CareTrust REIT, Inc. 10-K

ITEM 9A. Controls and Procedures Disclosure Controls and Procedures We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure 52 Table of Contents controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As of December 31, 2022, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of the Independent Registered Public Accounting Firm The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein. 53 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of CareTrust REIT, Inc. 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, 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 9, 2023, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Costa Mesa, California February 9, 2023 54 Table of Contents ITEM 9B. Other Information Not applicable. ITEM 9 C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Not applicable. 55 Table of Contents PART III ITEM 10. Directors, Executive Officers and Corporate Governance The information required under Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders. Code of Conduct and Ethics We have adopted a code of business conduct and ethics that applies to all employees, including employees of our subsidiaries, as well as each member of our Board of Directors. 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 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. ITEM 11. Executive Compensation The information required under Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required under Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders. ITEM 13. Certain Relationships and Related Transactions, and Director Independence The information required under Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders. ITEM 14. Principal Accountant Fees and Services The information required under Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders. 56 Table of Contents PART IV Table of Contents ITEM 15. Exhibit and Financial Statement Schedules (a)(1) Financial Statements See Index to Consolidated Financial Statements on page F-1 of this report. (a)(2) Financial Statement Schedules Schedule III: Real Estate Assets and Accumulated Depreciation Schedule IV: Mortgage Loans on Real Estate Note: All other schedules have been omitted because the required information is presented in the financial statements and the related notes or because the schedules are not applicable. (a)(3) Exhibits 3.1 Articles of Amendment and Restatement of CareTrust REIT, Inc. (incorporated by reference to Exhibit 3.1 to CareTrust REIT, Inc.’s Registration Statement on Form 10, filed on May 13, 2014). 3.2 Articles of Amendment, dated May 30, 2018, to the Articles of Amendment and Restatement of CareTrust REIT, Inc. (incorporated by reference to Exhibit 3.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K filed on May 31, 2018). 3.3 Amended and Restated Bylaws of CareTrust REIT, Inc. (incorporated by reference to Exhibit 3.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K filed on March 7, 2019). 4.1 Indenture, dated as of June 17, 2021, among CTR Partnership, L.P. and CareTrust Capital Corp., as Issuers, CareTrust REIT, Inc., the other guarantors named therein, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 17, 2021). 4.2 Form of 3.875% Senior Note due 2028 (included in Exhibit 4.1). 4.3 Specimen Stock Certificate of CareTrust REIT, Inc. (incorporated by reference to Exhibit 4.1 to CareTrust REIT, Inc.’s Registration Statement on Form 10, filed on April 15, 2014). 4.4 Description of CareTrust REIT, Inc.’s Capital Stock (incorporated by reference to Exhibit 4.5 to CareTrust REIT, Inc.’s Annual Report on Form 10-K, filed on February 20, 2020). 10.1 Form of Master Lease by and among certain subsidiaries of The Ensign Group, Inc. and certain subsidiaries of CareTrust REIT, Inc. (incorporated by reference to Exhibit 10.1 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). 10.2 Form of Guaranty of Master Lease by The Ensign Group, Inc. in favor of certain subsidiaries of CareTrust REIT, Inc., as landlords under the Ensign Master Leases (incorporated by reference to Exhibit 10.2 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). 10.3 Tax Matters Agreement, dated as of May 30, 2014, by and between The Ensign Group, Inc. and CareTrust REIT, Inc. (incorporated by reference to Exhibit 10.5 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). 10.4 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). 10.5 Amended and Restated Partnership Agreement of CTR Partnership, L.P. (incorporated by reference to Exhibit 3.4 to CareTrust REIT, Inc.’s Registration Statement on Form S-4, filed on August 28, 2014). +10.6 Form of Indemnification Agreement between CareTrust REIT, Inc. and its directors and officers (incorporated by reference to Exhibit 10.11 to CareTrust REIT, Inc.’s Current Report on Form 8-K, filed on June 5, 2014). +10.7 Incentive Award Plan (incorporated by reference to Exhibit 10.9 to CareTrust REIT, Inc.’s Registration Statement on Form 10, filed on May 13, 2014). +10.8 Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.14 to CareTrust REIT, Inc.’s Annual Report on Form 10-K, filed on February 11, 2015). 58 Table of Contents +10.9 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). *+10.10 Form of TSR Award Agreement *+10.11 Form of Performance-Based Restricted Stock Award Grant Notice +10.12 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). *21.1 List of Subsidiaries of CareTrust REIT, Inc. *23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. *31.1 Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *31.2 Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document *101.SCH XBRL Taxonomy Extension Schema Document *101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *101.DEF XBRL Taxonomy Extension Definition Linkbase Document *101.LAB XBRL Taxonomy Extension Label Linkbase Document *101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Filed herewith. ** Furnished herewith. + Management contract or compensatory plan or arrangement. 59 Table of Contents ITEM 16. Form 10-K Summary None. 60 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CARETRUST REIT, INC. By: / S / DAVID M. SEDGWICK David M. Sedgwick President and Chief Executive Officer Dated: February 9, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ DAVID M. SEDGWICK President and Chief Executive Officer (Principal Executive Officer) February 9, 2023 David M. Sedgwick /s/ WILLIAM M. WAGNER Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) February 9, 2023 William M. Wagner /s/ DIANA LAING Director February 9, 2023 Diana Laing /s/ ANNE OLSON Director February 9, 2023 Anne Olson /s/ SPENCER PLUMB Director February 9, 2023 Spencer Plumb /s/ CAREINA WILLIAMS Director February 9, 2023 Careina Williams 61 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) with respect to CareTrust REIT, Inc. F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 F-4 Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 F-5 Consolidated Statements of Equity for the years ended December 31, 2022, 2021 and 2020 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 F-7 Notes to Consolidated Financial Statements F-8 Schedule III: Real Estate Assets and Accumulated Depreciation F-30 Schedule IV: Mortgage Loans on Real Estate F-38 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of CareTrust REIT, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of CareTrust REIT, Inc. 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting 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 and our report dated February 9, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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 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 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. F-2 Table of Contents 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 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 Costa Mesa, California February 9, 2023 We have served as the Company's auditor since 2019. F-3 Table of Contents CARETRUST REIT, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2022 2021 Assets: Real estate investments, net $ 1,421,410 $ 1,589,971 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 Cash and cash equivalents 13,178 19,895 Accounts and other receivables 416 2,418 Prepaid expenses and other assets, net 11,690 7,512 Deferred financing costs, net 5,428 1,062 Total assets $ 1,620,781 $ 1,640,848 Liabilities and Equity: Senior unsecured notes payable, net $ 395,150 $ 394,262 Senior unsecured term loan, net 199,348 199,136 Unsecured revolving credit facility 125,000 80,000 Accounts payable, accrued liabilities and deferred rent liabilities 24,360 25,408 Dividends payable 27,550 26,285 Total liabilities 771,408 725,091 Commitments and contingencies (Note 11) Equity: Preferred stock, $ 0.01 par value; 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, 99,010,112 and 96,296,673 shares issued and outstanding as of December 31, 2022 and 2021, respectively 990 963 Additional paid-in capital 1,245,337 1,196,839 Cumulative distributions in excess of earnings ( 396,954 ) ( 282,045 ) Total equity 849,373 915,757 Total liabilities and equity $ 1,620,781 $ 1,640,848 See accompanying notes to consolidated financial statements. F-4 Table of Contents CARETRUST REIT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2022 2021 2020 Revenues: Rental income $ 187,506 $ 190,195 $ 173,612 Independent living facilities — — 2,077 Interest and other income 8,626 2,156 2,643 Total revenues 196,132 192,351 178,332 Expenses: Depreciation and amortization 50,316 55,340 52,760 Interest expense 30,008 23,677 23,661 Property taxes 4,333 3,574 2,836 Independent living facilities — — 1,869 Impairment of real estate investments 79,062 — — 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: Loss on extinguishment of debt — ( 10,827 ) — 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 Diluted $ ( 0.08 ) $ 0.74 $ 0.85 Weighted-average number of common shares: Basic 96,703 96,017 95,200 Diluted 96,703 96,092 95,207 See accompanying notes to consolidated financial statements. F-5 Table of Contents CARETRUST REIT, INC. CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except share and per share amounts) Common Stock Additional Paid-in Capital Cumulative Distributions in Excess of Earnings Total Equity Shares Amount Balance as of December 31, 2019 95,103,270 $ 951 $ 1,162,990 $ ( 236,350 ) $ 927,591 Issuance of common stock, net — — ( 404 ) — ( 404 ) Vesting of restricted common stock, net of shares withheld for employee taxes 112,527 1 ( 1,996 ) — ( 1,995 ) Amortization of stock-based compensation — — 3,812 — 3,812 Common dividends ($ 1.00 per share) — — — ( 95,729 ) ( 95,729 ) Net income — — — 80,867 80,867 Balance as of December 31, 2020 95,215,797 952 1,164,402 ( 251,212 ) 914,142 Issuance of common stock, net 990,000 10 22,936 — 22,946 Vesting of restricted common stock, net of shares withheld for employee taxes 90,876 1 ( 1,331 ) — ( 1,330 ) Amortization of stock-based compensation — — 10,832 — 10,832 Common dividends ($ 1.06 per share) — — — ( 102,815 ) ( 102,815 ) Net income — — — 71,982 71,982 Balance as of December 31, 2021 96,296,673 963 1,196,839 ( 282,045 ) 915,757 Issuance of common stock, net 2,405,000 24 47,212 — 47,236 Vesting of restricted common stock, net of shares withheld for employee taxes 308,439 3 ( 4,472 ) — ( 4,469 ) Amortization of stock-based compensation — — 5,758 — 5,758 Common dividends ($ 1.10 per share) — — — ( 107,403 ) ( 107,403 ) Net loss — — — ( 7,506 ) ( 7,506 ) Balance as of December 31, 2022 99,010,112 $ 990 $ 1,245,337 $ ( 396,954 ) $ 849,373 See accompanying notes to consolidated financial statements. F-6 Table of Contents CARETRUST REIT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2022 2021 2020 Cash flows from 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 Amortization of deferred financing costs 2,095 2,052 1,950 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 Straight-line rental income ( 17 ) ( 32 ) ( 77 ) Adjustment for collectibility of rental income 1,417 — — Noncash interest income ( 1,165 ) ( 155 ) — 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, net 3,844 — — Change in operating assets and liabilities: Accounts and other receivables 604 ( 562 ) 825 Prepaid expenses and other assets, net 123 399 387 Accounts payable, accrued liabilities and deferred rent liabilities ( 1,049 ) 6,057 3,791 Net cash provided by operating activities 144,415 156,871 145,735 Cash flows from investing activities: Acquisitions of real estate, net of deposits applied ( 21,915 ) ( 192,718 ) ( 89,650 ) Purchases of equipment, furniture and fixtures and improvements to real estate ( 7,292 ) ( 6,013 ) ( 8,297 ) 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 Escrow deposits for potential acquisitions of real estate — — ( 3,000 ) Net proceeds from sales of real estate 45,149 6,958 6,608 Net cash used in investing activities ( 127,400 ) ( 192,633 ) ( 41,582 ) Cash flows from financing activities: Proceeds from (costs paid for) the issuance of common stock, net 47,236 22,946 ( 404 ) Proceeds from the issuance of senior unsecured notes payable — 400,000 — Borrowings under unsecured revolving credit facility 160,000 220,000 65,000 Payments on senior unsecured notes payable — ( 300,000 ) — Payments on unsecured revolving credit facility ( 115,000 ) ( 190,000 ) ( 75,000 ) Payments on debt extinguishment and deferred financing costs ( 5,361 ) ( 14,095 ) — Net-settle adjustment on restricted stock ( 4,469 ) ( 1,331 ) ( 1,996 ) Dividends paid on common stock ( 106,138 ) ( 100,782 ) ( 93,161 ) 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 Cash and cash equivalents as of the end of period $ 13,178 $ 19,895 $ 18,919 Supplemental disclosures of cash flow information: Interest paid $ 25,912 $ 22,838 $ 21,691 Supplemental schedule of noncash investing and financing activities: Increase in dividends payable $ 1,265 $ 2,033 $ 2,568 Right-of-use asset obtained in exchange for new operating lease obligation $ — $ — $ 599 Transfer of pre-acquisition costs to acquired assets $ 7 $ 358 $ 168 Sale of real estate settled with notes receivable $ 12,000 $ — $ 32,400 See accompanying notes to consolidated financial statements. F-7 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION 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, 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 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 resurgences of COVID-19 or outbreaks of other highly infectious diseases. The adverse impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition could be material. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation —The accompanying consolidated financial statements of the Company reflect, for all periods presented, the historical financial position, results of operations and cash flows of the Company and its wholly-owned subsidiaries prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany transactions and account balances within the Company have been eliminated. Lessor Accounting —The Company recognizes lease revenue in accordance with Accounting Standards Codification (“ASC”) 842, Leases . The Company’s lease agreements typically contain annual escalators based on the percentage change in the Consumer Price Index which are accounted for as variable lease payments in the period in which the change occurs. For lease agreements that contain fixed rent escalators, the Company generally recognizes lease revenue on a straight-line basis of accounting. 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 statements of operations. 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. The Company considers the operator’s performance and anticipated trends, payment history, and the existence and creditworthiness of guarantees, among other factors, in making this determination. For such leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term, if applicable. 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 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. See Note 3, Real Estate Investments, Net for further detail. Estimates and Assumptions —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that the assumptions and estimates used in preparation of the underlying consolidated financial statements are reasonable. Actual results, however, could differ from those estimates and assumptions. F-8 Table of Contents 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. The assets acquired and liabilities assumed are measured at their acquisition date relative fair values. Acquisition costs are capitalized as incurred. The Company allocates the acquisition costs to the tangible assets, identifiable intangible assets/liabilities and assumed liabilities on a relative fair value basis. The Company assesses fair value based on available market information, such as capitalization and discount rates, comparable sale transactions and relevant per square foot or unit cost information. A real estate asset’s fair value may be determined utilizing cash flow projections that incorporate such market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, as well as market and economic conditions. The fair value of tangible assets of an acquired property is based on the value of the property as if it is vacant. 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 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, 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. 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. 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. 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, and ceases depreciation. 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. 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 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 F-9 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL 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, 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. The amortized cost of a loan receivable is the outstanding unpaid principal balance, net of unamortized discounts, costs and fees directly associated with the origination of the loan. Income Taxes —The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). The Company believes it has been organized and has operated, and the Company intends to continue to operate, in a manner to qualify for taxation as a REIT under the Code. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute to its stockholders at least 90% of the Company’s annual REIT taxable income (computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes as qualifying dividends all of its REIT taxable income to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Real Estate Depreciation and Amortization —Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows: Building 25 - 40 years Building improvements 10 - 25 years Tenant improvements Shorter of lease term or expected useful life Integral equipment, furniture and fixtures 5 years Identified intangible assets Shorter of lease term or expected useful life Cash and Cash Equivalents —Cash and cash equivalents consist of bank term deposits and money market funds with original maturities of three months or less at time of purchase and therefore approximate fair value. 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 cash equivalents with high credit quality financial institutions. The Company’s cash and cash equivalents balance periodically exceeds federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts. 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 F-10 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL 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 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 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. The Company measures and recognizes compensation expense for all share-based payment awards made to directors, officers and employees based on the grant date fair value, amortized over the requisite service period of the awar d. 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 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 (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 280, Segment Reporting . The Company has one reportable segment consisting of investments in healthcare-related real estate assets. Earnings Per Share —The Company calculates earnings per share (“EPS”) in accordance with ASC 260, Earnings Per Share . Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities. 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 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”). For U.S. 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 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. F-11 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. REAL ESTATE INVESTMENTS, NET 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 Land $ 238,738 $ 251,787 Buildings and improvements 1,483,133 1,622,019 Integral equipment, furniture and fixtures 97,199 104,722 Identified intangible assets 2,832 1,257 Real estate investments 1,821,902 1,979,785 Accumulated depreciation and amortization ( 400,492 ) ( 389,814 ) Real estate investments, net $ 1,421,410 $ 1,589,971 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 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. A default by any subsidiary of Ensign with regard to any facility leased pursuant to an Ensign Master Lease will result in a default under all of the Ensign Master Leases. As of December 31, 2022, annualized contractual rental income from the Ensign Master Leases was $ 62.3 million and is escalated annually, in June, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero ) or 2.5 %, and (2) the prior year’s rent. In addition to rent, the subsidiaries of Ensign that are tenants under the Ensign Master Leases are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). During the year ended December 31, 2020, the Company acquired four additional facilities leased to subsidiaries of Ensign on a triple-net basis under two separate master lease agreements, each of which contains a purchase option. As of December 31, 2022, annualized contractual rental income from the four additional Ensign facilities was $ 3.9 million and is escalated annually, in December, by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 2.5 %, and (2) the prior year’s rent. In addition to rent, the subsidiaries of Ensign that are tenants under the four additional facilities are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). The obligations under the lease agreements for the four additional facilities are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases. See below under “Lease Amendments” for further detail on Ensign lease amendments. As of December 31, 2022, 15 of the Company’s facilities were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”). The PMG Master Lease commenced on December 1, 2016, and provides an initial term of fifteen years , with two five-year renewal options. As of December 31, 2022, annualized contractual rental income from the PMG Master Lease was $ 30.2 million and is escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero ) or 3.0 %, and (2) the prior year’s rent. In addition to rent, the subsidiaries of PMG that are tenants under the PMG Master Lease are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). As of December 31, 2022, 103 of the Company’s 216 facilities were leased to various other operators under triple-net leases. 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. 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. F-12 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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): Year Amount 2023 $ 190,704 2024 190,463 2025 190,621 2026 190,727 2027 187,719 Thereafter 984,665 $ 1,934,899 Tenant Purchase Options Certain of the Company’s operators hold purchase options allowing them to acquire properties they currently lease from the Company. A summary of these purchase options is presented below (dollars in thousands): Asset Type Properties Lease Expiration Next Option Open Date (1) Option Type (2) Current Cash Rent (3) SNF 11 November 2030 1/1/2023 (4) B 5,092 SNF 1 March 2029 4/1/2022 (5) A / B (6) 805 SNF / Campus 2 October 2032 1/1/2023 (4) A 1,097 SNF 4 November 2034 12/1/2024 (5) A 3,891 (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. 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. Rental Income The following table summarizes components of the Company’s rental income (dollars in thousands): For the Year Ended December 31, 2022 2021 2020 Rental Income Contractual rent due (1) $ 188,906 $ 190,100 $ 171,309 Straight-line rent 17 32 77 Adjustment for collectibility (2) ( 1,417 ) — — Recoveries (3) — — 1,047 Lease termination revenue (4) — 63 1,179 Total $ 187,506 $ 190,195 $ 173,612 (1) Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company. 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, 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. F-13 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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. Recent Real Estate Acquisitions The following table summarizes the Company’s acquisitions for the years ended December 31, 2022, 2021 and 2020 (dollar amounts in thousands): Type of Property Purchase Price (1) Initial Annual Cash Rent Number of Properties Number of Beds/Units (2) December 31, 2022 Skilled nursing $ 8,918 $ 815 1 135 Multi-service campuses 13,003 1,235 1 130 Total $ 21,921 $ 2,050 2 265 December 31, 2021 Skilled nursing $ 57,973 $ 4,499 (3) 4 509 Multi-service campuses 125,708 8,604 (4) 4 640 Assisted living 12,395 — (5) 2 98 Total $ 196,076 $ 13,103 10 1,247 December 31, 2020 Skilled nursing $ 75,545 $ 6,453 6 715 Multi-service campuses 6,876 555 1 184 Assisted living 7,396 590 1 62 Total $ 89,817 $ 7,598 8 961 (1) Purchase price includes capitalized acquisition costs. (2) The number of beds/units includes operating beds at acquisition date. (3) Initial annual cash rent represents initial cash rent for the first twelve months excluding any impact of straight-line rent. (4) Initial annual cash rent represents the first twelve months of rent upon commencement of the Company’s long-term net leases, which occurred during the three months ended June 30, 2021, upon the tenant’s receipt of licensing approval and increases to $ 9.4 million in the second year with CPI-based annual escalators thereafter. (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. (“Ensign”). 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. F-14 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On March 1, 2022, operations at one ALF in Arizona operated by affiliates of Pennant were transferred to affiliates of Ensign. In connection with the transfer, the Company amended the Pennant master lease to reflect the removal of the ALF and amended an existing 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. During the three months ended September 30, 2021, the Company did not collect a portion of rent from affiliates of Noble Senior Services and Noble VA Holdings, LLC (collectively, “Noble”). On September 23, 2021, the Company amended its two existing triple-net master leases with Noble. The lease amendment granted a deferral for a total of $ 1.8 million of unpaid base rent, which represented approximately 4 % of the Company’s total contractual base rent for the three months ended September 30, 2021. In connection with its agreement to the rent deferral, the Company also entered into a purchase agreement with Noble to acquire two assisted living facilities owned by Noble. The lease amendment required the deferred rent, as well as all contractual rent for the fourth quarter of 2021, to be paid in full upon the closing of the purchase of the two facilities. The Company closed on the acquisition of the two facilities in December 2021 and the deferred rent, as well as all contractual rent for the fourth quarter of 2021, was paid in full. The two facilities are currently leased back to Noble under a short-term lease agreement while the Company pursues other tenants for the long-term. Amended Ensign Master Lease . On August 1, 2021, the Company acquired two skilled nursing facilities. 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 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. Five Oaks Lease Termination and Amended Ensign Master Lease. On June 1, 2021, operating affiliates of Ensign acquired certain operations and assets of Five Oaks Healthcare, LLC (“Five Oaks”) under an agreement with Five Oaks. The agreement granted Ensign the right to occupy and operate four of the Company’s skilled nursing facilities in Washington that were previously being operated by Five Oaks. In conjunction with consenting to the transfer, the Company terminated the existing Five Oaks master lease, and amended and extended the term of an existing triple-net master lease with Ensign to include the four skilled nursing facilities. The Ensign lease, as amended, 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. F-15 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Premier Partial Lease Termination and Amended Noble VA Master Lease . On March 10, 2021 and July 1, 2021, two assisted living facilities in Wisconsin operated by affiliates of Premier Senior Living, LLC (“Premier”) were transferred to affiliates of Noble VA Holdings, LLC (“Noble VA”). In connection with the transfer, the Company partially terminated the Premier master lease and amended the existing triple-net master lease with Noble VA to include the two assisted living facilities. The Noble VA master lease, as amended, 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. See above under “Amended Noble Master Leases and New Noble NJ Master Lease” for additional information regarding the Company’s leases with Noble. Twenty/20 Lease Termination and New Noble VA Master Lease . On December 1, 2020, five assisted living facilities in Virginia operated by Twenty/20 Management, Inc. (“Twenty/20”) were transferred to affiliates of Noble VA. In connection with the transfer, the Company entered into a new triple-net master lease with Noble VA. The lease had an initial term of approximately 14 years as of December 1, 2020, with two five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the new lease is approximately $ 3.2 million . See above under “Amended Noble Master Leases and New Noble NJ Master Lease” for additional information regarding the Company’s leases with Noble. 4. 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. F-16 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 . F-17 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. 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 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 (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, 2022 2021 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. F-18 Table of Contents 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 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 $ 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; 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 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; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The mezzanine loan bears interest at 11 % and is secured by a pledge of membership interests in an up-tier affiliate of the borrower group. The mezzanine loan is set to mature on June 30, 2032, and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date, commencing on June 30, 2029, for an exit fee ranging from 1 % to 3 % of the loan plus unpaid interest payments through the date of prepayment. The “C” tranche 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 F-19 Table of Contents 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, 2022 2021 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 Mortgage secured loans receivable $ 4,853 $ — $ 2,044 Mezzanine loans receivable 3,489 1,825 305 Preferred equity investments (1) — — 24 Other 284 331 270 Total $ 8,626 $ 2,156 $ 2,643 (1) As of December 31, 2022 and 2021, the Company had no preferred equity investments . 6. FAIR VALUE MEASUREMENTS The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. GAAP guidance defines three levels of inputs that may be used to measure fair value: Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. 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. 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. The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. The Company does not expect that changes in classifications between levels will be frequent. F-20 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Items Measured at Fair Value on a Recurring Basis The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands): Level 1 Level 2 Level 3 Balance as of December 31, 2022 Assets: 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 Assets: Mezzanine loan receivable $ — $ — $ 15,155 $ 15,155 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 $ — $ 15,155 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. Items Measured at Fair Value on a Non-Recurring Basis Real Estate Investments: The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of its real estate assets may not be recoverable. The Company estimates fair values using Level 3 inputs and uses a combined income and market approach. 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, 2022, the F-21 Table of Contents 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 Considerable judgment is necessary to estimate the fair value disclosure of financial instruments. 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 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 Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value Financial liabilities: Senior unsecured notes payable $ 400,000 $ 395,150 $ 345,036 $ 400,000 $ 394,262 $ 410,500 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 was determined using third-party quotes derived from orderly trades. Unsecured revolving credit facility and senior unsecured term loan: The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates for similar debt arrangements. 7. DEBT The following table summarizes the balance of the Company’s indebtedness as of December 31, 2022 and 2021 (in thousands): December 31, 2022 December 31, 2021 Principal Deferred Carrying Principal Deferred Carrying Amount Loan Fees Amount Amount Loan Fees Amount Senior unsecured notes payable $ 400,000 $ ( 4,850 ) $ 395,150 $ 400,000 $ ( 5,738 ) $ 394,262 Senior unsecured term loan 200,000 ( 652 ) 199,348 200,000 ( 864 ) 199,136 Unsecured revolving credit facility 125,000 — 125,000 80,000 — 80,000 $ 725,000 $ ( 5,502 ) $ 719,498 $ 680,000 $ ( 6,602 ) $ 673,398 Senior Unsecured Notes Payable 2028 Senior Notes. On June 17, 2021, the Company’s wholly owned subsidiary, CTR Partnership, L.P. (the “Operating Partnership”), and its wholly owned subsidiary, CareTrust Capital Corp. (together with the Operating Partnership, the “Issuers”) completed a private offering of $ 400.0 million aggregate principal amount of 3.875 % Senior Notes due 2028 (the “Notes”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended. The Notes were issued at par, resulting in gross proceeds of $ 400.0 million and net proceeds of approximately $ 393.8 million after deducting underwriting fees and other offering expenses. The Notes mature on June 30, 2028. The Notes accrue interest at a rate of 3.875 % per annum payable semiannually in arrears on June 30 and December 30 of each year, commencing on December 30, 2021. The Issuers may redeem some or all of the Notes at any time prior to March 30, 2028 at a price equal to 100 % of the principal amount of the Notes redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date, plus a “make-whole” premium. At any time on or after March 30, 2028, the Issuers may redeem some or all of the Notes at a redemption price equal to 100 % of the principal amount of the Notes redeemed plus accrued interest on the Notes, if any, to, but not including, the redemption date. In addition, at any time on or prior to June 30, 2024, up to 40 % of the F-22 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings at a redemption price of 103.875 % of the aggregate principal amount of Notes to be redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date. If certain changes of control of the Company occur, the Issuers will be required to make an offer to holders of the Notes to repurchase their Notes at a price of 101 % of their principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date. The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by the Company and all of CareTrust’s existing and future subsidiaries (other than the Issuers) that guarantee obligations under the Amended Credit Facility (as defined below); provided, however, that such guarantees are subject to automatic release under certain customary circumstances. The indenture governing the Notes contains customary covenants such as limiting the ability of the Company and its restricted subsidiaries to: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; enter into transactions with affiliates; merge or consolidate or sell all or substantially all of their assets; and create restrictions on the ability of the Issuers and their restricted subsidiaries to pay dividends or other amounts to the Issuers. The indenture governing the Notes also requires the Company and its restricted subsidiaries to maintain a specified ratio of unencumbered assets to unsecured indebtedness. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The indenture governing the Notes also contains customary events of default. As of December 31, 2022, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes. 2025 Senior Notes. On May 10, 2017, the Issuers completed an underwritten public offering of $ 300.0 million aggregate principal amount of 5.25 % Senior Notes due 2025 (the “2025 Notes”). The 2025 Notes were issued at par, resulting in gross proceeds of $ 300.0 million and net proceeds of approximately $ 294.0 million after deducting underwriting fees and other offering expenses. The 2025 Notes were scheduled to mature on June 1, 2025 and bore interest at a rate of 5.25 % per year. Interest on the 2025 Notes was payable on June 1 and December 1 of each year. On July 1, 2021 (the “Redemption Date”), the Issuers redeemed all $ 300.0 million aggregate principal amount of the 2025 Notes at a redemption price equal to 102.625 % of the principal amount of the 2025 Notes, plus 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 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 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 F-23 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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). As of December 31, 2022, the Operating Partnership had $ 200.0 million of borrowings outstanding under the Term Loan and $ 125.0 million outstanding under the Revolving Facility. The Revolving Facility has a maturity date of February 9, 2027, and includes, at the sole discretion of the Operating Partnership, two , six-month extension options. The Term Loan has a maturity date of February 8, 2026. 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 As of December 31, 2022, the Company’s debt maturities were (dollars in thousands): Year Amount 2023 $ — 2024 — 2025 — 2026 200,000 2027 125,000 Thereafter 400,000 $ 725,000 8. EQUITY Common Stock 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”), which expires in March 2023. F-24 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 for the years ended December 31, 2022 and 2021 (in thousands, except per share amounts): For the Year Ended December 31, 2022 2021 Number of shares 2,405 990 Average sales price per share $ 20.00 $ 23.74 Gross proceeds (1) $ 48,100 $ 23,505 (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. Share Repurchase Program — On March 20, 2020, the Company’s Board of Directors authorized a share repurchase program up to $ 150.0 million of outstanding shares of the Company’s common stock (the “Repurchase Program”). Repurchases under the Repurchase Program, which expires on March 31, 2023, may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by management. Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act. The Company expects to finance any share repurchases under the Repurchase Program using available cash and may also use short-term borrowings under the Revolving Facility. The Company did no t repurchase any shares of common stock under the Repurchase Program during the years ended December 31, 2022, 2021 and 2020. The Repurchase Program may be modified, discontinued or suspended at any time. Dividends on Common Stock — The following table summarizes the cash dividends per share of common stock declared by the Company’s Board of Directors for 2022, 2021 and 2020 (dollars in thousands, except per share amounts): For the Three Months Ended 2022 March 31, June 30, September 30, December 31, 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 2021 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 2020 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. F-25 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. STOCK-BASED COMPENSATION All stock-based awards are subject to the terms of the CareTrust REIT, Inc. and CTR Partnership, L.P. Incentive Award Plan (the “Plan”). The Plan provides for the granting of stock-based compensation, including stock options, restricted stock, performance awards, restricted stock units, relative total stockholder return-based stock awards and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company. Under the Plan, 5,000,000 shares have been authorized for awards. Under the Plan, restricted stock awards (“RSAs”) 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. 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 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 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 Units 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 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. The following table summarizes the status of the restricted stock award and performance award activity for the year ended December 31, 2022: Shares Weighted Average Share Price Unvested balance at December 31, 2021 891,333 $ 20.91 Granted: RSAs 159,663 19.56 Board Awards 25,992 16.93 Vested ( 501,479 ) 20.60 Forfeited ( 1,900 ) 21.50 Unvested balance at December 31, 2022 573,609 $ 20.63 As of December 31, 2022, the weighted-average remaining vesting period of such awards was 1.9 years . The following table summarizes the Company’s RSA, PSA and Board Award grants during the year ended December 31, 2022 (dollars in thousands, except per share amounts): Grants Vested Shares Weighted Average Share Price Grant Date Fair Value Shares Vest Date Fair Value During year ended December 31, 2022 (1) RSAs 159,663 $ 19.56 $ 3,123 263,568 $ 5,020 PSAs — — — 217,645 4,134 Board Awards 25,992 16.93 440 20,266 346 (1) The Compensation Committee granted annual awards for 2023 in December 2022. F-26 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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): Grants Shares Weighted Average Share Price Grant Date Fair Value During year ended December 31, 2021 (1) RSAs 394,863 $ 21.92 $ 8,654 PSAs 108,414 22.48 2,437 Board Awards 20,266 24.18 490 During year ended December 31, 2020 RSAs 134,790 $ 19.68 $ 2,653 PSAs 107,790 19.06 2,054 Board Awards 27,611 16.48 455 (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 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 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 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): For Year Ended December 31, 2022 2021 2020 Stock-based compensation expense $ 5,758 $ 10,832 $ 3,790 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. F-27 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. (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 Numerator: Net (loss) income $ ( 7,506 ) $ 71,982 $ 80,867 Less: Net income allocated to participating securities ( 440 ) ( 507 ) ( 298 ) Numerator for basic and diluted earnings available to common stockholders $ ( 7,946 ) $ 71,475 $ 80,569 Denominator: Weighted-average basic common shares outstanding 96,703 96,017 95,200 Dilutive performance stock awards — 75 7 Weighted-average diluted common shares outstanding 96,703 96,092 95,207 (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 11. COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of business, which are not individually or in the aggregate anticipated to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Claims and lawsuits may include matters involving general or professional liability asserted against the Company’s tenants, which are the responsibility of the Company’s tenants and for which the Company is entitled to be indemnified by its tenants under the insurance and indemnification provisions in the applicable leases. Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except that, for the facilities leased to subsidiaries of Ensign, under the Ensign Master Leases, and Pennant, the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of its initial investment in such property, subject to a corresponding rent increase at the time of funding. For the Company’s other triple-net master leases, the tenants also have the option to request capital expenditure funding that would generally be subject to a corresponding rent increase at the time of funding, which are subject to tenant compliance with the conditions to the Company’s approval and funding of their requests. As of December 31, 2022, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totaling $ 15.7 million, of which $ 2.7 million is subject to rent increase at the time of funding. 12. CONCENTRATION OF RISK Concentrations of credit risk arise when one or more tenants, operators, or obligors related to the Company’s investments are engaged in similar business activities or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. F-28 Table of Contents CARETRUST REIT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Major operator concentration – The Company has operators from which it derived 10% or more of its rental revenue for the years ended December 31, 2022, 2021 and 2020. The following table sets forth information regarding the Company’s major operators as of December 31, 2022, 2021 and 2020: Number of Facilities Number of Beds/Units Percentage of Total Revenue (1) Operator (2) SNF Campus ALF/ILF SNF Campus ALF/ILF December 31, 2022 Ensign 83 8 7 8,741 997 661 35 % PMG 13 2 — 1,742 402 — 16 % December 31, 2021 Ensign 83 8 4 8,756 997 395 32 % PMG 13 2 — 1,742 402 — 15 % December 31, 2020 Ensign 77 8 4 8,129 1,027 390 32 % PMG 13 2 — 1,742 403 — 16 % (1) The Company’s rental income, exclusive of operating expense reimburseme nts. (2) See Note 3, Real Estate Investments, Net , for further information regarding Ensign and PMG. Ensign is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. Ensign’s financial statements, as filed with the SEC, can be found at http://www.sec.gov. 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, 2022 and 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 % 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. 13. SUBSEQUENT EVENTS The Company evaluates subsequent events in accordance with ASC 855, Subsequent Events . The Company evaluates subsequent events up until the date the consolidated financial statements are issued. 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. F-29 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2022 (dollars in thousands) Initial Cost to Company Costs Capitalized Since Acquisition Gross Carrying Value Description Facility Location Encum. Land Building Improvs. Improvs. Land Building Improvs. Total (1) Accum. Depr. Const./Ren. Date Acq. Date Skilled Nursing Properties: Ensign Highland LLC Highland Manor Phoenix, AZ $ — $ 257 $ 976 $ 926 $ 257 $ 1,902 $ 2,159 $ ( 1,479 ) 2013 2000 Meadowbrook Health Associates LLC Sabino Canyon Tucson, AZ — 425 3,716 1,940 425 5,656 6,081 ( 3,505 ) 2012 2000 Terrace Holdings AZ LLC Desert Terrace Phoenix, AZ — 113 504 971 113 1,475 1,588 ( 1,026 ) 2004 2002 Rillito Holdings LLC Catalina Tucson, AZ — 471 2,041 3,055 471 5,096 5,567 ( 3,562 ) 2013 2003 Valley Health Holdings LLC North Mountain Phoenix, AZ — 629 5,154 1,519 629 6,673 7,302 ( 4,357 ) 2009 2004 Cedar Avenue Holdings LLC Upland Upland, CA — 2,812 3,919 1,994 2,812 5,913 8,725 ( 3,865 ) 2011 2005 Granada Investments LLC Camarillo Camarillo, CA — 3,526 2,827 1,522 3,526 4,349 7,875 ( 2,965 ) 2010 2005 Plaza Health Holdings LLC Park Manor Walla Walla, WA — 450 5,566 1,055 450 6,621 7,071 ( 4,407 ) 2009 2006 Mountainview Communitycare LLC Park View Gardens Santa Rosa, CA — 931 2,612 653 931 3,265 4,196 ( 2,317 ) 1963 2006 CM Health Holdings LLC Carmel Mountain San Diego, CA — 3,028 3,119 2,071 3,028 5,190 8,218 ( 3,381 ) 2012 2006 Polk Health Holdings LLC Timberwood Livingston, TX — 60 4,391 1,167 60 5,558 5,618 ( 3,522 ) 2009 2006 Snohomish Health Holdings LLC Emerald Hills Lynnwood, WA — 741 1,663 1,998 741 3,661 4,402 ( 2,854 ) 2009 2006 Cherry Health Holdings LLC Pacific Care Hoquiam, WA — 171 1,828 2,038 171 3,866 4,037 ( 2,951 ) 2010 2006 Golfview Holdings LLC Cambridge SNF Richmond, TX — 1,105 3,110 1,067 1,105 4,177 5,282 ( 2,554 ) 2007 2006 Tenth East Holdings LLC Arlington Hills Salt Lake City, UT — 332 2,426 2,507 332 4,933 5,265 ( 3,618 ) 2013 2006 Trinity Mill Holdings LLC Carrollton Carrollton, TX — 664 2,294 902 664 3,196 3,860 ( 2,551 ) 2007 2006 Cottonwood Health Holdings LLC Holladay Salt Lake City, UT — 965 2,070 958 965 3,028 3,993 ( 2,578 ) 2008 2007 Verde Villa Holdings LLC Lake Village Lewisville, TX — 600 1,890 470 600 2,360 2,960 ( 1,645 ) 2011 2007 Mesquite Health Holdings LLC Willow Bend Mesquite, TX — 470 1,715 8,632 441 10,376 10,817 ( 8,270 ) 2012 2007 Arrow Tree Health Holdings LLC Arbor Glen Glendora, CA — 2,165 1,105 324 2,165 1,429 3,594 ( 1,149 ) 1965 2007 Fort Street Health Holdings LLC Draper Draper, UT — 443 2,394 759 443 3,153 3,596 ( 1,839 ) 2008 2007 Trousdale Health Holdings LLC Brookfield Downey, CA — 1,415 1,841 1,861 1,415 3,702 5,117 ( 2,393 ) 2013 2007 Ensign Bellflower LLC Rose Villa Bellflower, CA — 937 1,168 357 937 1,525 2,462 ( 1,039 ) 2009 2007 RB Heights Health Holdings LLC Osborn Scottsdale, AZ — 2,007 2,793 1,762 2,007 4,555 6,562 ( 2,885 ) 2009 2008 San Corrine Health Holdings LLC Salado Creek San Antonio, TX — 310 2,090 719 310 2,809 3,119 ( 1,587 ) 2005 2008 Temple Health Holdings LLC Wellington Temple, TX — 529 2,207 1,163 529 3,370 3,899 ( 2,058 ) 2008 2008 Anson Health Holdings LLC Northern Oaks Abilene, TX — 369 3,220 1,725 369 4,945 5,314 ( 2,925 ) 2012 2008 Willits Health Holdings LLC Northbrook Willits, CA — 490 1,231 500 490 1,731 2,221 ( 1,018 ) 2011 2008 Lufkin Health Holdings LLC Southland Lufkin, TX — 467 4,644 782 467 5,426 5,893 ( 1,926 ) 1988 2009 Lowell Health Holdings LLC Littleton Littleton, CO — 217 856 1,735 217 2,591 2,808 ( 1,694 ) 2012 2009 Jefferson Ralston Holdings LLC Arvada Arvada, CO — 280 1,230 834 280 2,064 2,344 ( 1,082 ) 2012 2009 F-30 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2022 (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 Silver Lake Health Holdings LLC Provo Provo, UT — 2,051 8,362 2,011 2,051 10,373 12,424 ( 3,766 ) 2011 2009 Jordan Health Properties LLC Copper Ridge West Jordan, UT — 2,671 4,244 1,507 2,671 5,751 8,422 ( 2,186 ) 2013 2009 Regal Road Health Holdings LLC Sunview Youngstown, AZ — 767 4,648 155 193 5,377 5,570 ( 2,423 ) 2012 2009 Paredes Health Holdings LLC Alta Vista Brownsville, TX — 373 1,354 190 373 1,544 1,917 ( 548 ) 1969 2009 Expressway Health Holdings LLC Veranda Harlingen, TX — 90 675 430 90 1,105 1,195 ( 548 ) 2011 2009 Rio Grande Health Holdings LLC Grand Terrace McAllen, TX — 642 1,085 870 642 1,955 2,597 ( 1,139 ) 2012 2009 Fifth East Holdings LLC Paramount Salt Lake City, UT — 345 2,464 1,065 345 3,529 3,874 ( 1,600 ) 2011 2009 Emmett Healthcare Holdings LLC River's Edge Emmet, ID — 591 2,383 69 591 2,452 3,043 ( 948 ) 1972 2010 Burley Healthcare Holdings LLC Parke View Burley, ID — 250 4,004 424 250 4,428 4,678 ( 1,855 ) 2011 2010 Josey Ranch Healthcare Holdings LLC Heritage Gardens Carrollton, TX — 1,382 2,293 478 1,382 2,771 4,153 ( 1,117 ) 1996 2010 Everglades Health Holdings LLC Victoria Ventura Ventura, CA — 1,847 5,377 682 1,847 6,059 7,906 ( 1,916 ) 1990 2011 Irving Health Holdings LLC Beatrice Manor Beatrice, NE — 60 2,931 245 60 3,176 3,236 ( 1,277 ) 2011 2011 Falls City Health Holdings LLC Careage Estates of Falls City Falls City, NE — 170 2,141 82 170 2,223 2,393 ( 822 ) 1972 2011 Gillette Park Health Holdings LLC Careage of Cherokee Cherokee, IA — 163 1,491 12 163 1,503 1,666 ( 697 ) 1967 2011 Gazebo Park Health Holdings LLC Careage of Clarion Clarion, IA — 80 2,541 97 80 2,638 2,718 ( 1,264 ) 1978 2011 Oleson Park Health Holdings LLC Careage of Ft. Dodge Ft. Dodge, IA — 90 2,341 759 90 3,100 3,190 ( 1,862 ) 2012 2011 Arapahoe Health Holdings LLC Oceanview Texas City, TX — 158 4,810 759 128 5,599 5,727 ( 2,459 ) 2012 2011 Dixie Health Holdings LLC Hurricane Hurricane, UT — 487 1,978 98 487 2,076 2,563 ( 639 ) 1978 2011 Memorial Health Holdings LLC Pocatello Pocatello, ID — 537 2,138 698 537 2,836 3,373 ( 1,292 ) 2007 2011 Bogardus Health Holdings LLC Whittier East Whittier, CA — 1,425 5,307 1,079 1,425 6,386 7,811 ( 2,674 ) 2011 2011 South Dora Health Holdings LLC Ukiah Ukiah, CA — 297 2,087 1,621 297 3,708 4,005 ( 2,261 ) 2013 2011 Silverada Health Holdings LLC Rosewood Reno, NV — 1,012 3,282 103 1,012 3,385 4,397 ( 981 ) 1970 2011 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 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 Stillhouse Health Holdings LLC Stillhouse Paris, TX — 129 7,139 6 129 7,145 7,274 ( 1,331 ) 2009 2012 Fig Street Health Holdings LLC Palomar Vista Escondido, CA — 329 2,653 1,094 329 3,747 4,076 ( 1,820 ) 2007 2012 Lowell Lake Health Holdings LLC Owyhee Owyhee, ID — 49 1,554 29 49 1,583 1,632 ( 387 ) 1990 2012 Queensway Health Holdings LLC Atlantic Memorial Long Beach, CA — 999 4,237 2,331 999 6,568 7,567 ( 3,106 ) 2008 2012 Long Beach Health Associates LLC Shoreline Long Beach, CA — 1,285 2,343 2,172 1,285 4,515 5,800 ( 2,258 ) 2013 2012 Kings Court Health Holdings LLC Richland Hills Ft. Worth, TX — 193 2,311 318 193 2,629 2,822 ( 789 ) 1965 2012 51st Avenue Health Holdings LLC Legacy Amarillo, TX — 340 3,925 32 340 3,957 4,297 ( 1,124 ) 1970 2013 Ives Health Holdings LLC San Marcos San Marcos, TX — 371 2,951 274 371 3,225 3,596 ( 882 ) 1972 2013 Guadalupe Health Holdings LLC The Courtyard (Victoria East) Victoria, TX — 80 2,391 15 80 2,406 2,486 ( 532 ) 2013 2013 F-31 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2022 (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 Sky Holdings AZ LLC Bella Vita Health and Rehabilitation Center Glendale, AZ — 228 1,124 1,380 228 2,504 2,731 ( 1,927 ) 2004 2002 Lemon River Holdings LLC Plymouth Tower Riverside, CA — 152 357 1,493 152 1,850 2,002 ( 1,403 ) 2012 2009 CTR Partnership, L.P. Bethany Rehabilitation Center Lakewood, CO — 1,668 15,375 56 1,668 15,431 17,099 ( 3,058 ) 1989 2015 CTR Partnership, L.P. Mira Vista Care Center Mount Vernon, WA — 1,601 7,425 — 1,601 7,425 9,026 ( 1,439 ) 1989 2015 CTR Partnership, L.P. Shoreline Health and Rehabilitation Center Shoreline, WA — 1,462 5,034 — 1,462 5,034 6,496 ( 954 ) 1987 2015 CTR Partnership, L.P. Shamrock Nursing and Rehabilitation Center Dublin, GA — 251 7,855 — 251 7,855 8,106 ( 1,473 ) 2010 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. West Cove Care & Rehabilitation Center Toledo, OH — 93 10,365 88 93 10,453 10,546 ( 1,879 ) 2007 2015 CTR Partnership, L.P. Casa de Paz Sioux City, IA — 119 7,727 — 119 7,727 7,846 ( 1,336 ) 1974 2016 CTR Partnership, L.P. Denison Care Center Denison, IA — 96 2,784 — 96 2,784 2,880 ( 481 ) 2015 2016 CTR Partnership, L.P. Garden View Care Center Shenandoah, IA — 105 3,179 — 105 3,179 3,284 ( 550 ) 2013 2016 CTR Partnership, L.P. Grandview Health Care Center Dayton, IA — 39 1,167 — 39 1,167 1,206 ( 202 ) 2014 2016 CTR Partnership, L.P. Grundy Care Center Grundy Center, IA — 65 1,935 — 65 1,935 2,000 ( 335 ) 2011 2016 CTR Partnership, L.P. Iowa City Rehab and Health Care Center Iowa City, IA — 522 5,690 — 522 5,690 6,212 ( 984 ) 2014 2016 CTR Partnership, L.P. Lenox Care Center Lenox, IA — 31 1,915 — 31 1,915 1,946 ( 331 ) 2012 2016 CTR Partnership, L.P. Osage Osage, IA — 126 2,255 — 126 2,255 2,381 ( 390 ) 2014 2016 CTR Partnership, L.P. Pleasant Acres Care Center Hull, IA — 189 2,544 — 189 2,544 2,733 ( 440 ) 2014 2016 CTR Partnership, L.P. Cedar Falls Health Care Center Cedar Falls, IA — 324 4,366 — 324 4,366 4,690 ( 737 ) 2015 2016 CTR Partnership, L.P. Premier Estates of Highlands Norwood, OH — 364 2,199 623 143 943 1,086 ( 22 ) 2012 2016 CTR Partnership, L.P. Shaw Mountain at Cascadia Boise, ID — 1,801 6,572 395 1,801 6,967 8,768 ( 1,316 ) 1989 2016 CTR Partnership, L.P. The Oaks Petaluma, CA — 3,646 2,873 110 3,646 2,983 6,629 ( 519 ) 2015 2016 CTR Partnership, L.P. Arbor Nursing Center Lodi, CA — 768 10,712 — 768 10,712 11,480 ( 1,718 ) 1982 2016 CTR Partnership, L.P. Broadmoor Medical Lodge Rockwall, TX — 1,232 22,152 — 1,232 22,152 23,384 ( 3,370 ) 1984 2016 CTR Partnership, L.P. Decatur Medical Lodge Decatur, TX — 990 24,909 — 990 24,909 25,899 ( 3,788 ) 2013 2016 CTR Partnership, L.P. Royse City Medical Lodge Royse City, TX — 606 14,660 — 606 14,660 15,266 ( 2,230 ) 2009 2016 CTR Partnership, L.P. Saline Care Nursing & Rehabilitation Center Harrisburg, IL — 1,022 5,713 — 1,022 5,713 6,735 ( 833 ) 2009 2017 CTR Partnership, L.P. Carrier Mills Nursing & Rehabilitation Center Carrier Mills, IL — 775 8,377 — 775 8,377 9,152 ( 1,222 ) 1968 2017 CTR Partnership, L.P. StoneBridge Nursing & Rehabilitation Center Benton, IL — 439 3,475 — 439 3,475 3,914 ( 507 ) 2014 2017 CTR Partnership, L.P. DuQuoin Nursing & Rehabilitation Center DuQuoin, IL — 511 3,662 — 511 3,662 4,173 ( 534 ) 2014 2017 F-32 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2022 (dollars in thousands) CTR Partnership, L.P. Pinckneyville Nursing & Rehabilitation Center Pinckneyville, IL — 406 3,411 — 406 3,411 3,817 ( 497 ) 2014 2017 CTR Partnership, L.P. Wellspring Health and Rehabilitation of Cascadia Nampa, ID — 775 5,044 121 775 5,165 5,940 ( 715 ) 2011 2017 CTR Partnership, L.P. The Rio at Fox Hollow Brownsville, TX — 1,178 12,059 — 1,178 12,059 13,237 ( 1,683 ) 2016 2017 CTR Partnership, L.P. The Rio at Cabezon Albuquerque, NM — 2,055 9,749 — 2,055 9,749 11,804 ( 1,361 ) 2016 2017 CTR Partnership, L.P. Eldorado Rehab & Healthcare Eldorado, IL — 940 2,093 — 940 2,093 3,033 ( 288 ) 1993 2017 CTR Partnership, L.P. Secora Health and Rehabilitation of Cascadia Portland, OR — 1,481 2,216 110 1,481 2,326 3,807 ( 305 ) 2012 2017 CTR Partnership, L.P. Mountain Valley Kellogg, ID — 916 7,874 — 916 7,874 8,790 ( 1,050 ) 1971 2017 CTR Partnership, L.P. Caldwell Care Caldwell, ID — 906 7,020 516 906 7,536 8,442 ( 936 ) 1947 2017 CTR Partnership, L.P. Canyon West Caldwell, ID — 312 10,410 461 312 10,871 11,183 ( 1,388 ) 1969 2017 CTR Partnership, L.P. Lewiston Health and Rehabilitation Lewiston, ID — 625 12,087 200 625 12,287 12,912 ( 1,586 ) 1964 2017 CTR Partnership, L.P. The Orchards Nampa, ID — 785 8,923 116 785 9,039 9,824 ( 1,171 ) 1958 2017 CTR Partnership, L.P. Weiser Care Weiser, ID — 80 4,419 30 80 4,449 4,529 ( 580 ) 1964 2017 CTR Partnership, L.P. Aspen Park Moscow, ID — 698 5,092 274 698 5,366 6,064 ( 729 ) 1965 2017 CTR Partnership, L.P. Ridgmar Medical Lodge Fort Worth, TX — 681 6,587 1,256 681 7,843 8,524 ( 1,198 ) 2006 2017 CTR Partnership, L.P. Mansfield Medical Lodge Mansfield, TX — 607 4,801 1,073 607 5,874 6,481 ( 889 ) 2006 2017 CTR Partnership, L.P. Grapevine Medical Lodge Grapevine, TX — 1,602 4,536 891 1,602 5,427 7,029 ( 832 ) 2006 2017 CTR Partnership, L.P. The Oaks at Lakewood Tacoma, WA — 1,001 1,779 — 1,001 1,779 2,780 ( 233 ) 1989 2017 CTR Partnership, L.P. The Oaks at Timberline Vancouver, WA — 446 869 — 446 869 1,315 ( 114 ) 1972 2017 CTR Partnership, L.P. Providence Waterman Nursing Center San Bernardino, CA — 3,831 19,791 — 3,831 19,791 23,622 ( 2,598 ) 1967 2017 CTR Partnership, L.P. Providence Orange Tree Riverside, CA — 2,897 14,700 345 2,897 15,045 17,942 ( 1,975 ) 1969 2017 CTR Partnership, L.P. Providence Ontario Ontario, CA — 4,204 21,880 — 4,204 21,880 26,084 ( 2,872 ) 1980 2017 CTR Partnership, L.P. Greenville Nursing & Rehabilitation Center Greenville, IL — 188 3,972 — 188 3,972 4,160 ( 603 ) 1973 2017 CTR Partnership, L.P. Copper Ridge Health and Rehabilitation Center Butte, MT — 220 4,974 39 220 5,013 5,233 ( 675 ) 2010 2018 CTR Partnership, L.P. Prairie Heights Healthcare Center Aberdeen, SD — 1,372 7,491 — 1,372 7,491 8,863 ( 925 ) 1965 2018 CTR Partnership, L.P. The Meadows on University Fargo, ND — 989 3,275 — 989 3,275 4,264 ( 378 ) 1966 2018 CTR Partnership, L.P. The Suites - Parker Parker, CO — 1,178 17,857 — 1,178 17,857 19,035 ( 1,865 ) 2012 2018 CTR Partnership, L.P. Huntington Park Nursing Center Huntington Park, CA — 3,131 8,876 299 3,131 9,175 12,306 ( 976 ) 1955 2019 CTR Partnership, L.P. Shoreline Care Center Oxnard, CA — 1,699 9,004 — 1,699 9,004 10,703 ( 905 ) 1962 2019 CTR Partnership, L.P. Downey Care Center Downey, CA — 2,502 6,141 — 2,502 6,141 8,643 ( 619 ) 1967 2019 CTR Partnership, L.P. Courtyard Healthcare Center Davis, CA — 2,351 9,256 — 2,351 9,256 11,607 ( 949 ) 1969 2019 Gulf Coast Buyer 1 LLC Alpine Skilled Nursing and Rehabilitation Ruston, LA — 2,688 23,825 — 2,688 23,825 26,513 ( 2,357 ) 2014 2019 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 F-33 SCHEDULE III 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 Gulf Coast Buyer 1 LLC The Guest House Skilled Nursing and Rehabilitation Shreveport, LA — 3,437 20,889 2,845 3,437 23,734 27,171 ( 2,160 ) 2006 2019 Gulf Coast Buyer 1 LLC Pilgrim Manor Skilled Nursing and Rehabilitation Bossier City, LA — 2,979 24,617 2,100 2,979 26,717 29,696 ( 2,407 ) 2008 2019 Gulf Coast Buyer 1 LLC Shreveport Manor Skilled Nursing and Rehabilitation Shreveport, LA — 676 10,238 361 676 10,599 11,275 ( 1,058 ) 2008 2019 Gulf Coast Buyer 1 LLC Booker T. Washington Skilled Nursing and Rehabilitation Shreveport, LA — 2,452 9,148 113 2,452 9,261 11,713 ( 963 ) 2013 2019 Gulf Coast Buyer 1 LLC Legacy West Rehabilitation and Healthcare Corsicana, TX — 120 6,682 436 120 7,118 7,238 ( 782 ) 2002 2019 Gulf Coast Buyer 1 LLC Legacy at Jacksonville Jacksonville, TX — 173 7,481 127 173 7,608 7,781 ( 806 ) 2006 2019 Gulf Coast Buyer 1 LLC Pecan Tree Rehabilitation and Healthcare Gainesville, TX — 219 10,097 255 219 10,352 10,571 ( 1,064 ) 1990 2019 Lakewest SNF Realty, LLC Lakewest Rehabilitation and Skilled Care Dallas, TX — — 6,905 — — 6,905 6,905 ( 708 ) 2011 2019 CTR Partnership, L.P. Cascadia of Nampa Nampa, ID — 880 14,117 — 880 14,117 14,997 ( 1,344 ) 2017 2019 CTR Partnership, L.P. Valley Skilled Nursing Modesto, CA — 798 7,671 — 798 7,671 8,469 ( 647 ) 2016 2019 CTR Partnership, L.P. Cascadia of Boise Boise, ID — 1,597 15,692 — 1,597 15,692 17,289 ( 1,235 ) 2018 2020 CTR Partnership, L.P. Cooney Healthcare and Rehabilitation Helena, MT — 867 7,431 20 867 7,451 8,318 ( 458 ) 1984 2020 CTR Partnership, L.P. Elkhorn Healthcare and Rehabilitation Clancy, MT — 183 7,380 430 183 7,810 7,993 ( 465 ) 1960 2020 CTR Partnership, L.P. Beacon Harbor Healthcare and Rehabilitation Rockwall, TX — 1,295 17,069 — 1,295 17,069 18,364 ( 989 ) 1996 2020 CTR Partnership, L.P. Pleasant Manor Healthcare and Rehabilitation Waxahachie, TX — 629 7,433 — 629 7,433 8,062 ( 434 ) 1972 2020 CTR Partnership, L.P. Rowlett Health and Rehabilitation Center Rowlett, TX — 1,036 10,516 — 1,036 10,516 11,552 ( 606 ) 1990 2020 160 North Patterson Avenue, LLC Buena Vista Care Center Goleta, CA — 7,987 7,237 — 7,987 7,237 15,224 ( 351 ) 1967 2021 CTR Partnership, L.P. El Centro Post-Acute Care El Centro, CA — 1,283 8,133 135 1,283 8,268 9,551 ( 367 ) 1962 2021 CTR Partnership, L.P. Sedona Trace Health and Wellness Austin, TX — 3,282 12,763 — 3,282 12,763 16,045 ( 507 ) 2017 2021 CTR Partnership, L.P. Cedar Pointe Health and Wellness Suites Cedar Park, TX — 3,325 11,738 — 3,325 11,738 15,063 ( 461 ) 2017 2021 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 ) Multi-Service Campus Properties: Ensign Southland LLC Southland Care Norwalk, CA — 966 5,082 2,213 966 7,295 8,261 ( 5,864 ) 2011 1999 Mission CCRC LLC St. Joseph's Villa Salt Lake City, UT — 1,962 11,035 464 1,962 11,499 13,461 ( 3,932 ) 1994 2011 Wayne Health Holdings LLC Careage of Wayne Wayne, NE — 130 3,061 122 130 3,183 3,313 ( 1,202 ) 1978 2011 4th Street Holdings LLC West Bend Care Center West Bend, IA — 180 3,352 — 180 3,352 3,532 ( 1,199 ) 2006 2011 F-34 SCHEDULE III 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 Prairie Health Holdings LLC Colonial Manor of Randolph Randolph, NE — 130 1,571 22 130 1,593 1,723 ( 918 ) 2011 2011 Salmon River Health Holdings LLC Discovery Care Center Salmon, ID — 168 2,496 — 168 2,496 2,664 ( 650 ) 2012 2012 CTR Partnership, L.P. Liberty Nursing Center of Willard Willard, OH — 144 11,097 50 144 11,147 11,291 ( 2,042 ) 1985 2015 CTR Partnership, L.P. Premier Estates of Middletown/Premier Retirement Estates of Middletown Middletown, OH — 990 7,484 380 990 7,864 8,854 ( 1,451 ) 1985 2015 CTR Partnership, L.P. Premier Estates of Norwood Towers/Premier Retirement Estates of Norwood Towers Norwood, OH — 1,316 10,071 1,021 1,316 11,092 12,408 ( 1,875 ) 1991 2016 CTR Partnership, L.P. Turlock Nursing and Rehabilitation Center Turlock, CA — 1,258 16,526 — 1,258 16,526 17,784 ( 2,651 ) 1986 2016 CTR Partnership, L.P. Bridgeport Medical Lodge Bridgeport, TX — 980 27,917 — 980 27,917 28,897 ( 4,246 ) 2014 2016 CTR Partnership, L.P. The Villas at Saratoga Saratoga, CA — 8,709 9,736 1,397 8,709 11,133 19,842 ( 1,399 ) 2004 2018 CTR Partnership, L.P. Madison Park Healthcare Huntington, WV — 601 6,385 — 601 6,385 6,986 ( 691 ) 1924 2018 CTR Partnership, L.P. Oakview Heights Nursing & Rehabilitation Center Mt. Carmel, IL — 298 8,393 — 298 8,393 8,691 ( 930 ) 2004 2019 Gulf Coast Buyer 1 LLC Spring Lake Skilled Nursing and Rehabilitation Shreveport, LA — 3,217 21,195 2,729 3,217 23,924 27,141 ( 2,490 ) 2008 2019 Gulf Coast Buyer 1 LLC The Village at Heritage Oaks Corsicana, TX — 143 11,429 482 143 11,911 12,054 ( 1,266 ) 2007 2019 CTR Partnership, L.P. City Creek Post-Acute and Assisted Living Sacramento, CA — 3,980 10,106 1,488 3,980 11,594 15,574 ( 1,075 ) 1990 2019 CTR Partnership, L.P. Crestwood Health and Rehabilitation Center Wills Point, TX — 143 6,075 — 143 6,075 6,218 ( 368 ) 1980 2020 Northshore Healthcare Holdings LLC San Juan Capistrano Senior Living San Juan Capistrano, CA — 11,176 25,298 — 11,176 25,298 36,474 ( 1,205 ) 1999 2021 Northshore Healthcare Holdings LLC Camarillo Senior Living Camarillo, CA — 7,516 30,552 — 7,516 30,552 38,068 ( 1,441 ) 2000 2021 Northshore Healthcare Holdings LLC Bayshire Carlsbad Carlsbad, CA — 7,398 19,714 — 7,398 19,714 27,112 ( 944 ) 1999 2021 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 ) Assisted and Independent Living Properties: Avenue N Holdings LLC Cambridge ALF Rosenburg, TX — 124 2,301 392 124 2,693 2,817 ( 1,533 ) 2007 2006 Moenium Holdings LLC Grand Court Mesa, AZ — 1,893 5,268 1,210 1,893 6,478 8,371 ( 3,888 ) 1986 2007 Lafayette Health Holdings LLC Chateau Des Mons Englewood, CO — 420 1,160 189 420 1,349 1,769 ( 508 ) 2011 2009 Expo Park Health Holdings LLC Canterbury Gardens Aurora, CO — 570 1,692 248 570 1,940 2,510 ( 1,022 ) 1986 2010 Wisteria Health Holdings LLC Wisteria IND Abilene, TX — 244 3,241 81 244 3,322 3,566 ( 1,860 ) 2008 2011 Everglades Health Holdings LLC Lexington Ventura, CA — 1,542 4,012 113 1,542 4,125 5,667 ( 1,059 ) 1990 2011 Flamingo Health Holdings LLC Desert Springs ALF Las Vegas, NV — 908 4,767 281 908 5,048 5,956 ( 3,022 ) 1986 2011 18th Place Health Holdings LLC Rose Court Phoenix, AZ — 1,011 2,053 490 1,011 2,543 3,554 ( 1,142 ) 1974 2011 Boardwalk Health Holdings LLC Park Place Reno, NV — 367 1,633 52 367 1,685 2,052 ( 625 ) 1993 2012 F-35 SCHEDULE III 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 Lockwood Health Holdings LLC Santa Maria Santa Maria, CA — 1,792 2,253 585 1,792 2,838 4,630 ( 1,560 ) 1967 2013 Saratoga Health Holdings LLC Lake Ridge Orem, UT — 444 2,265 176 444 2,441 2,885 ( 576 ) 1995 2013 Sky Holdings AZ LLC Desert Sky Assisted Living Glendale, AZ — 61 304 372 61 676 738 ( 520 ) 2004 2002 Lemon River Holdings LLC The Grove Assisted Living Riverside, CA — 342 802 3,360 342 4,162 4,504 ( 3,156 ) 2012 2009 Mission CCRC LLC St. Joseph's Villa IND Salt Lake City, UT — 411 2,312 258 411 2,570 2,981 ( 1,778 ) 1994 2011 CTR Partnership, L.P. Prelude Cottages of Woodbury Woodbury, MN — 430 6,714 76 430 6,790 7,220 ( 1,352 ) 2011 2014 CTR Partnership, L.P. Lamplight Inn of West Allis West Allis, WI — 97 6,102 106 77 4,181 4,258 — 2013 2016 CTR Partnership, L.P. Fort Myers Assisted Living Fort Myers, FL — 1,489 3,531 1,006 1,489 4,537 6,026 ( 712 ) 1980 2016 CTR Partnership, L.P. Croatan Village New Bern, NC — 312 6,919 — 301 5,663 5,964 — 2010 2016 CTR Partnership, L.P. Countryside Village Pikeville, NC — 131 4,157 — 125 3,402 3,527 — 2011 2016 CTR Partnership, L.P. The Pines of Clarkston Village of Clarkston, MI — 603 9,326 — 522 5,329 5,851 — 2010 2016 CTR Partnership, L.P. The Pines of Goodrich Goodrich, MI — 241 4,112 459 207 3,862 4,069 — 2014 2016 CTR Partnership, L.P. The Pines of Burton Burton, MI — 492 9,199 — 426 7,751 8,177 — 2014 2016 CTR Partnership, L.P. The Pines of Lapeer Lapeer, MI — 302 5,773 — 261 4,066 4,327 — 2008 2016 CTR Partnership, L.P. Arbor Place Lodi, CA — 392 3,605 — 392 3,605 3,997 ( 578 ) 1984 2016 CTR Partnership, L.P. Applewood of Brookfield Brookfield, WI — 493 14,002 39 241 6,026 6,267 — 2013 2017 CTR Partnership, L.P. Applewood of New Berlin New Berlin, WI — 356 10,812 — 190 5,033 5,223 — 2016 2017 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. Vista Del Lago Escondido, CA — 4,362 7,997 — 4,362 7,997 12,359 ( 698 ) 2015 2019 CTR Partnership, L.P. Inn at Barton Creek Bountiful, UT — 2,480 4,804 15 2,480 4,819 7,299 ( 380 ) 1999 2020 CTR Partnership, L.P. Bridgeton Essentia Neighborhood Bridgeton, NJ — 245 5,795 — 190 4,510 4,700 ( 33 ) 2021 2021 CTR Partnership, L.P. Rio Grande Essentia Neighborhood Rio Grande, NJ — 224 5,652 — 224 5,652 5,876 ( 169 ) 2021 2021 — 27,224 155,677 10,345 26,492 139,044 165,537 ( 29,108 ) — $ 241,304 $ 1,392,128 $ 118,249 $ 238,738 $ 1,483,133 $ 1,721,871 $ ( 315,914 ) (1) The aggregate cost of real estate for federal income tax purposes was $ 1.7 billion . F-36 SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2022 (dollars in thousands) Year Ended December 31, Real estate: 2022 2021 2020 Balance at the beginning of the period $ 1,873,806 $ 1,683,205 $ 1,605,081 Acquisitions 21,252 190,133 84,630 Improvements 5,896 4,521 7,223 Impairment ( 29,803 ) — — 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 Accumulated depreciation: Balance at the beginning of the period $ ( 304,785 ) $ ( 259,803 ) $ ( 220,359 ) Depreciation expense ( 42,131 ) ( 45,498 ) ( 41,914 ) Impairment 10,232 — — 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 ) F-37 SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 2022 (dollars in thousands) Description Contractual Interest Rate Maturity Date Periodic Payment Terms Prior Liens Principal Balance Book Value (1) Carrying Amount of Loans Subject to Delinquent Principal or Interest 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) 10.2 % (2) 2025 (3) 53,400 (5) 22,250 21,345 N/A Georgia ( 4 SNF facilities) 9.0 % (2) 2025 (3) 72,700 (5) 24,900 23,796 N/A Mezzanine Loans: West Virginia ( 18 SNF facilities) 11.0 % 2032 (3) 557,000 (4) 25,000 24,012 N/A Virginia ( 9 SNF facilities) 12.0 % 2025 (3) 114,309 (6) 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. (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 secured and mezzanine loans are summarized as follows (in thousands): Year Ended December 31, 2022 2021 2020 Balance at beginning of period $ 15,155 $ 15,000 $ 29,500 Additions during period: New mortgage and mezzanine loans 147,150 — 61,258 Interest income added to principal 1,165 155 — Deductions during period: Paydowns/Repayments — — ( 75,758 ) Unrealized loss ( 7,102 ) Balance at end of period $ 156,368 $ 15,155 $ 15,000 F-38