What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-04 · 212 added, 146 removed, 420 unchanged (46% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Real estate investments, net $ 1,384,166 $ 1,589,971

Other real estate investments 115,168 15,155

Other real estate related investments, at fair value (including accrued interest of $ 1,218 as of September 30, 2022 and $ 155 as of December 31, 2021)

158,662 15,155

Assets held for sale, net 77,708 4,835

13 unchanged sentences

Preferred stock, $ 0.01 par value;

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

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

Common stock, $ 0.01 par value;

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

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

Additional paid-in capital 1,196,662 1,196,839

6 unchanged sentences

(in thousands, except per share amounts)

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

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

2022 2021 2022 2021

10 unchanged sentences

Total expenses 42,591 25,860 159,401 77,874

Other income (loss):

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

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

Loss on sale of real estate, net ( 2,287 ) — ( 2,101 ) ( 192 )

Unrealized loss on other real estate related investments ( 4,706 ) — ( 4,706 ) —

Total other loss ( 6,993 ) ( 10,827 ) ( 6,807 ) ( 11,019 )

Net income (loss) $ 709 $ 11,918 $ ( 21,886 ) $ 53,721

26 unchanged sentences

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

Amortization of stock-based compensation — — 1,380 — 1,380

Common dividends ($ 0.275 per share)

— — — ( 26,680 ) ( 26,680 )

Net income — — — 709 709

Balance at September 30, 2022 96,605,112 $ 966 $ 1,196,662 $ ( 383,951 ) $ 813,677

See accompanying notes to condensed consolidated financial statements.

21 unchanged sentences

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

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

Common dividends ($ 0.265 per share)

— — — ( 25,714 ) ( 25,714 )

Net income — — — 11,918 11,918

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities:

3 unchanged sentences

Amortization of deferred financing costs 1,560 1,531

Loss on extinguishment of debt — 10,827

Unrealized loss on other real estate related investments 4,706 —

Amortization of stock-based compensation 4,295 5,197

2 unchanged sentences

Noncash interest income ( 1,063 ) —

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

Loss on sale of real estate, net 2,101 192

Impairment of real estate investments 73,706 —

8 unchanged sentences

Purchases of equipment, furniture and fixtures and improvements to real estate ( 5,475 ) ( 4,826 )

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

Investment in real estate related investments and other loans receivable ( 149,650 ) ( 700 )

Principal payments received on other loans receivable 1,166 172

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

Net proceeds from sales of real estate 34,115 6,814

4 unchanged sentences

Borrowings under unsecured revolving credit facility 145,000 220,000

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

Payments on unsecured revolving credit facility ( 45,000 ) ( 190,000 )

3 unchanged sentences

Net cash provided by financing activities 16,053 62,397

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

Net decrease in cash and cash equivalents ( 15,034 ) ( 1,203 )

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

4 unchanged sentences

Increase in dividends payable $ 542 $ 1,913

Increase in deferred financing costs payable $ — $ 618

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

Sale of real estate settled with notes receivable $ 12,000 $ —

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

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

As of 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.

As of September 30, 2022, the Company owned and leased to independent ope rators , 221 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 23,135 operational beds and un its located in 29 st ates with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

As of September 30, 2022, the Company also had other real estate related inves tments consisting of three real estate secured loans receivable and two mezzanine loans receivable with an aggregate carrying value of $ 158.7 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.

10 unchanged sentences

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.

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

Dollar LIBOR rates were discontinued at the end of 2021.

4 unchanged sentences

REAL ESTATE INVESTMENTS, NET

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

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

September 30, 2022 December 31, 2021

Land $ 236,298 $ 251,787

5 unchanged sentences

Real estate investments, net $ 1,384,166 $ 1,589,971

As of June 30, 2022 , 226 of the Company’s 228 fac ilities wer e leased to various operators under triple-net leases.

As of September 30, 2022, 217 of the Company ’s 221 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 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

During the second and third quarters of 2022, the Company entered into triple-net lease agreements for two of the Company’s 221 f acilities which are being repurposed to behavioral health facilities with rent commencing 12 to 18 months following lease commencement.

Two of the Company’s 221 facilities are non-operational and are leased under a short term lease with an expected term of less than one year as of September 30, 2022.

As of September 30, 2022, 19 facilities were held for sale.

See Note 4, Impairment of Real Estate Investments, Assets Held for Sale, Net and Asset Sales for additional information.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

As of September 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 (three months) $ 48,193

Thereafter 1,001,323

15 unchanged sentences

C - Fixed capitalization rate on lease revenue.

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

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

Rental Income

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Rental Income 2022 2021 2022 2021

8 unchanged sentences

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.

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.

Tenant operating expense reimbursements for the three months ended September 30, 2022 and 2021 were $ 0.7 million and $ 1.0 million, respectively.

Tenant operating expense reimbursements for the nine months ended September 30, 2022 and 2021 were $ 2.0 million and $ 2.5 million, respectively.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

( 2) During the nine months ended September 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 nine months ended September 30, 2022.

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

(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.

(3) During the nine months ended September 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 six months ended June 30, 2022 (dollars in thousands):

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

Type of Property Purchase Price (1)

6 unchanged sentences

Lease Amendments

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.

Noble Partial Lease Termination and New Landmark Leases.

On August 29, 2022, one ALF in Maryland 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 approximate ly $ 0.5 million.

In connection with the partial lease terminatio n, the Company entered into a lease with Landmark Recovery of Maryland, LLC (“Landmark Maryland”) to repurpose the facility to a be havioral health treatment center.

Rent under the lease will commence 18 months following commencement of the lease term or, if earlier, upon Landmark Maryland 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.

On June 16, 2022, one ALF in Florida was removed from a master lease with affiliates of 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.

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

Rent under the lease will commence one year following commencement of the lease term or, if earlier, upon Landmark Florida 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.

3 unchanged sentences

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.

The applicable Ensign master leases, as amended, had a remaining term at the date of amendment 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 had a remaining term at the date of amendment of approximately 11 years, with two five-year renewal options and CPI-based rent escalators.

The applicable Ensign master lease, as amended, 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.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Amended Eduro Master Lease.

9 unchanged sentences

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, 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.

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 six months ended June 30, 2022.

A s 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 nine months ended September 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 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.

Following the asset sales and held for sale reclassifications discussed below, 19 properties continued to meet the criteria to be classified as held for sale as of September 30, 2022.

During the third quarter of 2022, the Company recognized an additional aggregate impairment charge of $ 12.3 million related to 16 of the 19 held for sale properties to reduce their carrying value to estimated fair value less costs to sell.

As of September 30, 2022, the real estate comprising the remaining 19 properties classified as held for sale had an aggregate carrying value of $ 77.7 million.

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

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

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

(i) comparable market transactions, (ii) estimated prices per unit, and (iii) binding agreements for sales and non-binding offers to purchase from unrelated third-parties.

There are inherent uncertainties in making these assumptions.

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

For the Company’s impairment calculations, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $ 35,000 to $ 145,000 , with a weighted average price per unit of $ 80,000 .

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

2 unchanged sentences

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 .

Asset Sales and Held for Sale Reclassifications

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 six months ended June 30, 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 nine months ended September 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 six months ended June 30, 2022, the Company recorded a gain of $ 0.2 million in connection with the sale.

During the nine months ended September 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 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

During the third quarter of 2022, the Company determined that one ALF, with a carrying value of $ 4.9 million, that was classified as held for sale at June 30, 2022 no longer met the held for sale criteria.

The Company reclassified this ALF out of assets held for sale at its fair value at the date of the decision not to sell of approximately $ 4.9 million, or a weighted average price per unit of $ 125,000 .

On September 29, 2022, the Company closed on the sale of six SNFs and one multi-service campus, operated by affiliates of Trio Healthcare Holdings, LLC (“Trio”), consisting of 708 beds located in Ohio for net proceeds of $ 32.8 million.

In connection with the sale, the Company provided affiliates of the purchaser of the properties with a $ 7.0 million term loan that bears interest at 8.5 % and has a maturity date of September 30, 2025.

The Company also provided a $ 5.0 million bridge loan to four individuals that bears interest at 8.5 % and has a maturity date of November 29, 2022.

The seven properties were classified as held for sale at June 30, 2022 with a carrying value of $ 46.9 million .

During the three months ended September 30, 2022, the Company recorded a loss of $ 2.1 million in connection with the sale.

OTHER REAL ESTATE RELATED INVESTMENTS, AT FAIR VALUE, AND OTHER LOANS RECEIVABLE

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

As of September 30, 2022

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

Book Value as of September 30, 2022

Book Value as of December 31, 2021

2 unchanged sentences

$ 75,000 $ 72,525 $ — 8.4 % [1]

Secured loan receivable 5 SNF

22,250 22,423 — 9.6 % [2]

Secured loan receivable 4 SNF

24,900 25,043 — 9.0 % [2]

Mezzanine loan receivable 9 SNF

3 unchanged sentences

$ 162,150 $ 158,662 $ 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 $ —

[1] Rate is net of subservicing fee.

[2] Term secured overnight financing rate (“SOFR”) used as of September 30, 2022 was 3.02 %.

Rates are net of subservicing fees.

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

Nine Months Ended September 30,

Origination of other real estate related investments $ 147,150 $ —

Accrued interest, net 1,063 150

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

Unrealized loss on other real estate related investments ( 4,706 ) —

Net increase in other real estate related investments, at fair value $ 143,507 $ 150

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

In September 2022, the Company extended a $ 24.9 million term loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner.

The secured term loan was structured with an “A” 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 Company’s $ 24.9 million secured term loan constituted the entirety of the “B” tranche with its payments subordinated accordingly.

The secured term loan is primarily secured by four skilled nursing faciliti es operated by an operator in the Southeast.

The “B” tranche secured term loan is set to mature on September 8, 2025, with two one-year extension options and ma y (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;

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 “B” tranche secured term loan provides for an earnout advance of $ 4.7 million if certain conditions are met.

The "B" tranche secured term loan bears interest at a rate based on term SOFR, calculated as a fraction, with the numerator being the difference between (i) the monthly payment of interest of term SOFR plus a 4.50 % spread and (ii) the amount of such monthly payment of interest of term SOFR plus a 2.85 % spread, and with the denominator being the average daily balance of the outstanding principal amount during the applicable month, with such fraction expressed as a percentage and annualized, with a term SOFR floor of 1.0 % and less a subservicing fee of 100 % over 9.00 %.

The “B” tranche secured term loan requires monthly interest payments.

The Company elected the fair value option for the “B” tranche secured term loan.

In August 2022, the Company extended a $ 22.3 million term loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner.

The Company’s $ 22.3 million secured term loan constituted the entirety of the “B” tranche with its payments subordinated accordingly.

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

The “B” tranche secured term loan is set to mature on August 1, 2025, with two one-year extension options and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an ex it fee ranging from 2 % to 3 % of the loan plus unpaid interest payments;

The "B" tranche secured term loan bears interest at a rate based on term secured overnight financing rate, calculated as a fraction, with the numerator being the difference between (i) the monthly payment of interest of term SOFR plus a 4.25 % spread and (ii) the amount of such monthly payment of interest of term SOFR plus a 2.75 % spread, and with the denominator being the average daily balance of the outstanding principal amount during the applicable month, with such fraction expressed as a percentage and annualized, with a term SOFR floor of 1.0 % and less a subservicing fee of 50 % over 8.25 %.

The “B” tranche secured term loan requires monthly interest payments.

The Company elected the fair value option for the “B” tranche secured term loan.

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.

1 unchanged sentence

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.

The senior secured term loan facility is secured by an 18 -facility skilled nursing portfolio in the Mid-Atlantic region, 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;

The “C” tranche senior secured 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;

1 unchanged sentence

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 “C” tranche senior secured 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

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.

As of September 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 September 30, 2022

Investment Principal Balance as of September 30, 2022

Book Value as of September 30, 2022

Book Value as of December 31, 2021

3 unchanged sentences

Total $ 12,644 $ 12,648 $ 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,

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

Nine Months Ended September 30,

Origination of loans receivable $ 14,500 $ 700

Principal payments ( 416 ) ( 172 )

Accrued interest ( 2 ) 5

Accrued interest, net ( 3 ) 39

Expected credit loss ( 5,344 ) —

Loan loss recovery 750 —

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

Net increase in other loans receivable $ 9,487 $ 567

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

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.

During the nine months ended September 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, net of a loan loss recovery of $ 0.8 million related to a loan previously written-off.

During the three months ended September 30, 2022, the Company wrote-off $ 2.5 million, related to one other loan receivable that was previously fully reserved, in connection with the sale of six SNFs and one multi-service campus.

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 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,

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Investment 2022 2021 2022 2021

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

Secured loans receivable $ 2,098 $ — $ 2,115 $ —

Mezzanine loans receivable 1,163 460 2,326 1,365

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Total $ 3,275 $ 518 $ 4,491 $ 1,537

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

FAIR VALUE MEASUREMENTS

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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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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 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

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

Secured loans receivable $ — $ — $ 119,991 $ 119,991

Mezzanine loans receivable — — 38,671 38,671

Total $ — $ — $ 158,662 $ 158,662

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

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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

Investments in Real Estate Secured Loans Investments in Mezzanine Loans

Balance at December 31, 2021

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Accrued interest, net 839 224

Balance as of June 30, 2022

Unrealized loss on other real estate related investments ( 2,998 ) ( 1,708 )

Balance as of September 30, 2022

$ 119,991 $ 38,671

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.

Real estate secured and mezzanine loans receivables:

The fair value of the 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 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.

During the three months ended September 30, 2022, the Company recorded an unrealized loss of $ 4.7 million on the Company’s secured and mezzanine loans receivable due to rising interest rates.

Future changes in market interest rates could

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

materially impact the estimated discounted cash flows that are used to determine the fair value of the secured and mezzanine loans receivable.

As of September 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.

The following table shows the quantitative information about unobservable inputs related to the Level 3 fair value measurements comprising the investments in secured and mezzanine loans receivables as of September 30, 2022 :

Type Book Value as of September 30, 2022

Valuation Technique Unobservable Inputs Range

Secured loans receivable $ 119,991 Discounted cash flow Discount Rate 9 % - 13 %

Mezzanine loans receivable 38,671 Discounted cash flow Discount Rate 12 % - 14 %

For the three and nine months ended September 30, 2022, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Disclosed at Fair Value

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

A summary of the face 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

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

September 30, 2022 December 31, 2021

Value Carrying

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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.

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

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

September 30, 2022 December 31, 2021

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

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

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

The Notes were issued at

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

The Notes mature on June 30, 2028.

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

As of September 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

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

The interest rates applicable to loans under the Term Loan are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.50 % to 1.20 % per annum or LIBOR plus a margin ranging from 1.50 % to 2.20 % per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt).

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

unsecured debt).

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

As of 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.

As of September 30, 2022, the Operating Partnership had $ 200.0 million of borrowings outstanding under the Term Loan and $ 180.0 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

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 June 30, 2022, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

As of September 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”).

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

There was no ATM Program activity for the three and nine months ended September 30, 2022 and the three months ended September 30, 2021.

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

For the Nine Months Ended

September 30, 2021

Number of shares 990

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Gross proceeds (1)

$ 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.

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

As of September 30, 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”).

1 unchanged sentence

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

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

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 Company expects to finance any share repurchases under the Repurchase Program using available cash and may also use

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

short-term borrowings under the Revolving Facility.

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

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

For the Three Months Ended

March 31, 2022 June 30, 2022

March 31, 2022 June 30, 2022 September 30, 2022

Dividends declared per share $ 0.275 $ 0.275 $ 0.275

Dividends payment date April 15, 2022 July 15, 2022

Dividends payment date April 15, 2022 July 15, 2022 October 14, 2022

Dividends payable as of record date (1)

$ 26,691 $ 26,683 $ 26,683

Dividends record date March 31, 2022 June 30, 2022

Dividends record date March 31, 2022 June 30, 2022 September 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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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:

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

Shares Weighted Average Share Price

4 unchanged sentences

Forfeited ( 1,900 ) 21.50

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.

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

As of September 30, 2022, the weighted-average remaining vesting period of such awards w as 1.6 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,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2022 2021 2022 2021

Stock-based compensation expense $ 1,380 $ 1,802 $ 4,295 $ 5,197

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.

As of September 30, 2022, there was $ 7.6 million of unamortized stock-based compensation expense related to the unvested RSAs, PSAs and TSR Awards.

CARETRUST REIT, INC.

1 unchanged sentence

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,

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 nine months ended September 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 September 30, For the Nine Months Ended September 30,

2022 2021 2022 2021

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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 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.

As of September 30, 2022, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totali ng $ 16.1 million, of which $ 3.9 million is subject 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 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 —

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

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

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

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

June 30, 2022

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

September 30, 2022

83 8 7 8,741 997 661 36 % 35 %

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

June 30, 2021

September 30, 2021

83 8 4 8,756 997 395 33 % 32 %

4 unchanged sentences

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 and six months ended June 30, 2022:

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

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

State SNF Campus ALF/ILF SNF Campus ALF/ILF Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

CA 27 8 5 3,048 1,359 437 27 % 27 %

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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