 2021 using Level 2 inputs is as follows (dollars in thousands):

June 30, 2022 December 31, 2021

Value Carrying

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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.

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

Senior unsecured notes payable:

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

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

The following table summarizes the balance of the Company’s indebtedness as of June 30, 2022 and December 31, 2021 (dollars in thousands):

June 30, 2022 December 31, 2021

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

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

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

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

As of June 30, 2022, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes.

Unsecured Revolving Credit Facility and Term Loan

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”).

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

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

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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 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.

As of June 30, 2022, the Operating Partnership had $ 200.0 million of borrowings outstanding under the Term Loan and $ 205.0 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 Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Amended Credit Agreement (other than the Operating Partnership).

The Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend organizational documents and pay certain dividends and other restricted payments.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

The Amended Credit Agreement requires the Company to comply with financial maintenance covenants to be tested quarterly, consisting of a maximum debt to asset value ratio, a minimum fixed charge coverage ratio, a minimum tangible net worth, a maximum cash distributions to operating income ratio, a maximum secured debt to asset value ratio, a maximum secured recourse debt to asset value ratio, a maximum unsecured debt to unencumbered properties asset value ratio, a minimum unsecured interest coverage ratio and a minimum rent coverage ratio.

The Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Amended Credit Facility or other material indebtedness, the failure to satisfy certain covenants (including the financial maintenance covenants), the occurrence of change of control and specified events of bankruptcy and insolvency.

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

As of June 30, 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”).

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

There was no ATM Program activity for the three and six months ended June 30, 2022.

The following table summarizes the ATM Program activity for the three and six months ended June 30, 2021 (in thousands, except per share amounts).

For the Three Months Ended For the Six Months Ended

June 30, 2021 June 30, 2021

Number of shares 288 990

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Gross proceeds (1)

(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.

$ 6,926 $ 23,505

(1) Total gross proceeds is before $ 0.1 million and $ 0.3 million of commissions paid to the sales agents during the three and six months ended June 30, 2021, respectively, under the ATM Program.

As of June 30, 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”).

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

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.

Through June 30, 2022, t he Company has no t repurchased any shares of common stock under the Repurchase Program.

As of June 30, 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 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):

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 six months of 2022 (dollars in thousands, except per share amounts):

For the Three Months Ended

March 31, 2022

March 31, 2022 June 30, 2022

Dividends declared per share $ 0.275 $ 0.275

Dividends payment date April 15, 2022

Dividends payment date April 15, 2022 July 15, 2022

Dividends payable as of record date (1)

Dividends record date March 31, 2022

$ 26,691 $ 26,683

Dividends record date March 31, 2022 June 30, 2022

(1) Dividends payable includes dividends on performance stock awards that will be paid if and when the shares subject to such awards vest.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

STOCK-BASED COMPENSATION

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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:

Under the Plan, restricted stock awards (“RSAs”) granted in fiscal 2022 to employees vest in equal annual installments beginning on the first anniversary of the grant date over a three year period.

RSAs granted to non-employee members of the Board of Directors (“Board Awards”) vest in full on the earlier to occur of the Company’s next annual meeting of stockholders or the first anniversary of the grant date.

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

The following table summarizes the RSAs and PSAs activity for the six months ended June 30, 2022:

Shares Weighted Average Share Price

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RSAs 9,684 17.56

Board Awards 25,992 16.93

Vested ( 501,479 ) 20.60

Forfeited ( 1,900 ) 21.50

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

Unvested balance at June 30, 2022 423,630 $ 20.96

As of June 30, 2022, the weighted-average remaining vesting period of such awards was 1.9 years.

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2022 2021 2022 2021

Stock-based compensation expense $ 1,394 $ 1,810 $ 2,915 $ 3,395

As of June 30, 2022, there was $ 8.9 million of unamortized stock-based compensation expense related to the unvested RSAs, PSAs and TSR Awards.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 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

EARNINGS (LOSS) PER COMMON SHARE

The following table presents the calculation of basic and diluted earnings (loss) per common share (“EPS”) for the Company’s common stock for the three and six months ended June 30, 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 June 30, For the Six Months Ended June 30,

2022 2021 2022 2021

Net income (loss) $ 20,669 $ 21,317 $ ( 22,595 ) $ 41,803

Net income allocated to participating securities ( 94 ) ( 116 ) ( 211 ) ( 234 )

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Weighted-average diluted common shares outstanding 96,598 96,120 96,487 95,755

(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

Earnings (loss) per common share, basic $ 0.21 $ 0.22 $ ( 0.24 ) $ 0.43

Earnings (loss) per common share, diluted $ 0.21 $ 0.22 $ ( 0.24 ) $ 0.43

Antidilutive unvested RSAs, PSAs and TSR Awards excluded from the computation 341 439 431 439

COMMITMENTS AND CONTINGENCIES

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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.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

As of June 30, 2022, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totaling $ 7.2 million, of which $ 1.9 million is s u bject to rent increase at the time of funding.

CONCENTRATION OF RISK

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:

Major operator concentration - The Company has operators from which it derived 10% or more of its rental revenue for the three and six months ended June 30, 2022 and 2021.

The following table sets forth information regarding the Company’s major operators as of June 30, 2022 and 2021:

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 %

Operator SNF Campus ALF/ILF SNF Campus ALF/ILF Three Months Ended Six Months Ended

June 30, 2022

83 8 7 8,756 997 678 35 % 35 %

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

March 31, 2021

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

June 30, 2021

81 8 4 8,515 997 395 31 % 32 %

Priority Management Group 13 2 — 1,742 402 — 15 % 15 %

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

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

State SNF Campus ALF/ILF SNF Campus ALF/ILF Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

CA 27 8 5 3,048 1,359 449 27 % 26 %

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

SUBSEQUENT EVENTS

The Company evaluates subsequent events in accordance with ASC 855, Subsequent Events .

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

Recent Investment

On August 1, 2022, the Company extended a $ 22.3 million “B” tranche secured term loan to a skilled nursing real estate owner in connection with the borrower’s acquisition of five skilled nursing facilities located in the state of California.

The secured loan was structured with an “A” tranche and a “B” tranche (with the payments on the “B” tranche being subordinate to the “A” tranche pursuant to the terms of a written agreement between the lenders).

The loan facility is primarily secured by the five skilled nursing facilities, four of which will be operated by an existing operator and one of which will be operated by a large, regional skilled nursing operator.

The “B” tranche term loan carries a three-year maturity (with two , 1-year extension options) and bears interest at a rate based on term secured overnight financing rate, with a floor of approximately 8.5 %.

The $ 22.3 million “B” tranche term loan was funded using a combination of cash on hand and borrowings under the Company’s Revolving Facility.

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