What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-03 compared with 2023-05-10 · 206 added, 156 removed, 389 unchanged (48% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Real estate investments, net $ 1,528,234 $ 1,421,410

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)

Other real estate related investments, at fair value (including accrued interest of $ 1,136 as of June 30, 2023 and $ 1,320 as of December 31, 2022)

166,822 156,368

14 unchanged sentences

Preferred stock, $ 0.01 par value;

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

100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value;

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

500,000,000 shares authorized, 99,124,082 and 99,010,112 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,245,717 1,245,337

6 unchanged sentences

(in thousands, except per share amounts)

For the Three Months Ended March 31,

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

2023 2022 2023 2022

Rental income $ 47,745 $ 46,806 $ 93,908 $ 92,813

10 unchanged sentences

Other (loss) income:

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

Gain on sale of real estate, net 2,028 — 1,958 186

Unrealized losses on other real estate related investments, net ( 2,151 ) — ( 2,605 ) —

Total other (loss) income ( 123 ) — ( 647 ) 186

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

Earnings (loss) per common share:

Net (loss) income $ ( 484 ) $ 20,669 $ 18,743 $ ( 22,595 )

(Loss) earnings per common share:

Basic $ ( 0.01 ) $ 0.21 $ 0.19 $ ( 0.24 )

18 unchanged sentences

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

Vesting of restricted common stock 25,992 — — — —

Amortization of stock-based compensation — — 924 — 924

Common dividends ($ 0.28 per share)

— — — ( 27,737 ) ( 27,737 )

Net loss — — — ( 484 ) ( 484 )

Balance at June 30, 2023 99,124,082 $ 991 $ 1,245,717 $ ( 433,686 ) $ 813,022

See accompanying notes to condensed consolidated financial statements.

13 unchanged sentences

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

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

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

Common dividends ($ 0.275 per share)

— — — ( 26,681 ) ( 26,681 )

Net income — — — 20,669 20,669

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

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

8 unchanged sentences

Noncash interest income 184 ( 13 )

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

Gain on sale of real estate, net ( 1,958 ) ( 186 )

Impairment of real estate investments 23,278 61,384

10 unchanged sentences

Principal payments received on real estate related investments and other loans receivable 15,287 1,026

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

Escrow deposits for potential acquisitions of real estate ( 300 ) —

Net proceeds from sales of real estate 14,464 959

6 unchanged sentences

Dividends paid on common stock ( 55,246 ) ( 52,817 )

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

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

Net cash provided by financing activities 97,625 67,714

Net (decrease) increase in cash and cash equivalents ( 12,033 ) 10,372

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

6 unchanged sentences

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

Sale of real estate settled with notes receivable $ 2,000 $ —

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 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.

As of June 30, 2023, the Company owned and leased to independent ope rators , 224 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 23,694 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 June 30, 2023, the Company also had other real estate related investments consisting of five real estate secured loans receivable and one mezzanine loan receivable with a carrying value of $ 166.8 million.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 unchanged sentences

REAL ESTATE INVESTMENTS, NET

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

The following table summarizes the Company’s investment in owned properties held for use at June 30, 2023 and December 31, 2022 (dollars in thousands):

June 30, 2023 December 31, 2022

Land $ 266,010 $ 238,738

5 unchanged sentences

Real estate investments, net $ 1,528,234 $ 1,421,410

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

As of June 30, 2023, 222 of the Company’s 224 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 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.

Two of the Company’s 224 facilities are non-operational and are leased under a short term lease with an expected remaining term of less than one year as of June 30, 2023.

As of June 30, 2023, 15 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 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

As of June 30, 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 (six months) $ 98,155

Thereafter 941,966

8 unchanged sentences

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

SNF / Campus 2 October 2032 1/1/2023 (5)

SNF / Campus 2 (8)

October 2032 1/1/2024 (6)

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

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

(1) Excludes a purchase option on an 11 building SNF portfolio classified as held for sale as of June 30, 2023 and representing $ 5.1 million of current cash rent.

Tenant is currently not eligible to elect the option.

3 unchanged sentences

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.

(4) Based on annualized cash revenue for contracts in place as of June 30, 2023.

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

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

(7) Purchase option reflects two option types.

(8) Includes one property classified as held for sale as of June 30, 2023.

Rental Income

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Rental Income 2023 2022 2023 2022

3 unchanged sentences

Adjustment for collectibility (2)

— — — ( 977 )

Total $ 47,745 $ 46,806 $ 93,908 $ 92,813

1 unchanged sentence

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 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.

Tenant operating expense reimbursements for the three months ended June 30, 2023 and 2022 were $ 1.2 million and $ 0.7 million, respectively.

Tenant operating expense reimbursements for the six months ended June 30, 2023 and 2022 were $ 1.9 million and $ 1.3 million, respectively.

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

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

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Recent Real Estate Acquisitions

The following table summarizes the Company’s acquisitions for the six months ended June 30, 2023 (dollars in thousands):

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

Skilled nursing $ 107,858 $ 9,085 7 871

Multi-service campuses 25,276 1,916 1 168

Assisted living 39,319 3,495 4 241

Total $ 172,453 $ 14,496 12 1,280

(1) Purchase price includes capitalized acquisition costs.

(2) Initial annual cash rent represents initial cash rent for the first twelve months excluding the impact of rent abatement in the first one to three months, if applicable.

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

Lease Amendments

2 unchanged sentences

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.

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

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

Annual cash rent under the applicable Noble VA 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.

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

Annual cash rent under the new lease was 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.

2 unchanged sentences

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.

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

Amended Momentum Lease .

On April 1, 2023, the Company acquired one SNF.

In connection with the acquisition, the Company amended its existing triple-net master lease with affiliates of Momentum Skilled Services (“Momentum”) to include the one SNF and extended the initial lease term.

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

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

IMPAIRMENT OF REAL ESTATE INVESTMENTS, ASSETS HELD FOR SALE, NET AND ASSET SALES

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.

During the three and six months ended June 30, 2023, the Company recognized an impairment charge on 12 and 15 facilities of $ 21.4 million and $ 23.3 million, respectively, which is reported in impairment of real estate investments in the condensed consolidated statements of operations.

As of June 30, 2023, there were 15 facilities classified as held for sale, all of which have been marked down to fair value and considered Level 3 measurements within the fair value hierarchy.

During the three and six months ended June 30, 2022, the Company recognized an impairment charge on one and 21 facilities of $ 1.7 million and $ 61.4 million, respectively.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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.

4 unchanged sentences

Asset Sales and Held for Sale Reclassifications

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,

The following table summarizes the Company’s dispositions for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Number of facilities 3 — 4 1

Net sales proceeds (1)

$ 13,234 $ — $ 16,464 $ 959

Net carrying value 11,206 — 14,506 773

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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Net gain on sale $ 2,028 $ — $ 1,958 $ 186

(1) Net sales proceeds includes $ 2 million of seller financing in connection with the sale of one ALF in June 2023.

The $ 2.0 million mortgage loan is included in other real estate related investments on the Company’s condensed consolidated balance sheets.

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

4 unchanged sentences

Impairment of real estate held for sale ( 23,278 ) —

March 31, 2023 $ 17,479 6

June 30, 2023 $ 21,554 15

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

As of June 30, 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 June 30, 2023

Investment Facility Count and Type Principal Balance as of June 30, 2023

Book Value as of June 30, 2023

Book Value as of December 31, 2022

6 unchanged sentences

24,900 23,503 23,796 9.0 % (2)

Mortgage secured loan receivable (3)

2,000 2,000 — 9.0 % 5/31/2024

Mortgage secured loan receivable (4)

2 SNF Campus / ILF

25,993 25,993 — 9.0 % 6/29/2033

Mezzanine loan receivable (5)

4 unchanged sentences

(1) Rate is net of subservicing fee.

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

(2) Term secured overnight financing rate (“SOFR”) used as of June 30, 2023 was 5.11 %.

Rates are net of subservicing fees.

(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,

(3) In June 2023, the Company closed on the sale of one ALF.

In connection with the sale, the Company provided affiliates of the purchaser of the properties with a $ 2.0 million mortgage loan.

The mortgage loan is secured by the ALF.

The mortgage loan has a one-year extension option and may be prepaid in whole before the maturity date.

(4) In June 2023, the Company extended a $ 26.0 million mortgage loan to a skilled nursing real estate owner.

The mortgage loan is secured by one SNF campus and one ILF.

The mortgage loan is set to mature on June 29, 2033 and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 0 % to 3 % of the loan plus unpaid interest payments.

(5) Mezzanine loan was prepaid during the six months ended June 30, 2023.

The following table summarizes the Company’s other real estate related investments activity for the six months ended June 30, 2023 and 2022 (dollars in thousands):

Six Months Ended June 30,

Origination of other real estate related investments $ 28,243 $ 100,000

Accrued interest, net ( 184 ) 13

1 unchanged sentence

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

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

Net increase in other real estate related investments, at fair value $ 10,454 $ 100,013

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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

As of June 30, 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 June 30, 2023

Investment Principal Balance as of June 30, 2023

Book Value as of June 30, 2023

Book Value as of December 31, 2022

3 unchanged sentences

Total $ 10,328 $ 8,239 $ 7,506

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,

The following table summarizes the Company’s other loans receivable activity for the six months ended June 30, 2023 and 2022 (dollars in thousands):

Six Months Ended June 30,

Origination of loans receivable $ 1,019 $ 2,500

2 unchanged sentences

Provision for loan losses, net — ( 4,594 )

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

Net increase (decrease) in other loans receivable $ 733 $ ( 2,372 )

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

During the three months ended March 31, 2022, the Company recorded a $ 4.6 million expected credit loss related to two other loans receivable that were placed on non-accrual status, 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,

During the six months ended June 30, 2022, the Company recorded a $ 4.6 million expected credit loss related to two other loans receivable that have been placed on non-accrual status, including an unfunded loan commitment of $ 0.4 million, net of a loan loss recovery of $ 0.8 million related to a loan previously written-off.

During the six months ended June 30, 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 and six months ended June 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Investment 2023 2022 2023 2022

1 unchanged sentence

Mezzanine loans receivable 695 713 2,278 1,163

Other 351 17 507 36

Total $ 3,808 $ 747 $ 8,251 $ 1,216

3 unchanged sentences

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.

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 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

The following table presents information about the Company’s assets measured at fair value on a recurring basis as of June 30, 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 June 30, 2023

Mortgage secured loans receivable $ — $ — $ 144,192 $ 144,192

9 unchanged sentences

$ 117,684 $ 38,684

Loan originations 28,243 —

Accrued interest, net ( 21 ) ( 163 )

1 unchanged sentence

Repayments — ( 15,000 )

Balance as of March 31, 2023

Balance as of June 30, 2023

$ 144,192 $ 22,630

2 unchanged sentences

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 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.

During the three months ended June 30, 2023, the Company recorded an unrealized loss of $ 1.9 million related to three mortgage loans and one mezzanine loan receivable due to rising interest rates and a $ 0.3 million loss due to a loan origination fee paid.

During the six months ended June 30, 2023, the Company recorded an unrealized loss of $ 2.8 million related to three mortgage loans and 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

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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 March 31, 2023:

Type Book Value as of March 31, 2023

determine the fair value of the secured and mezzanine loans receivable.

As of June 30, 2023 and December 31, 2022, the Company did no t have any loans that were 90 days or more past due.

Type Book Value as of June 30, 2023

Valuation Technique Unobservable Inputs Range

Mortgage secured loans receivable $ 144,192 Discounted cash flow Discount Rate 10 % - 14 %

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

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.

Mezzanine loan receivable 22,630 Discounted cash flow Discount Rate 12 % - 14 %

For the six months ended June 30, 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 March 31, 2023 and December 31, 2022 using Level 2 inputs is as follows (dollars in thousands):

March 31, 2023 December 31, 2022

A summary of the face value, carrying amount and fair value of the Notes (as defined in Note 7, Debt, below) as of June 30, 2023 and December 31, 2022 using Level 2 inputs is as follows (dollars in thousands):

June 30, 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 March 31, 2023 and December 31, 2022 (dollars in thousands):

March 31, 2023 December 31, 2022

The following table summarizes the balance of the Company’s indebtedness as of June 30, 2023 and December 31, 2022 (dollars in thousands):

June 30, 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 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

The Notes were issued at

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

3.875 % per annum payable semiannually in arrears on June 30 and December 30 of each year, commencing on December 30, 2021.

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.

15 unchanged sentences

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

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

As of June 30, 2023, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes.

Unsecured Revolving Credit Facility and Term Loan

4 unchanged sentences

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 —

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.

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 June 30, 2023, the Operating Partnership had $ 200.0 million of borrowings outstanding under the Term Loan and $ 280.0 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.

4 unchanged sentences

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.

As of June 30, 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 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.

In addition to the issuance and sale of shares of its 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.

The Company expects to fully physically settle forward equity sales by delivery of shares of common stock to the forward purchaser and receive cash proceeds upon one or more settlement dates, which are typically a one-year term, at the Company’s discretion, prior to the final settlement date, at which time the Company expects to receive aggregate net cash proceeds at settlement equal to the number of shares sold on a forward basis 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.

During the three and six months ended June 30, 2023, the Company executed forward equity sales under the ATM Program with a financial institution acting as a forward purchaser to sell 6,736,089 shares of common stock at a weighted average sales price of $ 19.71 per share before commissions and offering expenses.

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

As of June 30, 2023, the Company has not settled any portion of these forward equity sales.

There was no ATM Program activity (or activity under any predecessor at-the-market equity offering programs) for the three and six months ended June 30, 2022.

As of June 30, 2023, the Company had $ 367.2 million available for future issuances under the ATM Program.

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

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):

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

For the Three Months Ended

March 31, 2023

March 31, 2023 June 30, 2023

Dividends declared per share $ 0.28 $ 0.28

Dividends payment date April 14, 2023

Dividends payment date April 14, 2023 July 14, 2023

Dividends payable as of record date (1)

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.

$ 27,846 $ 27,853

Dividends record date March 31, 2023 June 30, 2023

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

STOCK-BASED COMPENSATION

12 unchanged sentences

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:

The following table summarizes the status of the restricted stock award and performance award activity for the six months ended June 30, 2023:

Shares Weighted Average Share Price

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

Board Awards 24,768 19.38

Vested ( 185,767 ) 20.94

Forfeited ( 61,680 ) 21.19

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.

Unvested balance at June 30, 2023 350,930 $ 20.28

As of June 30, 2023, the weighted-average remaining vesting period of such awards w as 1.7 years.

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2023 2022 2023 2022

Stock-based compensation expense $ 924 $ 1,394 $ 1,860 $ 2,915

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 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 )

For the three and six months ended June 30, 2023 , approximately $ 0.6 million of previously recognized stock-based compensation expense related to the PSAs was reversed as the awards are not expected to meet the performance conditions.

For the six months ended June 30, 2023 , approximately $ 0.9 million of previously recognized stock-based compensation expense was reversed due to forfeitures of stock awards.

As of June 30, 2023, there was $ 7.2 million of unamortized stock-based compensation expense related to the unvested RSAs and TSR Awards.

(LOSS) EARNINGS PER COMMON SHARE

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

2023 2022 2023 2022

Net (loss) income $ ( 484 ) $ 20,669 $ 18,743 $ ( 22,595 )

Net income allocated to participating securities ( 89 ) ( 94 ) ( 178 ) ( 211 )

1 unchanged sentence

Weighted-average basic common shares outstanding 99,117 96,564 99,090 96,487

Dilutive performance stock awards 24 —

Dilutive potential common shares - performance stock awards — 34 90 —

Dilutive potential common shares - forward equity agreements — — 14 —

Weighted-average diluted common shares outstanding 99,117 96,598 99,194 96,487

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

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

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

(Loss) earnings per common share, basic $ ( 0.01 ) $ 0.21 $ 0.19 $ ( 0.24 )

(Loss) earnings per common share, diluted $ ( 0.01 ) $ 0.21 $ 0.19 $ ( 0.24 )

Antidilutive unvested restricted stock awards, total shareholder return units, performance awards, and forward equity shares excluded from the computation 500 341 316 431

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

For the Company’s other triple-net master leases, the tenants also have the option to request capital expenditure funding that would generally be subject to a corresponding rent increase at the time of funding, which are subject to tenant compliance with the conditions to the Company’s approval and funding of their requests.

As of March 31, 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

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.

As of June 30, 2023, the Company had committed to fund

CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

Major operator concentration - The Company has operators from which it derived 10% or more of its rental revenue for the three 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:

expansions, construction and capital improvements at certain triple-net leased facilities totaling $ 14.2 million, of which $ 2.7 million is subject to rent increase at the time of funding.

CONCENTRATION OF RISK

Major operator concentration - The Company has operators from which it derived 10% or more of its rental revenue for the three and six months ended June 30, 2023 and 2022.

The following table sets forth information regarding the Company’s major operators as of June 30, 2023 and 2022:

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

Operator SNF Campus ALF/ILF SNF Campus ALF/ILF

March 31, 2023

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

June 30, 2023

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

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

March 31, 2022

June 30, 2022

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

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

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

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

(2) 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.

1 unchanged sentence

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

Major geographic concentration – The following table provides information regarding the Company’s concentrations with respect to certain states, from which the Company derived 10% or more of its rental revenue for the three months ended March 31, 2023 and 2022:

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

State SNF Campus ALF/ILF SNF Campus ALF/ILF

March 31, 2023

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

June 30, 2023

CA 29 9 5 3,307 1,527 437 28 % 28 %

TX 40 3 2 5,126 536 212 23 % 23 %

March 31, 2022

June 30, 2022

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

4 unchanged sentences

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.

Recent Investments

On July 17, 2023, the Company extended a $ 15.7 million mortgage secured loan to a skilled nursing real estate owner.

The mortgage loan is secured by a two -facility skilled nursing portfolio in Florida, operated by a regional skilled nursing operator.

The loan bears interest at 9.0 %, payable monthly.

The term loan is set to mature on August 1, 2028, with one five-year extension option and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 2 % to 3 % of the loan plus unpaid interest payments;

provided, however, that no exit fee is payable in connection with the loan being refinanced pursuant to a loan (or loans) provided by Fannie Mae, Freddie Mac, Federal Housing Administration, or a similar governmental authority.

The investment was funded using proceeds from the Revolving Facility as well as cash on hand.

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.

In July 2023, the Company executed forward equity sales under the ATM Program with a financial institution acting as a forward purchaser to sell 3,839,348 shares of common stock at a weighted average sales price of $ 19.94 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 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