What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-09 compared with 2022-02-16 · 416 added, 319 removed, 1056 unchanged (41% of the section changed)

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Opinion on Internal Control over Financial Reporting

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

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

and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

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The code of business conduct and ethics is available at our website at www.caretrustreit.com under the Investors-Corporate Governance section.

We intend to satisfy any disclosure requirement under applicable rules of the Securities and Exchange Commission or Nasdaq Stock Market regarding an amendment to, or waiver from, a provision of this code of business conduct and ethics by posting such information on our website, at the address specified above.

We intend to satisfy any disclosure requirement under applicable rules of the Securities and Exchange Commission or the New York Stock Exchange regarding an amendment to, or waiver from, a provision of this code of business conduct and ethics by posting such information on our website, at the address specified above.

Executive Compensation

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(a)(3) Exhibits

Membership Interest Purchase Agreement, dated as of January 27, 2019, by and between BME Texas Holdings LLC and CTR Partnership, L.P.

(incorporated by reference to Exhibit 2.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on April 2, 2019).

Articles of Amendment and Restatement of CareTrust REIT, Inc.

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(incorporated by reference to Exhibit 10.5 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014).

Amended and Restated Credit and Guaranty Agreement, dated February 8, 2019 by and among CTR Partnership, L.P., as borrower, CareTrust REIT, Inc., as guarantor, CareTrust GP, LLC and the other guarantors named therein and KeyBank National Association, as administrative agent, an issuing lender and swingline lender and the other parties thereto.

(incorporated by reference to Exhibit 10.1 to the CareTrust REIT, Inc.’s Current Report on Form 8-K filed on February 11, 2019).

First Amendment to Amended and Restated Credit and Guaranty Agreement, dated July 23, 2019, by and among CTR Partnership, L.P., as borrower, CareTrust REIT, Inc., as guarantor, CareTrust GP, LLC, and other guarantors named therein, the Lenders (as defined therein) from time to time party thereto and KeyBank National Association, as administrative agent, an issuing lender and swingline lender (incorporated by reference to Exhibit 10.1 to the CareTrust REIT, Inc.’s Quarterly Report on Form 10-Q filed on August 6, 2019).

Second Amended and Restated Credit and Guaranty Agreement, dated as of December 16, 2022 by and among CTR Partnership, L.P., as borrower, CareTrust REIT, Inc., as guarantor, CareTrust GP, LLC and the other guarantors named therein and KeyBank National Association, as administrative agent, an issuing lender and swingline lender and the other parties thereto (incorporated by reference to Exhibit 10.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K filed on December 19, 2022).

Amended and Restated Partnership Agreement of CTR Partnership, L.P.

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Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.15 to CareTrust REIT, Inc.’s Annual Report on Form 10-K, filed on February 11, 2015).

Form of TSR Award Agreement

Form of Performance-Based Restricted Stock Award Grant Notice

Form of Change in Control and Severance Agreement (incorporated by reference to Exhibit 10.1 to CareTrust REIT, Inc’s Current Report on Form 8-K filed on February 11, 2019).

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WAGNER Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) February 9, 2023

/s/ GREGORY K.

STAPLEY Director February 16, 2022

BARBIERI Director February 16, 2022

KLINE Director February 16, 2022

/s/ DIANA LAING Director February 9, 2023

/s/ ANNE OLSON Director February 9, 2023

/s/ SPENCER PLUMB Director February 9, 2023

Spencer Plumb

/s/ CAREINA WILLIAMS Director February 9, 2023

Careina Williams

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Consolidated Balance Sheets as of December 31, 2022 and 2021

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

Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Equity for the years ended December 31, 2022, 2021 and 2020

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

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

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Long-Lived Assets — Refer to Note 2 to the financial statements

Impairment of Real Estate Investments, Assets Held for Sale, Net and Asset Sales — Refer to Notes 2 and 4 to the financial statements

Critical Audit Matter Description

At each reporting period, the Company evaluates its real estate investments to be held and used for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The judgment regarding the existence of impairment indicators, used to determine if an impairment assessment is necessary, is based on factors such as, but not limited to, market conditions, operator performance and legal structure.

If indicators of impairment are present, the Company evaluates the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying facilities.

The most significant inputs to the undiscounted cash flows include, but are not limited to, facility level financial results, a lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate.

The analysis is also significantly impacted by determining the lowest level of cash flows, which generally would be at the master lease level of cash flows.

Provisions for impairment losses related to long-lived assets are recognized when expected future undiscounted cash flows are determined to be less than the carrying values of the assets.

The impairment is measured as the excess of carrying value over fair value.

We identified the impairment of long-lived assets as a critical audit matter because of the significant estimates and assumptions

management makes to evaluate the recoverability of the long-lived assets, specifically the estimates of lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate for the applicable long lived assets or group of assets.

Auditing the assumptions used by the Company in estimating future undiscounted cash flows required a high degree of auditor judgment and an increased extent of effort, when performing audit procedures to evaluate the reasonableness of the Company’s recoverability analysis.

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

Upon designation as held for sale, the Company writes down the excess of the carrying value over the estimated fair value less costs to sell, resulting in an impairment of the real estate investments, if necessary.

If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a real estate investment previously classified as held for sale or otherwise no longer meets the held for sale criteria, the respective assets are reclassified as real estate investments held for use.

A real estate investment that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the real estate investment was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the real estate investment been continuously classified as held for use, or (b) the fair value at the date of the decision not to sell or change in circumstances that led to the real estate investment no longer meeting the criteria of held for sale.

The fair value of the assets held for sale is based on a market approach using estimated sales prices (comparable sales model), which relies on certain assumptions by management, including:

(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.

The fair value of assets reclassified as real estate investments held for use is based on an income approach using current market conditions and considers matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, and, where applicable, terms of recent lease agreements or the results of negotiations with prospective tenants.

There are inherent uncertainties in making these assumptions.

We identified the impairment of real estate investments as a critical audit matter because of the significant estimates and assumptions management makes to determine the fair value of real estate investments held for sale and real estate investments reclassified from held for sale to held for use.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s determination of fair value.

As of December 31, 2022, the Company had real estate investments held for sale of $12.3 million, after taking an impairment loss of $14.4 million.

During the year ended December 31, 2022, the Company reclassified real estate investments from held for sale to held for use of $57.4 million, after taking an impairment loss of $18.0 million.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the significant inputs to the recoverability assessment of undiscounted cash flows included the following, among others:

• We tested the effectiveness of controls over management’s evaluation of the recoverability of long-lived assets based on undiscounted cash flows, including those over the lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate used in the assessment.

• We evaluated the reasonableness of significant assumptions in the undiscounted cash flow analyses, including estimates of the lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate, for properties with impairment indicators.

• We evaluated the reasonableness of management’s assertions regarding the intended hold period of its real estate assets, more specifically by performing the following:

◦ Engaged in discussions with management, including the Chief Executive Officer and Chief Financial Officer,

◦ Inspected Board of Directors meeting minutes regarding the assumptions utilized in the determination of intended hold periods,

◦ Performed a retrospective review around the Company’s estimates of hold periods used in previous periods in relation to real estate assets with impairment indicators, including those that were subsequently disposed of, and

◦ Evaluated audit evidence to determine whether it supported or contradicted the conclusions reached by management.

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

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

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

Our audit procedures related to the significant inputs to the fair value of real estate investments held for sale and real estate investments reclassified from held for sale to held for use included the following, among others:

• We tested the effectiveness of controls over management’s evaluation of balance sheet classification and determination of fair value for real estate investments held for sale and real estate investments reclassified to real estate investments held for use.

• We evaluated the reasonableness of the (1) valuation methodology;

and (2) the concluded real estate investment fair value by independently obtaining sales comparison data, capitalization rates, and market rents and developing a range of independent fair value estimates and comparing our estimates to those used by management.

• We used the assistance of our fair value specialists in obtaining relevant market data, where necessary.

• Read and considered terms of executed arrangements and evidence regarding terms for arrangements in the process of negotiation at or near the valuation date.

• We held discussions with management to understand individual real estate investment specific factors that impacted the Company’s fair value determination.

/s/ DELOITTE & TOUCHE LLP

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Real estate investments, net $ 1,421,410 $ 1,589,971

Other real estate investments 15,155 15,000

Other real estate related investments, at fair value (including accrued interest of $ 1,320 as of December 31, 2022 and $ 155 as of December 31, 2021)

156,368 15,155

Assets held for sale, net 12,291 4,835

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Preferred stock, $ 0.01 par value;

100,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2021 and December 31, 2020

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

Common stock, $ 0.01 par value;

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

500,000,000 shares authorized, 99,010,112 and 96,296,673 shares issued and outstanding as of December 31, 2022 and 2021, respectively

Additional paid-in capital 1,245,337 1,196,839

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CARETRUST REIT, INC.

CONSOLIDATED INCOME STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

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Impairment of real estate investments 79,062 — —

Provision for loan losses — — 1,076

Provision for loan losses, net 3,844 — —

Property operating expenses 5,039 — —

General and administrative 20,165 26,874 16,302

Total expenses 192,767 109,465 97,428

Other (loss) income:

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

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

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

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

Earnings per common share:

Loss on sale of real estate, net ( 3,769 ) ( 77 ) ( 37 )

Unrealized loss on other real estate related investments ( 7,102 ) — —

Total other loss ( 10,871 ) ( 10,904 ) ( 37 )

Net (loss) income $ ( 7,506 ) $ 71,982 $ 80,867

(Loss) earnings per common share:

Basic $ ( 0.08 ) $ 0.74 $ 0.85

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— — — ( 107,403 ) ( 107,403 )

Net income — — — 71,982 71,982

Net loss — — — ( 7,506 ) ( 7,506 )

Balance as of December 31, 2022 99,010,112 $ 990 $ 1,245,337 $ ( 396,954 ) $ 849,373

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Cash flows from operating activities:

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

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

Net (loss) income $ ( 7,506 ) $ 71,982 $ 80,867

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

Depreciation and amortization (including below-market ground leases) 50,378 55,394 52,819

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Loss on extinguishment of debt — 10,827 —

Unrealized loss on other real estate related investments 7,102 — —

Amortization of stock-based compensation 5,758 10,832 3,790

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Noncash interest income ( 1,165 ) ( 155 ) —

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

Loss on sale of real estate, net 3,769 77 37

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

Impairment of real estate investments 79,062 — —

Provision for loan losses — — 1,076

Provision for loan losses, net 3,844 — —

Change in operating assets and liabilities:

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Purchases of equipment, furniture and fixtures and improvements to real estate ( 7,292 ) ( 6,013 ) ( 8,297 )

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

Principal payments received on real estate mortgage and other loans receivable 393 80,928 24,283

Investment in real estate related investments and other loans receivable ( 149,650 ) ( 1,253 ) ( 30,498 )

Principal payments received on other loans receivable 6,308 393 80,928

Repayment of other real estate investment — — 2,327

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

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

Borrowings under unsecured revolving credit facility 160,000 220,000 65,000

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

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

Payments on unsecured revolving credit facility ( 115,000 ) ( 190,000 ) ( 75,000 )

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Dividends paid on common stock ( 106,138 ) ( 100,782 ) ( 93,161 )

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

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

Net cash (used in) provided by financing activities ( 23,732 ) 36,738 ( 105,561 )

Net (decrease) increase in cash and cash equivalents ( 6,717 ) 976 ( 1,408 )

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

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

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

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

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

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

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

As of December 31, 2022, the Company owned and leased to independent operators, 216 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 22,831 operational beds and units located in 28 states with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

As of December 31, 2022, the Company also had other real estate related investments consisting of three real estate secured loans receivable and two mezzanine loans receivable with a carrying value of $ 156.4 million.

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

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

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

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

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

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

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

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

Such write-offs and recoveries are recorded as decreases

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

For the year ended December 31, 2022, the Company did no t record any recovery adjustments and wrote-off $ 1.4 million of rental income.

For the year ended December 31, 2021, the Company did no t record any recovery adjustments or write-off adjustments to rental income.

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

For the year ended December 31, 2019, the Company recorded $ 11.8 million of write-off adjustments to rental income related to rental income recognized in prior periods.

See Note 3, Real Estate Investments, Net for further detail.

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Actual results, however, could differ from those estimates and assumptions.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Real Estate Acquisition Valuation — In accordance with ASC 805, Business Combinations , the Company’s acquisitions of real estate investments generally do not meet the definition of a business, and are treated as asset acquisitions.

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The fair value of tangible assets of an acquired property is based on the value of the property as if it is vacant.

As part of the Company’s real estate acquisitions, the Company may commit to provide contingent payments to a seller or lessee (e.g., an earn-out payable upon the applicable property achieving certain financial metrics).

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

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

If the contingent payment is an earn-out provided to the lessee, the payment is recorded as a lease incentive and is amortized as a yield adjustment over the life of the lease.

Impairment of Long-Lived Assets —At each reporting period, the Company evaluates its real estate investments to be held and used for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Impairment of Long-Lived Assets —At each reporting period, the Company evaluates its real estate investments held for use for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The most significant inputs to the undiscounted cash flows include, but are not limited to, historical and projected facility level financial results, a lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate.

The analysis is also significantly impacted by determining the lowest level of cash flows, which generally would be at the master lease level of cash flows.

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

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

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

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

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

The Company’s ability to accurately estimate future cash flows and estimate and allocate fair values impacts the timing and recognition of impairments.

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

For the year ended December 31, 2022, the Company recorded an impairment charge of $ 79.1 million.

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

Other Real Estate Related Investments —Included in other real estate related investments on the Company’s consolidated balance sheets at December 31, 2022, are three real estate secured loans receivable and two mezzanine loans receivable.

Included in other real estate related investments on the Company’s consolidated balance sheets at December 31, 2021, is one mezzanine loan receivable.

The Company elected the fair value option for all other real estate related investments.

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

Fair value was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

interest rates and other credit enhancements.

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

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

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

During the year ended December 31, 2022, the Company determined that the remaining contractual obligations under two other loans receivable were not collectible and recorded a $ 4.6 million expected credit loss, net of a loan loss recovery of $ 0.8 million related to a loan previously written-off.

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

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

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The fair value of these investments is determined based on “Level 1” inputs, which consist of unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets.

The Company places its cash and short-term investments with high credit quality financial institutions.

The Company places its cash and cash equivalents with high credit quality financial institutions.

The Company’s cash and cash equivalents balance periodically exceeds federally insurable limits.

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

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

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

Amortization of deferred financing costs is

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

classified as interest expense in the consolidated statements of operations.

Accumulated amortization of deferred financing costs was $ 2.5 million and $ 8.0 million at December 31, 2022 and 2021, respectively.

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

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

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

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

See Note 7, Debt, for further detail.

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

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

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

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

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

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

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

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

Net (loss) income reflects stock-based compensation expense of $ 5.8 million, $ 10.8 million and $ 3.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Concentration of Credit Risk —The Company is subject to concentrations of credit risk consisting primarily of operating leases on its owned properties.

See Note 12, Concentration of Risk , for a discussion of major operator concentration.

Segment Disclosures —The Company is subject to disclosures about segments of an enterprise and related information in accordance with ASC Topic 280, Segment Reporting .

Segment Disclosures —The Company is subject to disclosures about segments of an enterprise and related information in accordance with ASC 280, Segment Reporting .

The Company has one reportable segment consisting of investments in healthcare-related real estate assets.

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

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

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

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.

Dollar LIBOR rates were discontinued at the end of 2021.

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

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

The amendments in this update were effective immediately and could have been applied through December 31, 2022.

On December 21, 2022, the FASB issued ASU 2022-06 to defer the sunset date of ASC 848 to December 31, 2024.

During the year ended December 31, 2022, the Company adopted ASU 2020-04.

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

CARETRUST REIT, INC.

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REAL ESTATE INVESTMENTS, NET

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

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

December 31, 2022 December 31, 2021

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As of December 31, 2022, 94 of the Company’s 216 facilities were leased to subsidiaries of The Ensign Group, Inc.

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

(“Ensign”) on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease” and, collectively, the “Ensign Master Leases”) which commenced on June 1, 2014 and were subsequently modified on October 1, 2019, June 1, 2021, August 1, 2021, March 1, 2022 and April 1, 2022.

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

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

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

During the second and third quarters of 2022, the Company entered into triple-net lease agreements for two of the Company’s 216 facilities which are being repurposed to behavioral health facilities with rent commencing 12 to 18 months following lease commencement.

Two of the Company’s 216 facilities are non-operational and are leased under a short term lease with an expected remaining term of less than one year as of December 31, 2022.

As of December 31, 2022, five 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 CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 31, 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):

2023 $ 190,704

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

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

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

Option Type (2)

Current Cash Rent (3)

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

SNF 11 November 2030 1/1/2023 (4)

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

SNF / Campus 2 October 2032 1/1/2023 B 1,028

SNF 4 November 2034 12/1/2024 B 3,796

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

SNF 1 March 2029 4/1/2022 (5)

SNF / Campus 2 October 2032 1/1/2023 (4)

SNF 4 November 2034 12/1/2024 (5)

(1) The Company has not received notice of exercise for the option periods that are currently open.

(2) Option type includes:

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

B - Fixed base price.

C - Fixed capitalization rate on lease revenue.

A - Fixed base price.

B - Fixed capitalization rate on lease revenue.

(3) Based on annualized cash revenue for contracts in place at December 31, 2022.

(4) Option window is open for six months.

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

(6) Purchase option reflects two option types.

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( 1,417 ) — —

Recovery of previously reversed rent (3)

Recoveries (3)

Lease termination revenue (4)

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

As such, the Company reversed

(2) During the year ended December 31, 2022, and in accordance with ASC 842, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from five existing and former operators.

As such, the Company reversed $ 0.7 million of operating expense reimbursements, $ 0.2 million of contractual rent and $ 0.5 million of straight-line rent during the year ended December 31, 2022.

If lease payments are subsequently deemed probable of collection, the Company will reestablish the receivable which will result in an increase in rental income for such recoveries.

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

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

Initial Annual Cash Rent Number of Properties Number of Beds/Units (2)

December 31, 2022

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Multi-service campuses 13,003 1,235 1 130

Assisted living 12,395 — (6) 2 98

Total $ 21,921 $ 2,050 2 265

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(1) Purchase price includes capitalized acquisition costs.

(2) Initial annual cash rent excludes ground lease income.

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

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

Lease Amendments

Noble Partial Lease Termination and New Landmark Leases.

In June and August of 2022, one ALF in Florida and one ALF in Maryland were 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 two ALFs.

Annual cash rent under the applicable Noble master lease decreased by approximately $ 1.1 million.

In connection with the partial lease termination, the Company entered into a lease with Landmark Recovery of Maryland, LLC and Landmark Recovery of Florida, LLC ( collectively “Landmark”) to repurpose the facilities to behavioral health treatment centers.

Rent under the leases will commence 12 - 18 months 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 leases will expire on the 20th anniversary of the rent commencement date and both contain 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 Ensign Master Leases to include the two ALFs.

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 CONSOLIDATED FINANCIAL STATEMENTS

Lease Amendments

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 Ensign Master Lease to include the one ALF.

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.

Amended Eduro Master Lease.

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

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

The Eduro master lease, as amended, 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 Eduro master lease, as amended, increased by approximately $ 0.8 million.

Amended WLC Master Lease.

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

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

The WLC master lease, as amended, 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.

Amended Noble Master Leases and New Noble NJ Master Lease.

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The facilities were leased to affiliates of Ensign.

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

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

In conjunction with the acquisition of the two facilities, the Company amended and extended the initial term of an existing Ensign Master Lease to include the two skilled nursing facilities.

The Ensign Master Lease, as amended, had a remaining term at the date of amendment of approximately 17 years, with three five-year renewal options and CPI-based rent escalators.

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

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

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

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

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

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Premier Partial Lease Termination and Amended Noble VA Master Lease .

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

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

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

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

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

Pennant Spin .

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

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

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

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

The contractual annual cash rent under the amended Ensign

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 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.

During the year ended December 31, 2022, the Company recognized an aggregate impairment charge of $ 79.1 million, of which $ 45.0 million related to 12 facilities that have been sold, $ 18.0 million related to 10 facilities that were classified as held for sale in the first quarter of 2022 and reclassified to held for use in the third and fourth quarters of 2022, $ 14.4 million related to five facilities that were held for sale as of December 31, 2022, and $ 1.7 million related to one facility that was held for use during the year.

For properties classified as held for sale, the impairment charges were recognized to write down the properties to the lower of their carrying value or their aggregate fair value, less estimated costs to sell.

For properties classified as held for use, the impairment charges were recognized to write down the properties to their fair value.

Following the asset sales and held for sale reclassifications discussed below, five properties continued to meet the criteria to be classified as held for sale as of December 31, 2022.

As of December 31, 2022, the real estate comprising the remaining five properties classified as held for sale had an aggregate carrying value of $ 12.3 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) 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 ranging from $ 20,000 to $ 85,000 , with a weighted average price per unit of $ 55,000 .

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 year ended December 31, 2022.

During the first quarter of 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 year ended December 31, 2022, the Company recorded a gain of $ 0.2 million in connection with the sale.

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

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Master Leases was reduced by approximately $ 7.8 million.

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

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

Trillium Lease Termination and New Master Lease.

On July 15, 2019, the Company terminated its existing master lease (the “Original Trillium Lease”) with affiliates of Trillium Healthcare Group, LLC (“Trillium”), which covered ten properties in Iowa, seven properties in Ohio and one property in Georgia.

On August 16, 2019, the Company entered into a new master lease (the “New Trillium Lease”) with Trillium’s Iowa and Georgia affiliates covering the ten properties in Iowa and the one property in Georgia.

The Company recorded an adjustment to reduce rental income recognized under the Original Trillium Lease for unpaid contractual rent, straight-line rent and property tax reimbursements by approximately $ 3.8 million in the three months ended September 30, 2019.

On September 1, 2019, four of the seven skilled nursing properties in Ohio operated by Trillium under the Original Trillium Lease were transferred to affiliates of Providence Group, Inc.

(“Providence”).

In connection with the transfer, the Company amended its triple-net master lease with Providence.

The amended lease had a remaining initial term of approximately 13 years as of September 1, 2019, and includes two five-year renewal options and CPI-based rent escalators.

Annual cash rent under the amended lease increased by approximately $ 2.1 million.

Trio Lease Amendment.

On November 4, 2019, the Company amended its existing master lease with affiliates of Trio Healthcare, Inc.

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

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

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

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

On September 1, 2019, the Company sold three of the seven skilled nursing properties in Ohio operated by Trillium under the Original Trillium Lease for a purchase price of $ 28.0 million.

During the three months ended September 30, 2019 and prior to the disposition, the Company recorded an impairment expense of approximately $ 7.8 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

During the 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 .

During the third quarter of 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 bore interest at 8.5 % and was subsequently repaid during the fourth quarter of 2022.

Prior to their sale, the seven properties were classified as held for sale, with a carrying value of $ 46.9 million.

During the year ended December 31, 2022, the Company recorded a loss of $ 2.1 million in connection with the sale.

During the fourth quarter of 2022, the Company closed on the sale of five ALFs, operated by affiliates of Noble VA Holdings, LLC (“Noble”), consisting of 301 beds located in Virginia for net proceeds of $ 11.0 million.

Prior to their sale, the five properties had been classified as held for sale at September 30, 2022, with a carrying value of $ 12.7 million.

During the year ended December 31, 2022, the Company recorded a loss of $ 1.7 million in connection with the sale.

During the fourth quarter of 2022, the Company determined that nine ALFs, with a carrying value of $ 50.8 million, that were classified as held for sale at September 30, 2022, no longer met the held for sale criteria.

The Company reclassified the nine ALFs out of assets held for sale at their fair value at the date of the decision not to sell of approximately $ 47.8 million.

The fair value of assets reclassified as real estate investments held for use was based on an income approach using current market conditions and considers matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, and, where applicable, terms of recent lease agreements or the results of negotiations with prospective tenants, which are considered to be Level 3 measurements within the fair value hierarchy.

There are inherent uncertainties in making these assumptions.

For the Company’s impairment calculations, the Company’s fair value estimates primarily relied on an income approach.

When utilizing an income approach, assumptions include, but are not limited to, terminal capitalization rates ranging from 7.5 % to 8.75 % and discount rates ranging from 8.5 % to 9.75 %.

Impairment of Assets Held For Use

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 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 .

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

OTHER REAL ESTATE INVESTMENTS

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

OTHER REAL ESTATE RELATED AND OTHER INVESTMENTS

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

As of December 31, 2022

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

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

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

Investment Facility Count and Type Principal Balance as of December 31, 2022

Book Value as of December 31, 2022

Book Value as of December 31, 2021

Weighted Average Contractual Interest Rate Maturity Date

Senior mortgage secured loan receivable 18 SNF/Campus

$ 75,000 $ 72,543 $ — 8.4 % (1) 6/30/2027

Mortgage secured loan receivable 5 SNF

22,250 21,345 — 10.2 % (2) 8/1/2025

Mortgage secured loan receivable 4 SNF

24,900 23,796 — 9.0 % (2) 9/8/2025

Mezzanine loan receivable 9 SNF

15,000 14,672 15,155 12.0 % 11/30/2025

Mezzanine loan receivable 18 SNF/Campus

25,000 24,012 — 11.0 % 6/30/2032

Total $ 162,150 $ 156,368 $ 15,155

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

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

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

(1) Rate is net of subservicing fee.

(2) Term secured overnight financing rate (“SOFR”) used as of December 31, 2022 was 4.33 %.

Rates are net of subservicing fees.

The following table summarizes the Company’s other real estate related investments activity for the year ended December 31, 2022 and 2021 (dollars in thousands):

For the Year Ended December 31,

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

Accrued interest, net 1,165 155

Unrealized loss on other real estate related investments ( 7,102 ) —

Net increase in other real estate related investments, at fair value $ 141,213 $ 155

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.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 are operated by an existing o perator and one of which is 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.

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, 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 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;

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 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.

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

As of December 31, 2022

Investment Principal Balance as of December 31, 2022

Book Value as of December 31, 2022

Book Value as of December 31, 2021

Weighted Average Contractual Interest Rate Maturity Date

Other loans receivable $ 9,596 $ 9,600 $ 3,161 8.5 % 9/1/2023 - 9/30/2025

Expected credit loss — ( 2,094 ) —

Total $ 9,596 $ 7,506 $ 3,161

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company’s other loans receivable activity for the year ended December 31, 2022 and 2021 (dollars in thousands):

For the Year Ended December 31,

Origination of loans receivable $ 14,500 $ 1,253

Principal payments ( 6,307 ) ( 393 )

Accrued interest, net ( 4 ) ( 6 )

Provision for loan losses, net ( 3,844 ) —

Net increase in other loans receivable $ 4,345 $ 854

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

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

During the year ended December 31, 2022, the Company fully reserved and wrote-off $ 2.5 million, related to one other loan receivable, 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 years ended December 31, 2022, 2021 and 2020 ( dollar amounts in thousands):

For Year Ended December 31,

Investment 2022 2021 2020

Mezzanine loan receivable $ 1,825 $ 305 $ —

Mortgage loans receivable (1)

— 2,044 2,838

Mortgage secured loans receivable $ 4,853 $ — $ 2,044

Mezzanine loans receivable 3,489 1,825 305

Preferred equity investments (1)

1 unchanged sentence

Total $ 8,626 $ 2,156 $ 2,643

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

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

(1) As of December 31, 2022 and 2021, the Company had no preferred equity investments .

FAIR VALUE MEASUREMENTS

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

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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The Company does not expect that changes in classifications between levels will be frequent.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Items Measured at Fair Value on a Recurring Basis

1 unchanged sentence

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

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

Mortgage secured loans receivable $ — $ — $ 117,684 $ 117,684

Mezzanine loans receivable — — 38,684 38,684

Total $ — $ — $ 156,368 $ 156,368

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

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

Mezzanine loan receiv able:

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.

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

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 Real Estate Secured Loans Investments in Mezzanine Loans

Balance at December 31, 2021

Loan originations 122,150 25,000

Accrued interest, net 928 237

Unrealized loss on other real estate related investments ( 5,394 ) ( 1,708 )

Balance as of December 31, 2022

$ 117,684 $ 38,684

Real estate secured and mezzanine loans receiv able:

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.

During the year ended December 31, 2022, the Company recorded an unrealized loss of $ 7.1 million on the Company’s secured and mezzanine loans receivable due to rising interest rates.

Future changes in market interest rates or collateral value could materially impact the estimated discounted cash flows that are used to determine the fair value of the secured and mezzanine loans receivable.

As of December 31, 2022 and 2021, the Company did not have any loans 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 December 31, 2022 :

Type Book Value as of December 31, 2022

Valuation Technique Unobservable Inputs Range

Mortgage secured loans receivable $ 117,684 Discounted cash flow Discount Rate 9 % - 13 %

Mezzanine loans receivable 38,684 Discounted cash flow Discount Rate 12 % - 14 %

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

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

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

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

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

For the year ended December 31, 2022, the

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company recorded an impairment charge of $ 79.1 million.

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

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

Items Disclosed at Fair Value

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

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

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

December 31, 2022 December 31, 2021

3 unchanged sentences

Senior unsecured notes payable $ 400,000 $ 395,150 $ 345,036 $ 400,000 $ 394,262 $ 410,500

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

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

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

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

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

Senior unsecured notes payable :

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

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

Unsecured revolving credit facility and senior unsecured term loan:

5 unchanged sentences

Senior unsecured notes payable $ 400,000 $ ( 4,850 ) $ 395,150 $ 400,000 $ ( 5,738 ) $ 394,262

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

Senior unsecured term loan 200,000 ( 652 ) 199,348 200,000 ( 864 ) 199,136

37 unchanged sentences

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

During the year ended December 31 2021, the Company recorded a loss on extinguishment of debt of $ 10.8 million in the consolidated income statements, including a prepayment penalty of $ 7.9 million and a $ 2.9 million write-off of deferred financing costs associated with the redemption of the 2025 Notes.

During the year ended December 31 2021, the Company recorded a loss on extinguishment of debt of $ 10.8 million in the consolidated statements of operations, including a prepayment penalty of $ 7.9 million and a $ 2.9 million write-off of deferred financing costs associated with the redemption of the 2025 Notes.

Unsecured Revolving Credit Facility and Term Loan

On 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:

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

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

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

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

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

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

On December 16, 2022, 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 a second amended and restated credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender (the “Second Amended Credit Agreement”).

The Second Amended Credit Agreement, which amends and restates the Company’s amended and restated credit and guaranty agreement, dated as of February 8, 2019 (as amended, the “Prior Credit Agreement”) provides for:

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

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

The interest rates applicable to loans under the Revolving Facility are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.10 % to 0.55 % per annum or Adjusted Term SOFR or Adjusted Daily Simple SOFR (each as defined in the Second Amended Credit Agreement) 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 Adjusted Term SOFR or Adjusted Daily Simple SOFR 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

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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).

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).

2 unchanged sentences

The Term Loan has a maturity date of February 8, 2026.

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.

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 December 31, 2021, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

The Second Amended Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Second Amended Credit Agreement (other than the Operating Partnership).

The Second 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.

The Second 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 Second Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Second 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 December 31, 2022, the Company was in compliance with all applicable financial covenants under the Second Amended Credit Agreement.

Schedule of Debt Maturities

1 unchanged sentence

Thereafter 400,000

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

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

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

In connection with the entry into the equity distribution agreement and

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

The following table summarizes ATM Program activity for the years ended December 31, 2022 and 2021 (in thousands, except per share amounts):

For the Year Ended December 31,

3 unchanged sentences

$ 48,100 $ 23,505

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

(1) Total gross proceeds is before $ 0.6 million and $ 0.3 million of commissions paid to the sales agents during the year ended December 31, 2022 and 2021, respectively, under the ATM Program.

As of December 31, 2022, the Company had $ 428.4 million available for future issuances under the ATM Program.

8 unchanged sentences

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

Dividends declared $ 0.265 $ 0.265 $ 0.265 $ 0.265

Dividends declared per share $ 0.275 $ 0.275 $ 0.275 $ 0.275

Dividends payment date April 15, 2022 July 15, 2022 October 14, 2022 January 13, 2023

Dividends payable as of record date [1]

$ 26,691 $ 26,683 $ 26,683 $ 27,386

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

Dividends declared $ 0.25 $ 0.25 $ 0.25 $ 0.25

Dividends declared per share $ 0.265 $ 0.265 $ 0.265 $ 0.265

Dividends payment date April 15, 2021 July 15, 2021 October 15, 2021 January 14, 2022

Dividends payable as of record date [1]

$ 25,633 $ 25,714 $ 25,714 $ 25,755

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

Dividends declared $ 0.225 $ 0.225 $ 0.225 $ 0.225

Dividends declared per share $ 0.25 $ 0.25 $ 0.25 $ 0.25

Dividends payment date April 15, 2020 July 15, 2020 October 15, 2020 January 15, 2021

Dividends payable as of record date [1]

$ 23,931 $ 23,931 $ 23,934 $ 23,933

Dividends record date March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020

(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.

6 unchanged sentences

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

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

Under the Plan, restricted stock awards (“RSAs”) vest in equal annual installments beginning on the first anniversary of the grant date over a three year period for the RSAs granted in 2022 and 2021 and a four year period for the RSAs granted in 2020.

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

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

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

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

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

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

Relative total shareholder return units (“TSR Units”) granted in 2022 and 2021 are subject to both time and market based conditions and cliff vest after a three-year period.

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

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

3 unchanged sentences

RSAs 159,663 19.56

PSAs 108,414 22.48

Board Awards 25,992 16.93

10 unchanged sentences

Board Awards 25,992 16.93 440 20,266 346

(1) The Compensation Committee granted annual awards for 2023 in December 2022.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The following table summarizes the Company’s RSA, PSA and Board Award grants during the years ended December 31, 2021 and 2020 (dollars in thousands, except per share amounts):

8 unchanged sentences

Board Awards 27,611 16.48 455

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

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

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

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

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

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

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

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

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

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

The following table reflects the weighted-average key assumptions used in this valuation for awards granted during the year ended December 31, 2022 and 2021 :

For the Year Ended December 31, 2022

For the Year Ended December 31, 2021

Risk-free interest rate 3.91 % 0.60 %

Expected stock price volatility 52.90 % 52.42 %

Expected service period 2.93 years

Expected service period 3.04 years 2.93 years

Expected dividend yield (assuming full reinvestment) — % — %

Fair value per share at date of grant $ 26.53 $ 29.10

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

The total fair value of the TSR Units granted during the year ended December 31, 2022 and 2021 was $ 2.5 million and $ 5.3 million, respectively.

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

2 unchanged sentences

Stock-based compensation expense $ 5,758 $ 10,832 $ 3,790

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

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

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

As of December 31, 2022, there wa s $ 11.6 million o f unamortized stock-based compensation expense related to the unvested RSAs, PSAs, Board Awards, and TSR Units.

CARETRUST REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER COMMON SHARE

The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the years ended December 31, 2021, 2020 and 2019, 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 for the years ended December 31, 2021, 2020 and 2019 (amounts in thousands, except per share amounts):

(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 years ended December 31, 2022, 2021 and 2020, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the years ended December 31, 2022, 2021 and 2020 (amounts in thousands, except per share amounts):

Year Ended December 31,

2022 2021 2020

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

Net (loss) income $ ( 7,506 ) $ 71,982 $ 80,867

Net income allocated to participating securities ( 440 ) ( 507 ) ( 298 )

3 unchanged sentences

Weighted-average diluted common shares outstanding 96,703 96,092 95,207

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

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

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

(Loss) earnings per common share, basic $ ( 0.08 ) $ 0.74 $ 0.85

(Loss) earnings per common share, diluted $ ( 0.08 ) $ 0.74 $ 0.85

Antidilutive unvested restricted stock awards, total shareholder units and performance awards excluded from the computation 744 591 296

COMMITMENTS AND CONTINGENCIES

26 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 year ended December 31, 2021:

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

State SNF Campus ALF/ILF SNF Campus ALF/ILF

December 31, 2022

CA 27 8 5 3,048 1,359 437 26 %

TX 38 3 3 4,849 536 242 22 %

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

December 31, 2021

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

TX 37 3 3 4,694 536 242 20 %

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

SUBSEQUENT EVENTS

1 unchanged sentence

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

Recent Acquisition and Amended Lease Agreement

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

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

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

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

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

The acquisition was funded using cash on hand.

Recent Asset Sale

On January 13, 2023, the Company closed on the sale of one ALF consisting of 105 beds located in Florida with a carrying value of $ 3.3 million, which approximated the net sales proceeds received.

The facility was classified as held for sale as of December 31, 2022.

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

1 unchanged sentence

(dollars in thousands)

Initial Cost to Company Gross Carrying Value

Initial Cost to Company Costs Capitalized Since Acquisition Gross Carrying Value

Description Facility Location Encum.

34 unchanged sentences

Jefferson Ralston Holdings LLC Arvada Arvada, CO — 280 1,230 834 280 2,064 2,344 ( 1,082 ) 2012 2009

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

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

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

1 unchanged sentence

(dollars in thousands)

Lafayette Health Holdings LLC Julia Temple Englewood, CO — 1,607 4,222 6,195 1,607 10,417 12,024 ( 6,030 ) 2012 2009

Hillendahl Health Holdings LLC Golden Acres Dallas, TX — 2,133 11,977 1,421 2,133 13,398 15,531 ( 6,543 ) 1984 2009

Price Health Holdings LLC Pinnacle Price, UT — 193 2,209 849 193 3,058 3,251 ( 1,316 ) 2012 2009

23 unchanged sentences

Orem Health Holdings LLC Orem Orem, UT — 1,689 3,896 3,235 1,689 7,131 8,820 ( 3,509 ) 2011 2011

Wisteria Health Holdings LLC Wisteria Abilene, TX — 746 9,903 290 746 10,193 10,939 ( 2,456 ) 2008 2011

Wisteria Health Holdings Wisteria Abilene, TX 746 9,903 290 746 10,193 10,939 ( 2,641 )

Renee Avenue Health Holdings LLC Monte Vista Pocatello, ID — 180 2,481 966 180 3,447 3,627 ( 1,516 ) 2013 2012

9 unchanged sentences

Guadalupe Health Holdings LLC The Courtyard (Victoria East) Victoria, TX — 80 2,391 15 80 2,406 2,486 ( 532 ) 2013 2013

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

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

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

1 unchanged sentence

(dollars in thousands)

49th Street Health Holdings LLC Omaha Omaha, NE — 129 2,418 24 129 2,442 2,571 ( 793 ) 1960 2013

Willows Health Holdings LLC Cascade Vista Redmond, WA — 1,388 2,982 202 1,388 3,184 4,572 ( 1,134 ) 1970 2013

Tulalip Bay Health Holdings LLC Mountain View Marysville, WA — 1,722 2,642 ( 980 ) 742 2,642 3,384 ( 837 ) 1966 2013

10 unchanged sentences

CTR Partnership, L.P.

BeaverCreek Health and Rehab Beavercreek, OH — 892 17,159 13 892 17,172 18,064 ( 2,684 ) 2014 2015

CTR Partnership, L.P.

Premier Estates of Cincinnati-Riverview Cincinnati, OH — 833 18,086 792 833 18,878 19,711 ( 3,408 ) 1992 2015

CTR Partnership, L.P.

Englewood Health and Rehab Englewood, OH — 1,014 18,541 88 1,014 18,629 19,643 ( 2,937 ) 1962 2015

CTR Partnership, L.P.

Portsmouth Health and Rehab Portsmouth, OH — 282 9,726 428 282 10,154 10,436 ( 1,679 ) 2008 2015

CTR Partnership, L.P.

West Cove Care & Rehabilitation Center Toledo, OH — 93 10,365 88 93 10,453 10,546 ( 1,879 ) 2007 2015

CTR Partnership, L.P.

BellBrook Health and Rehab Bellbrook, OH — 214 2,573 231 214 2,804 3,018 ( 466 ) 2003 2015

CTR Partnership, L.P.

Xenia Health and Rehab Xenia, OH — 205 3,564 23 205 3,587 3,792 ( 562 ) 1981 2015

CTR Partnership, L.P.

Jamestown Place Health and Rehab Jamestown, OH — 266 4,725 268 266 4,993 5,259 ( 834 ) 1967 2015

CTR Partnership, L.P.

Casa de Paz Sioux City, IA — 119 7,727 — 119 7,727 7,846 ( 1,336 ) 1974 2016

31 unchanged sentences

Royse City Medical Lodge Royse City, TX — 606 14,660 — 606 14,660 15,266 ( 2,230 ) 2009 2016

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

CTR Partnership, L.P.

6 unchanged sentences

DuQuoin Nursing & Rehabilitation Center DuQuoin, IL — 511 3,662 — 511 3,662 4,173 ( 534 ) 2014 2017

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2022

(dollars in thousands)

CTR Partnership, L.P.

31 unchanged sentences

CTR Partnership, L.P.

Brookfield Health and Rehab Battle Ground, WA — 320 500 — 320 500 820 ( 54 ) 2012 2017

CTR Partnership, L.P.

The Oaks at Lakewood Tacoma, WA — 1,001 1,779 — 1,001 1,779 2,780 ( 233 ) 1989 2017

17 unchanged sentences

The Suites - Parker Parker, CO — 1,178 17,857 — 1,178 17,857 19,035 ( 1,865 ) 2012 2018

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

CTR Partnership, L.P.

8 unchanged sentences

Gulf Coast Buyer 1 LLC The Bradford Skilled Nursing and Rehabilitation Shreveport, LA — 3,758 21,325 17 3,758 21,342 25,100 ( 2,127 ) 1980 2019

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2022

(dollars in thousands)

Gulf Coast Buyer 1 LLC Colonial Oaks Skilled Nursing and Rehabilitation Bossier City, LA — 1,635 21,180 — 1,635 21,180 22,815 ( 2,045 ) 2013 2019

31 unchanged sentences

Cedar Pointe Health and Wellness Suites Cedar Park, TX — 3,325 11,738 — 3,325 11,738 15,063 ( 461 ) 2017 2021

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

CTR Partnership, L.P.

Ennis Care Center Ennis,TX — 568 8,055 — 568 8,055 8,623 ( 201 ) 1982 2022

— 157,842 947,010 97,380 156,008 1,044,124 1,200,131 ( 246,446 )

5 unchanged sentences

4th Street Holdings LLC West Bend Care Center West Bend, IA — 180 3,352 — 180 3,352 3,532 ( 1,199 ) 2006 2011

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2022

(dollars in thousands)

Big Sioux River Health Holdings LLC Hillcrest Health Hawarden, IA — 110 3,522 75 110 3,597 3,707 ( 1,211 ) 1974 2011

2 unchanged sentences

CTR Partnership, L.P.

Centerville Senior Independent Living Dayton, OH — 3,912 22,458 117 3,781 22,706 26,487 ( 3,605 ) 2007 2015

CTR Partnership, L.P.

Liberty Nursing Center of Willard Willard, OH — 144 11,097 50 144 11,147 11,291 ( 2,042 ) 1985 2015

24 unchanged sentences

Northshore Healthcare Holdings LLC Bayshire Rancho Mirage Rancho Mirage, CA — 4,024 16,790 — 4,024 16,790 20,814 ( 820 ) 2000 2021

CTR Partnership, L.P.

Imboden Creek Living Center Decatur, IL — 131 12,499 81 131 12,580 12,711 ( 289 ) 2003 2022

— 55,670 281,386 10,524 55,670 291,910 347,580 ( 40,159 )

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

Assisted and Independent Living Properties:

8 unchanged sentences

Boardwalk Health Holdings LLC Park Place Reno, NV — 367 1,633 52 367 1,685 2,052 ( 625 ) 1993 2012

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2022

(dollars in thousands)

Willows Health Holdings LLC Cascade Plaza Redmond, WA — 2,835 3,784 395 2,835 4,179 7,014 ( 1,500 ) 2013 2013

8 unchanged sentences

CTR Partnership, L.P.

English Meadows Senior Living Community Christiansburg, VA — 250 6,114 175 250 6,289 6,539 ( 1,076 ) 2011 2014

CTR Partnership, L.P.

Bristol Court Assisted Living Saint Petersburg, FL — 645 7,322 408 645 7,730 8,375 ( 1,198 ) 2010 2015

CTR Partnership, L.P.

Asbury Place Assisted Living Pensacola, FL — 212 4,992 222 212 5,214 5,426 ( 802 ) 1997 2015

CTR Partnership, L.P.

New Haven Assisted Living of San Angelo San Angelo, TX — 284 4,478 — 284 4,478 4,762 ( 662 ) 2012 2016

CTR Partnership, L.P.

Lamplight Inn of Fort Wayne Fort Wayne, IN — 452 8,703 304 452 9,007 9,459 ( 1,269 ) 2015 2016

CTR Partnership, L.P.

Lamplight Inn of West Allis West Allis, WI — 97 6,102 106 77 4,181 4,258 — 2013 2016

2 unchanged sentences

CTR Partnership, L.P.

English Meadows Elks Home Campus Bedford, VA — 451 9,023 287 451 9,310 9,761 ( 1,360 ) 2014 2016

CTR Partnership, L.P.

Croatan Village New Bern, NC — 312 6,919 — 301 5,663 5,964 — 2010 2016

16 unchanged sentences

CTR Partnership, L.P.

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

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2021

(dollars in thousands)

CTR Partnership, L.P.

Memory Care Cottages in White Bear Lake White Bear Lake, MN — 1,611 5,633 — 1,611 5,633 7,244 ( 775 ) 2016 2017

CTR Partnership, L.P.

Culpeper Culpepper, VA — 318 3,897 197 318 4,094 4,412 ( 492 ) 1997 2017

CTR Partnership, L.P.

Louisa Louisa, VA — 407 4,660 240 407 4,900 5,307 ( 599 ) 2002 2017

CTR Partnership, L.P.

Warrenton Warrenton, VA — 1,238 7,247 194 1,238 7,441 8,679 ( 880 ) 1999 2017

CTR Partnership, L.P.

Vista Del Lago Escondido, CA — 4,362 7,997 — 4,362 7,997 12,359 ( 698 ) 2015 2019

17 unchanged sentences

Impairment ( 29,803 ) — —

Sales of real estate ( 4,053 ) ( 13,729 ) ( 62,784 )

Sales and/or transfers to assets held for sale, net ( 149,280 ) ( 4,053 ) ( 13,729 )

Balance at the end of the period $ 1,721,871 $ 1,873,806 $ 1,683,205

3 unchanged sentences

Impairment 10,232 — —

Sales of real estate 516 2,470 720

Sales and/or transfers to assets held for sale, net 20,770 516 2,470

Balance at the end of the period $ ( 315,914 ) $ ( 304,785 ) $ ( 259,803 )

4 unchanged sentences

Carrying Amount of Loans Subject to Delinquent Principal or Interest

Mezzanine Loan:

Virginia (9 SNF facilities) 12.0 % 2025 (1) $ 112,278 (3) $ 15,000 $ 15,155 N/A

Mortgage Secured Loans:

West Virginia ( 18 SNF facilities)

8.4 % 2027 (3)

$ 482,000 (4)

$ 75,000 $ 72,543 N/A

California ( 5 SNF facilities)

22,250 21,345 N/A

Georgia ( 4 SNF facilities)

24,900 23,796 N/A

Mezzanine Loans:

West Virginia ( 18 SNF facilities)

11.0 % 2032 (3)

25,000 24,012 N/A

Virginia ( 9 SNF facilities)

12.0 % 2025 (3)

15,000 14,672 N/A

$ 1,279,409 $ 162,150 $ 156,368

(1) The aggregate cost for federal income tax purposes was $ 162.2 million as of December 31, 2022.

(2) Interest rates are variable and represent the rate in effect as of December 31, 2022.

(3) Interest is due monthly, and principal is due at the maturity date.

(2) The aggregate cost of investments in real estate mortgage loans for federal income tax purposes was $ 15.0 million.

(4) The 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 loan constituted the entirety of the “C” tranche.

The Company also extended a mezzanine loan to the borrower group.

Accordingly, the amounts of the prior liens at December 31, 2022 are estimated.

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

The Company’s loan constituted the entirety of the “B” tranche.

Accordingly, the amounts of the prior liens at December 31, 2022 are estimated.

(6) The first mortgage loans on these properties are not held by the Company.

Accordingly, the amounts of the prior liens at December 31, 2022 are estimated.

Changes in mortgage loans are summarized as follows (in thousands):

Changes in mortgage secured and mezzanine loans are summarized as follows (in thousands):

Year Ended December 31,

2 unchanged sentences

Additions during period:

New mortgage loans — 61,258 40,889

New mortgage and mezzanine loans 147,150 — 61,258

Interest income added to principal 1,165 155 —

1 unchanged sentence

Paydowns/Repayments — — ( 75,758 )

Unrealized loss ( 7,102 )

Balance at end of period $ 156,368 $ 15,155 $ 15,000

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

What changed 10-K

Item 9A. Controls and Procedures