What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-10 compared with 2022-11-08 · 229 added, 316 removed, 316 unchanged (63% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Real estate investments, net $ 1,400,813 $ 1,421,410

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

Other real estate related investments, at fair value (including accrued interest of $ 1,170 as of March 31, 2023 and $ 1,320 as of December 31, 2022)

140,764 156,368

14 unchanged sentences

Preferred stock, $ 0.01 par value;

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

100,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022

Common stock, $ 0.01 par value;

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

500,000,000 shares authorized, 99,098,090 and 99,010,112 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,244,793 1,245,337

6 unchanged sentences

(in thousands, except per share amounts)

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

2022 2021 2022 2021

For the Three Months Ended March 31,

Rental income $ 46,163 $ 46,007

9 unchanged sentences

Total expenses 30,855 89,926

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

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

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

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

Other (loss) income:

(Loss) gain on sale of real estate, net ( 70 ) 186

Unrealized losses on other real estate related investments, net ( 454 ) —

Total other (loss) income ( 524 ) 186

Net income (loss) $ 19,227 $ ( 43,264 )

18 unchanged sentences

— — — ( 27,738 ) ( 27,738 )

Net loss — — — ( 43,264 ) ( 43,264 )

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

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

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

Common dividends ($ 0.275 per share)

— — — ( 26,681 ) ( 26,681 )

Net income — — — 19,227 19,227

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

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

Common dividends ($ 0.275 per share)

— — — ( 26,680 ) ( 26,680 )

Net income — — — 709 709

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

Balance at March 31, 2023 99,098,090 $ 991 $ 1,244,793 $ ( 405,465 ) $ 840,319

See accompanying notes to condensed consolidated financial statements.

7 unchanged sentences

Balance at January 1, 2022 96,296,673 $ 963 $ 1,196,839 $ ( 282,045 ) $ 915,757

Issuance of common stock, net 702,000 7 16,184 — 16,191

Vesting of restricted common stock, net of shares withheld for employee taxes 190,393 2 ( 2,774 ) — ( 2,772 )

2 unchanged sentences

— — — ( 26,659 ) ( 26,659 )

Net income — — — 20,486 20,486

Net loss — — — ( 43,264 ) ( 43,264 )

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

Issuance of common stock, net 288,000 3 6,752 — 6,755

Vesting of restricted common stock 27,611 — — — —

Amortization of stock-based compensation — — 1,810 — 1,810

Common dividends ($ 0.265 per share)

— — — ( 25,714 ) ( 25,714 )

Net income — — — 21,317 21,317

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

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

Common dividends ($ 0.265 per share)

— — — ( 25,714 ) ( 25,714 )

Net income — — — 11,918 11,918

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

Net (loss) income $ ( 21,886 ) $ 53,721

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

Net income (loss) $ 19,227 $ ( 43,264 )

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

Depreciation and amortization (including below-market ground leases) 12,252 13,594

Amortization of deferred financing costs 609 520

Loss on extinguishment of debt — 10,827

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

Unrealized losses on other real estate related investments, net 454 —

Amortization of stock-based compensation 936 1,521

2 unchanged sentences

Noncash interest income 150 —

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

Loss (gain) on sale of real estate, net 70 ( 186 )

Impairment of real estate investments 1,886 59,683

9 unchanged sentences

Investment in real estate related investments and other loans receivable — ( 2,086 )

Principal payments received on other loans receivable 1,166 172

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

Principal payments received on real estate related investments and other loans receivable 15,143 888

Escrow deposits for acquisitions and potential acquisitions of real estate ( 17,172 ) —

Net proceeds from sales of real estate 3,230 959

1 unchanged sentence

Cash flows from financing activities:

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

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

Proceeds from (costs paid for) the issuance of common stock, net ( 501 ) —

Borrowings under unsecured revolving credit facility 10,000 25,000

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

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

Payments on debt extinguishment and deferred financing costs — ( 14,070 )

Payments of deferred financing costs ( 21 ) —

Net-settle adjustment on restricted stock ( 1,479 ) ( 2,772 )

Dividends paid on common stock ( 27,409 ) ( 26,044 )

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

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

Net cash used in financing activities ( 19,410 ) ( 3,816 )

Net increase in cash and cash equivalents 14,892 6,691

Cash and cash equivalents as of the beginning of period 13,178 19,895

4 unchanged sentences

Increase in dividends payable $ 393 $ 615

Right-of-use asset obtained in exchange for new operating lease obligation $ 369 $ —

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

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

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

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

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

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

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

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

As of March 31, 2023, the Company owned and leased to independent ope rators , 215 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 22,727 operational beds and un its locate d in 28 st a tes with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona.

As of March 31, 2023, the Company also had other real estate related inves tments consisting of three real estate secured loans receivable and one mezzanine loan receivable with a carrying value of $ 140.8 million.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5 unchanged sentences

All intercompany transactions and account balances within the Company have been eliminated.

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

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

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

Dollar LIBOR rates were discontinued at the end of 2021.

The amendments in this update are effective immediately and may be applied through December 31, 2022.

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

REAL ESTATE INVESTMENTS, NET

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

September 30, 2022 December 31, 2021

The following table summarizes the Company’s investment in owned properties held for use at March 31, 2023 and December 31, 2022 (dollars in thousands):

March 31, 2023 December 31, 2022

Land $ 235,013 $ 238,738

5 unchanged sentences

Real estate investments, net $ 1,400,813 $ 1,421,410

As of September 30, 2022, 217 of the Company ’s 221 fac ilities wer e leased to various operators under triple-net leases.

As of March 31, 2023, 213 of the Company’s 215 facilities were leased to various operators under triple-net leases.

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

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

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

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

During the year ended December 31, 2022, the Company entered into triple-net lease agreements for two of the Company’s 213 facilities which are being repurposed to behavioral health facilities with rent commencing 12 to 18 months following lease commencement.

Two of the Company’s 215 facilities are non-operational and are leased under a short term lease with an expected remaining term of less than one year as of March 31, 2023.

As of March 31, 2023, 6 facilities were held for sale.

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

2022 (three months) $ 48,193

As of March 31, 2023, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements and assets held for sale, was as follows (dollars in thousands):

2023 (nine months) $ 137,942

Thereafter 778,259

3 unchanged sentences

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

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

Asset Type (1)

Properties Lease Expiration Option Period Open Date (2)

Option Type (3)

Current Cash Rent (4)

October 2034 1/1/2023 (3)

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

SNF 1 March 2029 4/1/2022 (6)

1 unchanged sentence

SNF 4 November 2034 12/1/2024 (6)

October 2034 1/1/2026 (3)

(1) Excludes a purchase option on an 11 building SNF portfolio representing $ 5.1 million of current cash rent.

Tenant is currently not eligible to elect the option.

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

(3) Option type includes:

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

B - Fixed base price.

C - Fixed capitalization rate on lease revenue.

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

(3) Option window is open for six months.

A - Fixed base price.

B - Fixed capitalization rate on lease revenue.

(4) Based on annualized cash revenue for contracts in place as of March 31, 2023.

(5) Option window is open for six months from the option period open date.

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

(7) Purchase option reflects two option types.

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

Rental Income

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Rental Income 2023 2022

3 unchanged sentences

Adjustment for collectibility (2)

— — ( 977 ) —

Lease termination revenue (3)

Total $ 46,163 $ 46,007

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

(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.

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

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

Tenant operating expense reimbursements for the three months ended March 31, 2023 and 2022 were $ 0.7 million and $ 0.6 million, respectively.

(2) During the three months ended March 31, 2022, and in accordance with Accounting Standards Codification 842, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from four existing and former operators.

As such, the Company reversed $ 0.7 million of operating expense reimbursements, $ 0.2 million of contractual rent and $ 0.1 million of straight-line rent during the three months ended March 31, 2022.

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.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

( 2) During the nine months ended September 30, 2022, and in accordance with Accounting Standards Codification 842, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from four existing and former operators.

As such, the Company reversed $ 0.7 million of operating expense reimbursements, $ 0.2 million of contractual rent and $ 0.1 million of straight-line rent during the nine months ended September 30, 2022.

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

(3) During the nine months ended September 30, 2021, in connection with the agreement to terminate its lease agreements with Metron Integrated Health Systems (“Metron”) and to sell the facilities to a third party, the Company received approximately $ 0.1 million from Metron affiliates.

Recent Real Estate Acquisitions

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

Type of Property Purchase Price (1)

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

Skilled nursing $ 8,918 $ 815 1 135

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

Total $ 21,921 $ 2,050 2 265

(1) Purchase price includes capitalized acquisition costs.

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

Lease Amendments

Noble Partial Lease Termination and New Landmark Leases.

On August 29, 2022, one ALF in Maryland was removed from a master lease with affiliates of Noble Senior Services (“Noble”) and the Company amended the applicable Noble master lease to reflect the removal of the ALF.

Annual cash rent under the applicable Noble master lease decreased by approximate ly $ 0.5 million.

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

Rent under the lease will commence 18 months following commencement of the lease term or, if earlier, upon Landmark Maryland obtaining all licensure, permits, and other required regulatory authorizations with respect to operating the facility.

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

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

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

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

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

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

Pennant Partial Lease Termination and Amended Ensign Master Leases.

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

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

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

The applicable Ensign master leases, 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.

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

In connection with the transfer, the Company amended the Pennant master lease to reflect the removal of the ALF and amended an existing triple-net master lease with Ensign to include the one ALF.

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

Annual cash rent under the applicable Ensign master lease, as amended, increased by approximately $ 0.3 million and annual cash rent under the Pennant master lease, as amended, decreased by the same amount.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Amended Eduro Master Lease.

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, wit h two five-year re newal options and CPI-based rent escalators.

Annual cash rent under the Eduro master lease, as amended, increased by approximately $ 0.8 million.

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 Premier Lease .

Effective January 1, 2023, the Company amended its master lease with affiliates of Premier Senior Living, LLC (“Premier”).

In connection with the lease amendment, the Company reduced the annual cash rent by $ 1.7 million, to approximately $ 2.6 million.

The Premier lease has a remaining term of approximately 8 years with two five-year renewal options and CPI-based rent escalators.

Noble VA Lease Termination and New Pennant Lease.

Effective March 16, 2023, two ALFs in Wisconsin were removed from a master lease with affiliates of Noble VA Holdings (“Noble”) and the Company terminated the applicable Noble master lease.

Annual cash rent under the applicable Noble master lease prior to lease termination was approximately $ 2.3 million.

In connection with the lease termination, the Company entered into a new lease with The Pennant Group, Inc.

(“Pennant”) with respect to the two ALFs.

The applicable Pennant lease has an initial term of approximately 15 years with two five-year renewal options and CPI-based rent escalators.

Annual cash rent under the new lease is approximately $ 0.8 million and the master lease provides Pennant with three months deferred rent to be repaid before the expiration or termination of the lease.

Amended Hillstone Lease.

On March 24, 2023, the Company amended its master lease with affiliates of Hillstone Healthcare, Inc.

(“Hillstone”).

In connection with the lease amendment, the Company agreed to defer rent of approximately $ 0.7 million for 12 months from December 2022 through November 2023 to be repaid as a percentage of adjusted gross revenues of one underlying facility, as defined in the amended lease, beginning January 1, 2025, until deferred rent has been paid in full.

The amended Hillstone lease has a remaining term of approximately 7 years with two five-year renewal options and 2 % fixed rent escalators.

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.

A s of March 31, 2022, the Company determined that these 27 properties met the criteria to be classified as assets held for sale and, in connection with this determination, the Company recognized an aggregate impairment charge of $ 59.7 million related to 20 of the 27 held for sale properties, which is reported in impairment of real estate investments in the condensed consolidated statements of operations for the nine months ended September 30, 2022.

The impairment charge was recognized to write down the properties’ aggregate carrying value to their aggregate fair value, less estimated costs to sell.

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

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

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

During the three months ended March 31, 2023, the Company recognized an impairment charge of $ 1.9 million related to 4 of the 6 facilities that were classified as held for sale at March 31, 2023, which is reported in impairment of real estate investments in the condensed consolidated statements of operations.

During the three months ended March 31, 2022, the Company recognized an impairment charge of $ 59.7 million related to 20 properties held for sale.

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

3 unchanged sentences

For the Company’s impairment calculations, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $ 20,000 to $ 85,000 , with a weighted average price per unit of $ 32,000 .

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

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

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

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

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 nine months ended September 30, 2022.

On February 22, 2022, the Company closed on the sale of one SNF, operated by affiliates of Cascadia Healthcare, LLC (“Cascadia”), consisting of 83 beds located in Washington with a carrying value of $ 0.8 million, for net sales proceeds of $ 1.0 million.

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

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

The following table summarizes the Company’s dispositions for the three months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31,

Number of facilities 1 1

Net sales proceeds $ 3,230 $ 959

Net carrying value 3,300 773

Net (loss) gain on sale $ ( 70 ) $ 186

CARETRUST REIT, INC.

NOTES TO CONDENSED 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 .

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

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

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

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

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

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

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

As of September 30, 2022

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

Book Value as of September 30, 2022

The following table summarizes the Company’s assets held for sale activity for the periods presented (dollars in thousands):

Net Carrying Value Number of Facilities

December 31, 2022 $ 12,291 5

Additions to assets held for sale 10,374 2

Assets sold ( 3,300 ) ( 1 )

Impairment of real estate held for sale ( 1,886 ) —

March 31, 2023 $ 17,479 6

OTHER REAL ESTATE RELATED AND OTHER INVESTMENTS

As of March 31, 2023 and December 31, 2022, the Company’s other real estate related investments, at fair value, consisted of the following (dollar amounts in thousands):

As of March 31, 2023

Investment Facility Count and Type Principal Balance as of March 31, 2023

Book Value as of March 31, 2023

Book Value as of December 31, 2022

Weighted Average Contractual Interest Rate Maturity Date

Senior secured loan receivable 18 SNF/Campus

Senior mortgage secured loan receivable 18 SNF/Campus

$ 75,000 $ 72,543 $ 72,543 8.4 % (1)

Secured loan receivable 5 SNF

Mortgage secured loan receivable 5 SNF

22,250 21,350 21,345 10.5 % (2)

Secured loan receivable 4 SNF

Mortgage secured loan receivable 4 SNF

24,900 23,796 23,796 9.0 % (2)

Mezzanine loan receivable 9 SNF

Mezzanine loan receivable (3)

— — 14,672 — —

3 unchanged sentences

(1) Rate is net of subservicing fee.

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

(2) Term secured overnight financing rate (“SOFR”) used as of March 31, 2023 was 4.80 %.

Rates are net of subservicing fees.

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

Nine Months Ended September 30,

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

(3) Mezzanine loan was prepaid during the three months ended March 31, 2023.

The following table summarizes the Company’s other real estate related investments activity for the three months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31,

Accrued interest, net $ ( 150 ) $ —

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

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

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

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

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

The “B” tranche secured term loan is set to mature on September 8, 2025, with two one-year extension options and ma y (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1 % to 3 % of the loan plus unpaid interest payments;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Unrealized losses on other real estate related investments, net ( 454 ) —

Repayments of other real estate related investments ( 15,000 ) —

Net decrease in other real estate related investments, at fair value $ ( 15,604 ) $ —

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

As of September 30, 2022

Investment Principal Balance as of September 30, 2022

Book Value as of September 30, 2022

As of March 31, 2023 and December 31, 2022, the Company’s other loans receivable, included in prepaid expenses and other assets, net on the Company’s condensed consolidated balance sheets, consisted of the following (dollars in thousands):

As of March 31, 2023

Investment Principal Balance as of March 31, 2023

Book Value as of March 31, 2023

Book Value as of December 31, 2022

3 unchanged sentences

Total $ 9,453 $ 7,362 $ 7,506

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

Nine Months Ended September 30,

The following table summarizes the Company’s other loans receivable activity for the three months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31,

Origination of loans receivable $ — $ 2,500

1 unchanged sentence

Accrued interest, net ( 1 ) —

Expected credit loss ( 5,344 ) —

Loan loss recovery 750 —

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

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

Net decrease in other loans receivable $ ( 144 ) $ ( 2,232 )

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

During the nine months ended September 30, 2022, the Company recorded a $ 4.6 million expected credit loss related to two other loans receivable that were placed on non-accrual status, net of a loan loss recovery of $ 0.8 million related to a loan previously written-off.

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

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

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

During the three months ended March 31, 2022, the Company recorded a $ 4.6 million expected credit loss related to two other loans receivable that were placed on non-accrual status, net of a loan loss recovery of $ 0.8 million related to a loan previously written-off.

During the three months ended March 31, 2023, the Company had no additional expected credit loss and did not consider any loan receivable investments to be impaired.

The following table summarizes the interest and other income recognized from the Company’s loans receivable and other investments during the three months ended March 31, 2023 and 2022 (dollars in thousands):

For the Three Months Ended March 31,

Investment 2023 2022

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

Mortgage secured loans receivable $ 2,704 $ —

Mezzanine loans receivable 1,583 450

Other 14 58 50 172

Total $ 4,443 $ 469

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

FAIR VALUE MEASUREMENTS

3 unchanged sentences

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

5 unchanged sentences

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 September 30, 2022 and December 31, 2021, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

Level 1 Level 2 Level 3 Balance as of September 30, 2022

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

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

Level 1 Level 2 Level 3 Balance as of March 31, 2023

Mortgage secured loans receivable $ — $ — $ 117,689 $ 117,689

Mezzanine loans receivable — — 23,075 23,075

1 unchanged sentence

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

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

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

Mezzanine loans receivable — — 38,684 38,684

Total $ — $ — $ 156,368 $ 156,368

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

1 unchanged sentence

Balance at December 31, 2022

Loan originations 122,150 25,000

$ 117,684 $ 38,684

Accrued interest, net 5 ( 155 )

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

Balance as of September 30, 2022

Unrealized losses on other real estate related investments, net — ( 454 )

Repayments — ( 15,000 )

Balance as of March 31, 2023

$ 117,689 $ 23,075

Real estate secured and mezzanine loans receivables:

Real estate secured and mezzanine loans receivable:

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

Future changes in market interest rates could

During the three months ended March 31, 2023, the Company recorded an unrealized loss of $ 1.0 million related to one mezzanine loan receivable due to rising interest rates, partially offset by a reversal of a previously recognized unrealized loss of $ 0.5 million related to the repayment of one mezzanine loan receivable.

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 March 31, 2023 and December 31, 2022, the Company did no t have any loans that were 90 days or more past due.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

As of September 30, 2022 and December 31, 2021, the Company did no t have any loans measured at fair value that were 90 days or more past due.

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

Type Book Value as of September 30, 2022

Type Book Value as of March 31, 2023

Valuation Technique Unobservable Inputs Range

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

Mortgage secured loans receivable $ 117,689 Discounted cash flow Discount Rate 10 % - 13 %

Mezzanine loans receivable 23,075 Discounted cash flow Discount Rate 12 % - 13 %

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

For the three months ended March 31, 2023, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Disclosed at Fair Value

1 unchanged sentence

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

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

September 30, 2022 December 31, 2021

A summary of the face value, carrying amount and fair value of the Notes (as defined in Note 7, Debt, below) as of March 31, 2023 and December 31, 2022 using Level 2 inputs is as follows (dollars in thousands):

March 31, 2023 December 31, 2022

Value Carrying

8 unchanged sentences

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

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

September 30, 2022 December 31, 2021

The following table summarizes the balance of the Company’s indebtedness as of March 31, 2023 and December 31, 2022 (dollars in thousands):

March 31, 2023 December 31, 2022

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

9 unchanged sentences

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

The Notes were issued at

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

The Notes mature on June 30, 2028.

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.

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.

15 unchanged sentences

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

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

As of March 31, 2023, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes.

Unsecured Revolving Credit Facility and Term Loan

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

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

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

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

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

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

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

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 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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

unsecured debt).

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

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

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

As of March 31, 2023, the Operating Partnership had $ 200.0 million of borrowings outstanding under the Term Loan and $ 135.0 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 Amended Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Amended Credit Agreement (other than the Operating Partnership).

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

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

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

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

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

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

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

For the Nine Months Ended

September 30, 2021

Number of shares 990

Average sales price per share $ 23.74

Gross proceeds (1)

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

As of September 30, 2022, the Company had $ 476.5 million available for future issuances under the ATM Program.

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 March 31, 2023, the Company was in compliance with all applicable financial covenants under the Second Amended Credit Agreement.

At-The-Market Offering —On February 24, 2023, the Company entered into a new equity distribution agreement to issue and sell, from time to time, up to $ 500.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “ATM Program”).

In addition to the issuance and sale of shares of our common stock, the Company may also enter into one or more forward sales agreements (each, an “ATM forward contract”) with sales agents for the sale of the Company’s shares of common stock under the ATM Program.

There was no ATM Program activity (or activity under any predecessor at-the-market equity offering programs) for the three months ended March 31, 2023 and 2022.

As of March 31, 2023, the Company had $ 500.0 million available for future issuances under the ATM Program.

Share Repurchase Program —On March 20, 2020, the Company’s board of directors authorized a share repurchase program for up to $ 150.0 million of outstanding shares of the Company’s common stock (the “Repurchase Program”).

Repurchases under the Repurchase Program, which expires on March 31, 2023, may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by management.

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

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

Repurchases under the Repurchase Program were authorized 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 were also allowed to be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Company did not repurchase any shares of common stock under the Repurchase Program, which expired on March 31, 2023.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

short-term borrowings under the Revolving Facility.

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

As of September 30, 2022 , $ 150.0 million remained available under the Repurchase Program.

The Repurchase Program may be modified, discontinued or suspended at any time.

Dividends on Common Stock — The following table summarizes the cash dividends per share of common stock declared by the Company’s Board of Directors for the first nine months of 2022 (dollars in thousands, except per share amounts):

Dividends on Common Stock — The following table summarizes the cash dividends per share of common stock declared by the Company’s board of directors for the three months ended March 31, 2023 (dollars in thousands, except per share amounts):

For the Three Months Ended

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

March 31, 2023

Dividends declared per share $ 0.28

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

Dividends payment date April 14, 2023

Dividends payable as of record date (1)

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

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

Dividends record date March 31, 2023

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

3 unchanged sentences

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 (“TSR Awards”) and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company.

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”) granted in fiscal 2022 to employees vest in equal annual installments beginning on the first anniversary of the grant date over a three year period.

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

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

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

Under the Plan, restricted stock awards (“RSAs”) vest in equal annual installments 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 three months ended March 31, 2023:

Shares Weighted Average Share Price

Unvested balance at December 31, 2022 573,609 $ 20.63

RSAs 9,684 17.56

Board Awards 25,992 16.93

Vested ( 159,775 ) 21.59

Forfeited ( 60,545 ) 21.20

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

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

Unvested balance at March 31, 2023 353,289 $ 20.10

As of March 31, 2023, the weighted-average remaining vesting period of such awards w as 1.9 years.

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2022 2021 2022 2021

For the Three Months Ended March 31,

Stock-based compensation expense $ 936 $ 1,521

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

For the three months ended March 31, 2023, approximately $ 0.9 million of previously recognized stock-based compensation expense was reversed due to forfeitures of stock awards.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

As of March 31, 2023, there was $ 8.5 million of unamortized stock-based compensation expense related to the unvested RSAs, PSAs and TSR Awards.

EARNINGS (LOSS) PER COMMON SHARE

The following table presents the calculation of basic and diluted earnings (loss) per common share (“EPS”) for the Company’s common stock for the three and nine months ended September 30, 2022 and 2021, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS (amounts in thousands, except per share amounts):

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

2022 2021 2022 2021

The following table presents the calculation of basic and diluted earnings (loss) per common share (“EPS”) for the Company’s common stock for the three months ended March 31, 2023 and 2022, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS (amounts in thousands, except per share amounts):

For the Three Months Ended March 31,

Net income (loss) $ 19,227 $ ( 43,264 )

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Earnings (loss) per common share, diluted $ 0.19 $ ( 0.45 )

Antidilutive unvested RSAs, PSAs and TSR Awards excluded from the computation 341 535 478 436

Antidilutive unvested restricted stock awards, total shareholder units and performance awards excluded from the computation 318 534

COMMITMENTS AND CONTINGENCIES

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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 and Pennant, the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of the Company’s initial investment in such property, subject to a corresponding rent increase at the time of funding.

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 The Ensign Group, Inc., under multiple long-term 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 the Company’s 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 September 30, 2022, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totali ng $ 16.1 million, of which $ 3.9 million is subject to rent increase at the time of funding.

As of March 31, 2023, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totaling $ 14.8 million, of which $ 1.6 million is subject to rent increase at the time of funding.

CONCENTRATION OF RISK

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

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

Major operator concentration - The Company has operators from which it derived 10% or more of its rental revenue for the three months ended March 31, 2023 and 2022.

The following table sets forth information regarding the Company’s major operators as of March 31, 2023 and 2022:

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

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

September 30, 2022

Operator SNF Campus ALF/ILF SNF Campus ALF/ILF

March 31, 2023

83 8 7 8,741 997 661 36 %

Priority Management Group 13 2 — 1,742 402 — 17 %

September 30, 2021

March 31, 2022

83 8 5 8,756 997 495 34 %

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

Major geographic concentration – The following table provides information regarding the Company’s concentrations with respect to certain states, from which the Company derived 10% or more of its rental revenue for the three and nine months ended September 30, 2022:

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

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

State SNF Campus ALF/ILF SNF Campus ALF/ILF

March 31, 2023

CA 27 8 5 3,048 1,359 437 28 %

TX 38 3 3 4,849 536 242 23 %

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

March 31, 2022

CA 27 8 5 3,048 1359 449 26 %

TX 38 3 3 4,829 536 242 22 %

(1) Represents the Company’s rental income, exclusive of operating expense reimbursements and adjustments for collectibility.

SUBSEQUENT EVENTS

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

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

Recent Acquisitions, New and Amended Lease Agreements

On April 1, 2023, the Company acquired two SNFs in Texas and Kansas for approximately $ 17.2 million, which includes estimated capitalized acquisition costs and capital expenditure commitments.

In connection with the acquisition of the facility in Texas, the Company amended an existing master lease with affiliates of Momentum Skilled Services (“Momentum”) and extended the initial term of the lease.

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

Annual cash rent under the amended lease increased by approximately $ 1.0 million.

In connection with the acquisition of the facility in Kansas, the Company entered into a new master lease with an affiliate of Summit Healthcare Management.

The new master lease has an initial term of approximately 15 years, with two five-year renewal options and CPI based rent escalators.

Annual cash rent under the new lease is approximately $ 0.7 million and the master lease provides for one month rent abatement.

The acquisition was funded using cash on hand.

On May 1, 2023, the Company acquired two ALFs in Illinois for approximately $ 18.2 million, which includes estimated capitalized acquisition costs.

In connection with the acquisition of the two facilities, the Company entered into a new

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

master lease with affiliates of Chapters Living, LLC.

The new master lease has an initial term of approximately 15 years, with two five-year renewal options and CPI based rent escalators.

Annual cash rent under the new lease is approximately $ 1.7 million and the master lease provides for rent abatement of the first three months.

The acquisition was funded using proceeds from the Company’s unsecured revolving credit facility.

On May 1, 2023, the Company acquired one SNF in Georgia for approximately $ 12.1 million, which includes estimated capitalized acquisition costs.

In connection with the acquisition of the facility, the Company entered into a new master lease with an affiliate of Elevation Group, LLC.

The new master lease has an initial term of approximately 15 years, with two five-year renewal options and CPI based rent escalators.

Annual cash rent under the new lease is approximately $ 1.1 million.

The acquisition was funded using proceeds from the Company’s unsecured revolving credit facility.

Recent Asset Sales

On May 1, 2023, the Company closed on the sale of one ALF consisting of 30 beds located in Texas with a carrying value of $ 2.6 million, which approximated the net sales proceeds received.

The facility was classified as held for sale as of March 31, 2023.

At-The-Market Offering of Common Stock

In April 2023, the Company executed a 12-month forward equity sale under the ATM Program with a financial institution acting as a forward purchaser to sell 1,757,500 shares of common stock at a weighted average sales price of $ 19.91 per share before commissions and offering expenses.

The Company did not receive any proceeds from the sale of its shares of common stock by the forward sellers.

The Company currently expects to fully physically settle the forward equity sales by delivery of shares of common stock to the forward purchaser and receive cash proceeds upon one or more settlement dates, at the Company’s discretion, prior to the final settlement date in the second quarter of 2024, at which time the Company expects to receive aggregate net cash proceeds at settlement equal to the number of shares specified in such forward equity sale multiplied by the relevant forward price per share.

The weighted average forward sale price that the Company expects to receive upon physical settlement will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends through the settlement.

The Company has not settled any portion of this forward equity sale as of the date the condensed consolidated financial statements are issued.

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

What changed 10-Q

Item 1. Financial Statements