What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-09 · 168 added, 201 removed, 179 unchanged (67% of the section changed)

10 unchanged sentences

Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

(i) the impact of possible additional surges of COVID-19 infections or the risk of other pandemics, epidemics or infectious disease outbreaks, measures taken to prevent the spread of such outbreaks and the related impact on our business or the businesses of our tenants;

(ii) the ability and willingness of our tenants to meet and/or perform their obligations under the triple-net leases we have entered into with them, including, without limitation, their respective obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;

(iii) the risk that we may have to incur additional impairment charges related to our assets held for sale if we are unable to sell such assets at the prices we expect;

(i) the ability and willingness of our tenants to meet and/or perform their obligations under the triple-net leases we have entered into with them, including, without limitation, their respective obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;

(ii) the risk that we may have to incur additional impairment charges related to our assets held for sale if we are unable to sell such assets at the prices we expect;

(iii) the impact of healthcare reform legislation, including minimum staffing level requirements, on the operating results and financial conditions of our tenants;

(iv) the ability of our tenants to comply with applicable laws, rules and regulations in the operation of the properties we lease to them;

4 unchanged sentences

(ix) fluctuating interest rates;

(x) the ability to retain our key management personnel;

(xi) the ability to maintain our status as a real estate investment trust (“REIT”);

(xii) changes in the U.S.

(x) the impact of public health crises, including significant COVID-19 outbreaks as well as other pandemics or epidemics;

(xi) the ability to retain our key management personnel;

(xii) the ability to maintain our status as a real estate investment trust (“REIT”);

(xiii) changes in the U.S.

tax law and other state, federal or local laws, whether or not specific to REITs;

(xiii) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments;

and (xiv) any additional factors included under Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023 and this report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the “SEC”).

(xiv) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments;

and (xv) any additional factors included under Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the “SEC”).

Forward-looking statements speak only as of the date of this report.

Except in the normal course of our public disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.

CareTrust REIT is a self-administered, publicly-traded REIT engaged in the ownership, acquisition, financing, development and leasing of skilled nursing, senio rs housing and other healthcare-related properties .

As of September 30, 2023, we owned, directly or through a joint venture, and leased to independent operators, 225 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 23,916 operational beds and units located in 28 states with the highest concentration of properties by rental revenues located in California, Texas, Louisiana, Idaho and Arizona.

As of September 30, 2023, we also had other real estate related investments consisting of seven real estate secured loans receivable and one mezzanine loan receivable with an aggregate carrying value of $181.2 million.

We generate revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the tenant is solely responsible for the costs related to the property (including property taxes, insurance, maintenance and repair costs and capital expenditures, subject to certain exceptions in the case of properties leased to Ensign and Pennant).

From time to time, we also extend secured mortgage loans to healthcare operators, secured by healthcare-related properties, and secured mezzanine loans to healthcare operators, secured by membership interests in healthcare-related properties.

We also partner with third-party institutional investors to invest in healthcare real estate through various joint

We conduct and manage our business as one operating segment for internal reporting and internal decision-making purposes.

We expect to grow our portfolio by pursuing opportunities to acquire additional properties that will be leased to a diverse group of local, regional and national healthcare providers, which may include new or existing skilled nursing operators, as well as seniors housing operators, behavioral health facilities and related businesses.

We also anticipate diversifying our portfolio over time, including by acquiring properties in different geographic markets, and in different asset classes.

In addition, we actively monitor the clinical, regulatory and financial operating results of our tenants, and work to identify opportunities within their operations and markets that could improve their operating results at our facilities.

We communicate such observations to our tenants;

however, we have no contractual obligation to do so.

Moreover, our tenants have sole discretion with respect to the day-to-day operation of the facilities they lease from us, and how and whether to implement any observation we may share with them.

We also actively monitor the overall occupancy, skilled mix, and other operating metrics of our tenants on at least a monthly basis including, beginning in the quarter ended June 30, 2020, any stimulus funds received by each tenant.

We have replaced tenants in the past, and may elect to replace tenants in the future, if they fail to meet the terms and conditions of their leases with us.

In addition, we have, and may from time to time in the future, repurpose facilities for other uses, such as behavioral health.

The replacement tenants may include tenants with whom we have had no prior landlord-tenant relationship as well as current tenants with whom we are comfortable expanding our relationships.

We have also provided select tenants with strategic capital for facility upkeep and modernization, as well as short-term working capital loans when they are awaiting licensure and certification or conducting turnaround work in one or more of our properties, and we may continue to do so in the future.

In addition, we periodically reassess the investments we have made and the tenant relationships we have entered into, and have selectively disposed of facilities or investments, or terminated such relationships, and we expect to continue making such reassessments and, where appropriate, taking such actions.

CareTrust REIT is a self-administered, publicly-traded REIT engaged in the ownership, acquisition, financing, development and leasing of skilled nursing, seniors housing and other healthcare-related properties.

As of March 31, 2024, we owned, directly or indirectly through joint ventures, and leased to independent operators, 228 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 24,189 operational beds and units located in 29 states with the highest concentration of properties by rental income located in California and Texas.

As of March 31, 2024, we also had other real estate related investments consisting of one preferred equity investment, nine real estate secured loans receivable and four mezzanine loans receivable with a carrying value of $233.3 million.

Recent Developments

Post COVID-19 Pandemic Conditions and Outlook

Tenants of our properties operating pursuant to triple-net master leases have been adversely impacted, and we expect that they will continue to be adversely impacted, by adverse conditions that emerged during, and have continued following, the COVID-19 pandemic.

Our tenants are experiencing increased operating costs as a result of actions they took to prevent or mitigate the outbreak or spread of COVID-19 at their facilities.

Our tenants are also experiencing labor shortages resulting in limited admissions, higher operating costs and continued reduced occupancy levels.

At a portfolio wide level, occupancy levels at our seniors housing facilities, comprising our ALFs and ILFs, are continuing to show signs of recovery following the onset of the COVID-19 pandemic, although they have not yet fully normalized to pre-pandemic levels.

Within our SNFs, occupancy levels have continued to improve since their trough in January 2021, but still remain below pre-COVID occupancy levels for most of our tenants.

Federal and state governmental relief programs enacted during the pandemic provided temporary assistance to many of our tenants during the COVID-19 pandemic.

These included the Public Health and Social Services Emergency Fund that began funding in late 2021, a temporary suspension of Medicare sequestration cuts under the Coronavirus Aid, Relief, and Economic Security Act and a temporary 6.2% increase in Federal Medical Assistance Percentage (“FMAP”) that was approved retroactive to January 1, 2020 and will be phased down by December 31, 2023 under the Consolidated Appropriations Act of 2023.

The tapering and/or end of these relief programs has adversely impacted, and may continue to adversely impact, the business and financial condition of our tenants, as they continue to experience lower occupancy levels and higher operating costs.

In response to the COVID-19 pandemic, the U.S.

Department of Health and Human Services (“HHS”) enacted the COVID-19 Public Health Emergency (“PHE”) that allowed HHS to provide temporary regulatory waivers, including waiver of the three-day hospital stay requirement for a patient’s Medicare benefits to refresh.

This waiver had the effect of increasing skilled mix in our SNFs periodically during the COVID-19 pandemic, especially during surges in COVID-19 outbreaks.

An increase in skilled mix can, but may not necessarily, offset some or all of the adverse financial impact to the operator of the SNF from occupancy declines.

The PHE, including HHS’s waiver of the three-day hospital stay requirement, expired on May 11, 2023.

With the expiration of the PHE and the lifting of the three-day hospital stay requirement, our SNFs may experience decreases in occupancy levels or revenues, which may have a further adverse impact on the business and financial condition of the operators of our SNFs.

State specific approaches have been developed including various states having increased their Medicaid base rates or taken other measures to account for the increase in expenses as a result of the COVID-19 pandemic.

For example, Texas approved a $900 million general Medicaid rate increase as part of the overall state budget effective September 1, 2023, which will allow for the increase in its Medicaid rate to offset the expiration of the FMAP.

There is no assurance that these measures

will continue, will be widely available to our tenants or will sufficiently offset the impact that the government relief programs previously provided.

In July 2023, The Centers for Medicare and Medicaid Services (“CMS”) approved its payment rate update to SNF reimbursements for fiscal 2024, which commenced October 1, 2023, and includes a net increase of 4.0%, or approximately $1.4 billion, in Medicare Part A payments to SNFs.

This increase is expected to partially offset some of our tenants’ higher operating costs.

On September 1, 2023, CMS issued proposed rules regarding minimum staffing requirements and increased inspections at nursing homes in order to establish comprehensive nurse staffing requirements.

The proposed rule consists of three core staffing proposals:

(1) minimum nurse staffing standards of 0.55 hours per resident day for registered nurses and 2.45 hours of care from a nurse aid per resident per day;

(2) a requirement to have a registered nurse onsite 24 hours a day, seven days a week;

and (3) enhanced facility assessment requirements.

The proposed rule also includes a staggered implementation approach and possible hardship exemptions for select facilities.

Comments on the proposed rule had to be submitted by November 6, 2023.

It is uncertain when the proposed rules will be finalized and become effective, what the ultimate scope and timing of the staffing requirements will be thereunder, and whether any such requirements will be accompanied by additional funding to offset any increased costs associated with meeting these requirements for our operators.

Depending on the ultimate level of staffing required, an unfunded mandate to increase staff may have a material and adverse impact on the financial condition of our tenants.

As a result of impacts experienced by our tenants since the onset of the COVID-19 pandemic, the ability of some of our tenants to continue to meet their financial obligations to us in full has been negatively impacted.

See “Impairment of Real Estate Assets, Assets Held for Sale and Asset Sales” below.

During the three and nine months ended September 30, 2023, we collected 97.5% and 96.9%, respectively, of contractual rents due from our operators excluding cash deposits.

In October 2023, we collected 99.3% of contractual rents due from our operators excluding cash deposits.

From time to time in the past, we have taken actions to reposition one or more properties with a replacement tenant or sell the property and, in certain cases, we may also determine to restructure tenants’ long-term obligations.

In the event our tenants are unable to satisfy their obligations to us and we are unable to effect these actions on terms that are as favorable to us as those currently in place, our rental income could be adversely impacted and we may incur additional expenses or obligations and be required to recognize additional impairment charges.

Impact of Macroeconomic Conditions

The substantial inflationary pressures that our economy continues to face has resulted in many headwinds for us and our tenants, most notably in the form of rising interest rates, volatility in the capital markets, a softening of consumer sentiment and signs of a potential broader economic slowdown.

These current macroeconomic conditions, particularly inflation (including rising wages and supply costs), rising interest rates and related changes to consumer spending, including, but not limited to, causing individuals to delay or defer moves to seniors housing, has adversely impacted and could continue to adversely impact our tenants’ ability to meet some of their financial obligations to us.

Rising interest rates also increase our costs of capital to finance acquisitions and increase our borrowing costs, and future changes in market interest rates could materially impact the estimated discounted cash flows that are used to determine the fair value of our other real estate related investments.

Market Trends and Uncertainties

Current macroeconomic conditions, particularly inflation (including higher wages and supply costs), elevated interest rates and related changes to consumer spending, including, but not limited to, causing individuals to delay or defer

moves to seniors housing, has adversely impacted and could continue to adversely impact our tenants’ ability to meet some of their financial obligations to us.

Higher interest rates also increase our costs of capital to finance acquisitions and increase our borrowing costs.

In addition, current macroeconomic conditions and the resulting market volatility may adversely impact our ability to sell properties on acceptable terms, if at all, which could result in additional impairment charges.

For more information regarding the potential impact of COVID-19 and macroeconomic conditions on our business, see “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2022.

As a result of the above factors our tenants are continuing to experience increased operating costs at their facilities.

Our tenants are also experiencing labor shortages resulting in higher operating costs.

At a portfolio wide level, occupancy levels at our seniors housing facilities, comprising our ALFs and ILFs, continue to remain below occupancy levels at the onset of the COVID-19 pandemic.

Within our SNFs, occupancy levels have continued to improve since their trough in January 2021 and remained stable for the three months ended December 31, 2023 compared to the three months ended September 30, 2023, for most of our tenants.

As a result of impacts experienced by our tenants since the onset of the COVID-19 pandemic, the ability of some of our tenants to meet their financial obligations to us in full has been negatively impacted.

From time to time in the past, we have taken actions to reposition one or more properties with a replacement tenant or sell the property and, in certain cases, we have also restructured tenants’ long-term obligations.

See “Impairment of Real Estate Assets, Assets Held for Sale and Asset Sales” below.

During the three months ended March 31, 2024, we collected 98.0% of contractual rents and interest due from our operators and borrowers excluding cash deposits.

In the event our tenants are unable to satisfy their obligations to us and we are unable to effect these actions on terms that are as favorable to us as those currently in place, our rental income would be adversely impacted and we may incur additional expenses or obligations and be required to recognize additional impairment charges.

Regulatory Updates

In March 2024, The Centers for Medicare and Medicaid Services (“CMS”) proposed a payment rate update to SNF reimbursements for fiscal 2025, which includes a net increase of 4.1%, or approximately $1.4 billion in Medicare Part A payments to SNFs.

In July 2023, CMS approved its payment rate update to SNF reimbursements for fiscal 2024, which commenced October 1, 2023, and includes a net increase of 4.0%, or approximately $1.4 billion, in Medicare Part A payments to SNFs.

These increases are expected to partially offset some of our tenants’ higher operating costs.

On April 22, 2024, CMS issued a final rule regarding minimum staffing requirements and increased inspections at nursing homes in order to establish comprehensive nurse staffing requirements.

The rule consists of three core staffing requirements:

(1) overall minimum standard of 3.48 total nurse staff hours per resident day;

(2) minimum nurse staffing standards of 0.55 hours per resident day for registered nurses and 2.45 hours of care from a certified nurse’s aid per resident per day;

and (3) a requirement to have a registered nurse onsite 24 hours a day, seven days a week.

The rule includes a staggered implementation approach for which CMS will publish additional details on compliance as the implementation dates approach.

The rule also includes possible waivers and temporary hardship exemptions for select facilities, however no funding for the additional staff will be provided.

We are currently evaluating the impact of the rule, but believe the unfunded mandate to increase staff may have a material and adverse impact on the financial condition of our tenants.

On October 13, 2023, California Senate Bill No.

525 (“SB 525”) was signed into law, requiring a substantial increase in the minimum wage for workers operating in certain health care facilities.

As a result of SB 525, certain health care facilities (including licensed skilled nursing facilities) operating in California are required to increase the wages of their covered health care employees to at least $21 per hour from June 1, 2024 to May 31, 2026, $22 or $23 per hour (depending on facility type) from June 1, 2026 to May 31, 2028, and $25 per hour after June 1, 2028.

Recent Investments

The following table summarizes our acquisitions from January 1, 2024 through May 2, 2024 (dollars in thousands):

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

Skilled nursing $ 38,311 $ 3,450 2 140

Multi-service campuses (5)

78,344 6,268 4 569

Assisted living (4)

11,036 1,022 1 86

Total $ 127,691 $ 10,740 7 795

(1) Purchase price includes capitalized acquisition costs.

(2) Initial annual cash rent represents initial cash rent for the first twelve months.

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

(4) Includes one ALF held through a joint venture.

See Note 3, Real Estate Investments, Net , and Note 11, Variable Interest Entities for additional information.

(5) Includes two multi-service campuses held through a joint venture.

See Note 14, Subsequent Events , for additional information.

The following table summarizes our other real estate related investments from January 1, 2024 through May 2, 2024 (dollars in thousands):

Investment Type (1)

Investment Annual Initial Interest Income (2)

Number of Properties Number of Beds/Units (3)

Mortgage secured loan receivable $ 26,675 $ 2,427 2 271

Mezzanine loans receivable $ 52,165 $ 7,119 26 3,202

Total $ 78,840 $ 9,546 28 3,473

(1) Table excludes a $1.0 million mortgage loan originated in connection with the sale of one ALF during the period presented.

(2) Represents annualized acquisition-date interest income, less subservicing fees, if applicable.

For floating rate loans, interest income has been calculated using the benchmark rate floor.

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

At-The-Market Offering of Common Stock

On September 15, 2023, we 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 our common stock through an “at-the-market” equity offering program (the “New ATM Program”) and terminated our previous $500.0 million “at-the-market” equity offering program (the “Previous ATM Program” and together with the New ATM Program, the “ATM Program”).

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

The following tables summarize the ATM Program activity for the three months ended March 31, 2024 (in thousands, except per share amounts).

For the Three Months Ended

March 31, 2024

Number of shares 11,600

Average sales price per share $ 23.55

Gross proceeds (1)

(1) Total gross proceeds is before $3.4 million of commissions paid to the sales agents during the three months ended March 31, 2024, under the ATM Program.

As of March 31, 2024, we had $0.9 million available for future issuances under the New ATM Program.

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

During the three months ended March 31, 2023, we recognized an impairment charge of $1.9 million on four facilities held for sale.

During the three months ended June 30, 2023, we recognized an impairment charge of $21.4 million on 12 facilities held for sale.

During the three months ended September 30, 2023, we recognized an impairment charge of $0.2 million on one facility held for sale.

These charges are reported in impairment of real estate investments in the condensed consolidated statements of operations.

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

During the three months ended September 30, 2023, we recognized an impairment charge of $8.0 million related to one SNF.

We wrote down its carrying value of $8.7 million to its estimated fair value of $0.7 million, which is included in real estate investments, net on our condensed consolidated balance sheets.

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

During the three months ended March 31, 2024, we recognized an impairment charge of $2.7 million related to properties held for sale, which is reported in impairment of real estate investments in the condensed consolidated income statements.

Asset Sales and Held for Sale Reclassifications

The following table summarizes our dispositions for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

We periodically reassess our investments and tenant relationships, and from time to time we have selectively disposed of certain facilities or investments, or terminated tenant relationships, and we expect to continue making such reassessments and, where appropriate, taking such actions.

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

Upon designation as held for sale, we cease depreciation and record the investment at the lower of carrying value or estimated fair value less costs to sell, which could result in an impairment of the real estate investments held for sale, if necessary.

The following table summarizes our dispositions for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Three Months Ended March 31,

Number of facilities 2 1

1 unchanged sentence

Net carrying value 1,035 3,300

Net (loss) gain on sale $ — $ (2,287) $ 1,958 $ (2,101)

Net gain (loss) on sale $ 11 $ (70)

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

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Impairment of real estate held for sale (2,744) —

September 30, 2023 $ 21,341 15

On October 20, 2023, we closed on the sale of one ALF consisting of 135 beds located in Florida with a carrying value of $1.6 million, which approximated the net sales proceeds received.

The facility was classified as held for sale as of September 30, 2023.

New Lease Agreement

On October 24, 2023, the Company entered into a new master lease (the “New Ridgeline Lease”) with affiliates of Ridgeline Properties, LLC to lease two ALFs in New Jersey which were non-operational and under a short-term lease.

The New Ridgeline Lease has an initial term at the date of the lease of approximately 10 years from the facility opening date with two five-year renewal options and CPI-based rent escalators.

Annual cash rent under the new lease is approximately $1.0 million beginning on the first day of the second lease year.

Other Real Estate Investment Transactions

In March 2023, the Company received full repayment of the outstanding balance of a $15 million mezzanine loan receivable.

Recent Investments

From January 1, 2023 through November 9, 2023, we acquired ten SNFs, one multi-service campus, and four ALFs for approximately $233.7 million, which includes estimated capitalized acquisition costs.

These acquisitions are expected to generate initial annual cash revenues of approximately $19.2 million and an initial blended yield of approximately 8.2% before the impact of any rent abatement.

From January 1, 2023 through November 9, 2023, we originated $45.3 million in mortgage loans.

These investments are expected to generate annual interest income of approximately $4.2 million and an initial blended yield of approximately 9.2%.

At-The-Market Offering of Common Stock

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

From January 1, 2023 through November 9, 2023, we entered into ATM forward contracts under the ATM Program with a financial institution acting as a forward purchaser to sell an aggregate of 15,794,229 shares of common stock at a weighted average initial sales price of $19.87 per share before commissions and offering expenses.

During the three months ended September 30, 2023, we settled 10,893,229 shares outstanding under the ATM forward contracts at a weighted average sales price of $19.57 for net proceeds of $213.1 million.

For the remaining shares subject to the ATM forward contracts, we will not receive any proceeds from sales of those shares of common stock by the forward sellers until the forward contracts are settled.

We currently expect 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 our discretion, prior to the final settlement date, at which time we expect 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 we expect 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.

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

The following table summarizes the ATM Program activity under the ATM forward contracts and direct issuances for the three and nine months ended September 30, 2023 (in thousands, except per share amounts).

For the Three Months Ended For the Nine Months Ended

September 30, 2023 September 30, 2023

Number of shares 16,285 16,285

Average sales price per share $ 19.89 $ 19.89

Gross proceeds (1)

$ 323,886 $ 323,886

(1) Total gross proceeds is before $4.0 million of commissions paid to the sales agents and forward adjustments during both the three and nine months ended September 30, 2023, respectively, under the ATM Program.

As of September 30, 2023, 4,901,000 shares of common stock at the weighted average initial sales price of $20.00 per share as of September 30, 2023, before commissions and offering expenses, remain outstanding under the ATM forward contracts.

As of November 9, 2023 , w e had $496.0 million ava ilable for future issuances under the New ATM Program.

March 31, 2024 $ 12,483 13

Results of Operations

Three Months Ended September 30, 2023 Compared to Three Months Ended June 30, 2023:

Three Months Ended March 31, 2024 Compared to Three Months Ended December 31, 2023:

Three Months Ended Increase

(Decrease) Percentage

September 30, 2023 June 30, 2023

March 31, 2024 December 31, 2023

(dollars in thousands)

8 unchanged sentences

Gain on sale of real estate, net 11 260 (249) (96) %

Unrealized losses on other real estate related investments, net (5,251) (2,151) (3,100) 144 %

Net loss allocated to noncontrolling interests (11) — (11) *

Unrealized (loss) gain on other real estate related investments, net (612) 1,371 (1,983) (145) %

Net income (loss) attributable to noncontrolling interests 4 (2) 6 *

• Not meaningful

Rental income .

Rental income increased by $3.5 million as detailed below:

Rental income increased by approximately $29,000 as detailed below:

Three Months Ended Increase/(Decrease)

(in thousands) September 30, 2023 June 30, 2023

(in thousands) March 31, 2024 December 31, 2023

Contractual cash rent $ 51,430 $ 51,515 $ (85)

1 unchanged sentence

Total contractual rent 52,934 53,097 (163)

51,225 47,752 3,473

Straight-line rent (7) (8) 1

Rental income $ 51,218 $ 47,745 $ 3,473

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

Amortization of below market lease intangible 575 384 191

Total amount in rental income $ 53,502 $ 53,473 $ 29

Total contractual rent 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.

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.

Total contractual cash rent increased by $3.5 million due to a $2.5 million increase in rental income from real estate investments made after April 1, 2023, a $0.8 million increase in tenant reimbursements, and a $0.4 million increase in rental rates for our existing tenants, partially offset by a $0.2 million decrease in rental income related to dispositions in June 2023.

Total contractual cash rent decreased by $0.2 million due to a $1.1 million decrease in rental income related to certain tenants on a cash basis method of accounting and a $0.1 million decrease in tenant reimbursements, partially offset by a $0.7 million increase in rental income from real estate investments made after October 1, 2023 and a $0.3 million increase in rental rates for our existing tenants.

Interest and other income.

The $0.9 million, or 22%, increase in interest and other income was primarily due to an increase of $1.0 million of interest income on new loan investments made after April 1, 2023 and an increase of $0.1 million of interest income on other loans due to a higher number of days during the three months ended September 30, 2023 compared to the three months ended June 30, 2023, partially offset by a decrease of $0.2 million of interest income on money market funds.

The $3.3 million, or 53%, increase in interest and other income was primarily due to an increase of $2.4 million of interest income on money market funds and an increase of $1.4 million of interest income on new loan investments made after October 1, 2023, partially offset by a decrease of $0.3 million related to repayments of loans receivable and a decrease of $0.2 million related to a prepayment penalty received during the three months ended December 31, 2023.

Depreciation and amortization.

The $0.3 million, or 3%, increase in depreciation and amortization was primarily due to an increase of $0.7 million due to acquisitions and capital improvements made after April 1, 2023, partially offset by a decrease of $0.3 million due to assets classified as held for sale and a decrease of $0.1 million due to assets becoming fully depreciated after April 1, 2023.

The $0.2 million, or 2%, increase in depreciation and amortization was primarily due to an increase of $0.4 million due to acquisitions and capital improvements made after October 1, 2023, partially offset by a decrease of $0.2 million due to assets becoming fully depreciated after October 1, 2023.

Interest expense.

Interest expense increased by $0.7 million as detailed below:

Change in interest expense for the three months ended September 30, 2023 compared to the three months ended June 30, 2023

Interest expense decreased by approximately $38,000 as detailed below:

Change in interest expense for the three months ended March 31, 2024 compared to the three months ended December 31, 2023

(in thousands)

Increase in outstanding borrowing amount for the Revolving Facility, net $ 364

Increase in interest rates for the Term Loan (as defined below) 208

Increase in interest rates for the Revolving Facility (as defined below) 138

Net change in interest expense $ 710

Decrease in interest for the Term Loan (as defined below) $ (40)

Other changes in interest expense 2

Total change to interest expense $ (38)

Property taxes.

The $0.8 million, or 56%, increase in property taxes was primarily due to a $0.6 million increase related to acquisitions made after April 1, 2023 and a $0.2 million increase due to property taxes expected to be paid directly by us as a result of certain assets being designated as held for sale.

The $0.1 million, or 4%, increase in property taxes was primarily due to a $0.1 million increase related to acquisitions made after October 1, 2023.

Impairment of real estate investments.

During the three months ended September 30, 2023, we recognized impairment charges of $8.0 million related to one property held for investment and $0.2 million related to one property held for sale.

During the three months ended March 31, 2024, we recognized impairment charges of $2.7 million related to properties held for sale.

See above under “Recent Developments - Impairment of Real Estate Assets, Assets Held for Sale, and Asset Sales” for additional information.

During the three months ended June 30, 2023, we recognized an impairment charge of $21.4 million related to 12 properties classified as held for sale during the quarter.

During the three months ended December 31, 2023, we recognized an impairment charge of $4.8 million related to properties held for sale.

Property operating expenses.

During the three months ended September 30, 2023 and June 30, 2023, we recognized $1.2 million and $0.7 million, respectively, of property operating expenses related to assets we plan to sell or repurpose, or have sold.

During the three months ended March 31, 2024 and December 31, 2023, we recognized $0.7 million and $0.6 million, respectively, of property operating expenses related to assets we plan to sell or repurpose, re-tenant, or have sold.

General and administrative expense.

1 unchanged sentence

Three Months Ended Increase/(Decrease)

(in thousands) September 30, 2023 June 30, 2023

Cash compensation $ 1,439 $ 1,267 $ 172

(in thousands) March 31, 2024 December 31, 2023

Share-based compensation $ 2,120 $ 1,774 $ 346

Cash compensation 1,765 1,380 385

Incentive compensation 1,500 1,650 (150)

4 unchanged sentences

Gain on sale of real estate, net.

During the three months ended June 30, 2023, we recorded a $2.1 million gain on sale of real estate related to the sale of one SNF and one ALF, partially offset by a $0.1 million loss on sale of real estate related to the sale of one ALF.

No gain or loss on sale of real estate was recognized during the three months ended September 30, 2023.

Unrealized losses on other real estate related investments, net.

During the three months ended September 30, 2023, we recorded a $5.3 million unrealized loss on four mortgage loans receivable and one mezzanine loan receivable.

During the three months ended June 30, 2023, we recorded a $1.9 million unrealized loss on three mortgage loans and one mezzanine loan receivable and a $0.3 million loss related to a loan origination fee paid.

The unrealized loss is due to rising interest rates.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022:

Nine Months Ended Increase

During the three months ended March 31, 2024, we recorded an $11,000 gain on sale of real estate, net related to the sale of one SNF and one ALF.

During the three months ended December 31, 2023, we recorded a $0.3 million gain on sale of real estate related to the sale of one ALF.

Unrealized (loss) gain on other real estate related investments, net.

During the three months ended March 31, 2024, we recorded an $0.8 million unrealized loss on our secured and mezzanine loans receivable due to an increase in interest rates, partially offset by unrealized gains of $0.2 million due to an increase in expected cash flows on floating rate loans.

During the three months ended December 31, 2023, we recorded a $1.4 million unrealized gain due to a reversal of a previously recognized unrealized loss related to the partial repayment of one mortgage loan receivable, a decrease in interest rates and a decrease in projected forward interest rates.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023:

Three Months Ended Increase

(Decrease) Percentage

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

(dollars in thousands)

5 unchanged sentences

Impairment of real estate investments 2,744 1,886 858 45 %

Provision for loan losses, net — 3,844 (3,844) (100) %

Property operating expenses 660 963 (303) (31) %

2 unchanged sentences

Unrealized losses on other real estate related investments, net (612) (454) (158) 35 %

Net loss allocated to noncontrolling interests (11) — (11) *

Net income attributable to noncontrolling interests 4 — 4 *

• Not meaningful

1 unchanged sentence

Rental income increased by $7.3 million as detailed below:

Nine Months Ended

Three Months Ended

Increase/(Decrease)

(in thousands) September 30, 2023 September 30, 2022

(in thousands) March 31, 2024 March 31, 2023

Contractual cash rent $ 51,430 $ 45,461 $ 5,969

1 unchanged sentence

Total contractual rent 52,934 46,170 6,764

145,147 140,794 4,353

Straight-line rent (7) (7) —

Adjustment for collectibility (2)

Rental income $ 145,126 $ 139,831 $ 5,295

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

Amortization of below market lease intangible 575 — 575

Total amount in rental income $ 53,502 $ 46,163 $ 7,339

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.

Total contractual cash rent increased by $4.4 million due to an increase of $4.9 million from real estate investments made after January 1, 2022, a $3.9 million increase in rental rates for our existing tenants and a $1.9 million increase in tenant reimbursements, partially offset by a $5.5 million decrease in rental income related to lower cash collections from tenants on a cash basis method of accounting and a $0.8 million decrease due to dispositions after January 1, 2022.

(2) During the nine months ended September 30, 2022, the Company wrote off $1.0 million of uncollectible rent.

Total contractual cash rent increased by $6.8 million due to a $4.2 million increase in rental income from real estate investments made after January 1, 2023, a $1.3 million increase in rental rates for our existing tenants, a $0.8 million increase in tenant reimbursements, a $0.5 million increase in rental income related to certain tenants on a cash basis method of accounting, and a $0.2 million increase in rental rates due to the transfer of two facilities to a new operator, partially offset by a $0.2 million decrease in rental income related to dispositions made after January 1, 2023.

Interest and other income.

The $8.4 million increase in interest and other income was primarily due to an increase of $8.9 million due to the origination of loans receivable after January 1, 2022, a prepayment penalty of $0.4 million during the nine months ended September 30, 2023, and an increase of $0.2 million of interest income on money market funds, partially offset by a decrease of $0.9 million of interest income due to a loan repayment and a decrease of $0.2 million of interest income due to a loan origination fee received during the nine months ended September 30, 2022.

The $5.1 million increase in interest and other income was primarily due to an increase of $3.5 million of interest income on money market funds, an increase of $2.6 million due to the origination of loans receivable after January 1, 2023, and an increase of $0.2 million due to originations of other loans, partially offset by a decrease of $0.7 million of interest income due to loan repayments and a decrease of $0.5 million related to a prepayment penalty on one mezzanine loan receivable during the three months ended March 31, 2023.

Depreciation and amortization.

The $0.4 million, or 1%, decrease in depreciation and amortization was primarily due to a decrease of $2.4 million due to assets becoming fully depreciated after January 1, 2022 and a decrease of $1.0 million due to classifying assets as held for sale after January 1, 2022, partially offset by an increase of $2.3 million related to acquisitions and capital improvements made after January 1, 2022 and a $0.7 million increase due to reclassifying assets out of held for sale during the three months ended December 31, 2022.

The $1.2 million, or 10%, increase in depreciation and amortization was primarily due to an increase of $2.0 million related to acquisitions and capital improvements made after January 1, 2023, partially offset

by a decrease of $0.5 million due to assets becoming fully depreciated after January 1, 2023 and a decrease of $0.3 million due to classifying assets as held for sale after January 1, 2023.

Interest expense.

Interest expense increased by $12.2 million as detailed below:

Change in interest expense for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

Interest expense decreased by $1.6 million as detailed below:

Change in interest expense for the three months ended March 31, 2024 compared to the three months ended March 31, 2023

(in thousands)

Decrease in outstanding borrowing amount for the Revolving Facility, net $ (1,932)

Increase in interest rates for the Term Loan 400

Increase in interest rates for the Revolving Facility 3,623

Increase in outstanding borrowing amount for the Revolving Facility, net 2,286

Other changes in interest expense (67)

Net change in interest expense $ 12,217

Total change to interest expense $ (1,599)

Property taxes.

The $1.1 million, or 32%, increase in property taxes was due to a $0.9 million increase due to property taxes expected to be paid directly by us as a result of certain assets being designated as held for sale, a $0.7 million increase related to acquisitions made after January 1, 2022, an increase of $0.2 million due to reassessments, and an increase of $0.2 million due to the transfer of certain properties to new operators in March 2023 that do not make direct tax payments, partially offset by a decrease of $0.9 million due to the sale of properties after January 1, 2022.

The $0.9 million, or 105%, increase in property taxes was due to a $0.8 million increase related to acquisitions made after January 1, 2023 and an increase of $0.1 million due to the transfer of certain properties to new operators in March 2023 that do not make direct tax payments.

Impairment of real estate investments.

During the nine months ended September 30, 2023, we recognized an impairment charge of $23.1 million related to properties classified as held for sale, $8.0 million related to properties held for investment, and $0.4 million related to properties that were sold.

During the three months ended March 31, 2024, we recognized impairment charges of $2.7 million related to properties held for sale.

See above under “Recent Developments - Impairment of Real Estate Assets, Assets Held for Sale, and Asset Sales” for additional information.

During the nine months ended September 30, 2022, we recognized an aggregate impairment charge of $73.7 million related to properties held for sale.

Provision for loan losses, net.

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

No such provision for loan losses was recorded during the nine months ended September 30, 2023.

During the three months ended March 31, 2023, we recognized an impairment charge of $1.9 million related to properties held for sale as of March 31, 2023.

Property operating expenses.

During the nine months ended September 30, 2023 and 2022, we recognized $2.9 million and $4.3 million, respectively, of property operating expenses related to assets we plan to sell or repurpose, or have sold.

During the three months ended March 31, 2024 and 2023, we recognized $0.7 million and $1.0 million, respectively, of property operating expenses related to assets we plan to sell or repurpose, re-tenant or have sold.

General and administrative expense.

General and administrative expense decreased by $0.1 million as detailed below:

Nine Months Ended

General and administrative expense increased by $1.8 million as detailed below:

Three Months Ended

Increase/(Decrease)

(in thousands) September 30, 2023 September 30, 2022

(in thousands) March 31, 2024 March 31, 2023

Share-based compensation $ 2,120 $ 936 $ 1,184

Cash compensation 1,765 1,550 215

Incentive compensation 1,500 1,550 (50)

Share-based compensation 3,379 4,295 (916)

Professional services 738 474 264

3 unchanged sentences

Gain (loss) on sale of real estate, net.

During the nine months ended September 30, 2023, we recorded a $2.1 million gain on sale of real estate related to the sale of one SNF and one ALF, partially offset by a $0.1 million loss on sale of real estate related to the sale of two ALFs.

During the nine months ended September 30, 2022, we recorded a $2.1 million loss on sale of real estate related to the sale of six SNFs and one multi-service campus and a $0.2 million loss on sale of real estate related to the sale of a land parcel, partially offset by a $0.2 million gain on sale of real estate related to the sale of one SNF.

During the three months ended March 31, 2024, we recorded a $11,000 gain on sale of real estate, net related to the sale of one SNF and one ALF.

During the three months ended March 31, 2023, we recorded a $70,000 loss on sale of real estate related to the sale of one ALF.

Unrealized losses on other real estate related investments, net.

During the nine months ended September 30, 2023, we recorded an unrealized loss of $8.1 million related to five 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, partially offset by a reversal of a previously recognized unrealized loss of $0.5 million related to the repayment of one mezzanine loan receivable.

During the nine months ended September 30, 2022, we recorded a $4.7 million unrealized loss on one secured loan receivable and two mezzanine loans receivable.

The unrealized loss is due to rising interest rates.

During the three months ended March 31, 2024, we recorded a $0.8 million unrealized loss on our secured and mezzanine loans receivable due to an increase in interest rates, partially offset by unrealized gains of $0.2 million due to an increase in expected cash flows on floating rate loans due to an increase in projected forward interest rates.

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

Liquidity and Capital Resources

14 unchanged sentences

Department of Housing and Urban Development, in appropriate circumstances in connection with acquisitions and refinancing of existing mortgage loans.

We believe that our expected operating cash flow from rent collections, interest payments on our other real estate related investments, and borrowings under our Second Amended Credit Facility, together with our cash balance of $3.5 million, available borrowing capacity of $600.0 million under the Revolving Facility, 4,901,000 shares of common stock subject to forward equity sale contracts at the weighted average initial sales price of $20.00 per share, before commissions and offering expenses, which can be settled at any time before the one year anniversary of the applicable forward contract, and availability of $496.0 million under the ATM Program, each at September 30, 2023, will be sufficient to meet ongoing debt service requirements, dividend plans, operating lease obligations, capital expenditures, working capital requirements and other needs for at least the next 12 months.

We believe that our expected operating cash flow from rent collections and interest payments on our other real estate related investments, together with our cash balance of $451.2 million and available borrowing capacity of $600.0 million under the Revolving Facility (as defined below), each at March 31, 2024, will be sufficient to meet ongoing debt service requirements, dividend plans, operating lease obligations, capital expenditures, working capital requirements and other needs for at least the next 12 months.

We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.

While we are currently pursuing the sale, re-tenanting or repurposing of certain of our assets in connection with our ongoing review and monitoring of our investment portfolio as described under “Recent Developments” above, we currently do not expect to sell any of our properties to meet liquidity needs, although we may do so in the future.

We currently do not expect to sell any of our properties to meet liquidity needs, although we may do so from time to time as part of our hold strategy on an investment-by-investment basis.

Our quarterly cash dividend and any failure of our operators to pay rent or of our borrowers to make interest or principal payments may impact our available capital resources.

3 unchanged sentences

On September 15, 2023, we entered into the New ATM Program.

In addition to the issuance and sale of shares of our common stock, we may also enter into one or more ATM forward contracts with sales agents for the sale of shares of our common stock under the ATM Program.

During the three months ended March 31, 2024, we sold $273.2 million of shares of our common stock under the New ATM Program.

As of March 31, 2024, the Company had $0.9 million available for future issuances under the New ATM Program.

See “At-The-Market Offering of Common Stock” for information regarding activity under the ATM Program.

Although we are subject to restrictions on our ability to incur indebtedness, we expect that we will be able to refinance existing indebtedness or incur additional indebtedness for acquisitions or other purposes, if needed.

However, there can be no

assurance that we will be able to refinance our indebtedness, incur additional indebtedness or access additional sources of capital, such as by issuing common stock or other debt or equity securities, on terms that are acceptable to us or at all.

As of September 30, 2023, we are in compliance with all debt covenants on our outstanding indebtedness.

However, there can be no assurance that we will be able to refinance our indebtedness, incur additional indebtedness or access additional sources of capital, such as by issuing common stock or other debt or equity securities, on terms that are acceptable to us or at all.

As of March 31, 2024, we are in compliance with all debt covenants on our outstanding indebtedness.

The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented (dollars in thousands):

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Net cash provided by operating activities $ 48,820 $ 35,120

Net cash used in investing activities (123,241) (818)

Net cash provided by financing activities 110,516 16,053

Net decrease in cash and cash equivalents (9,693) (15,034)

Net cash provided by (used in) financing activities 231,146 (19,410)

Net increase in cash and cash equivalents 156,725 14,892

Cash and cash equivalents as of the beginning of period 294,448 13,178

Cash and cash equivalents as of the end of period $ 451,173 $ 28,070

Net cash provided by operating activities increased for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Net cash provided by operating activities increased for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Operating cash inflows are derived primarily from the rental payments received under our lease agreements, including as a result of new investments, and interest payments on our other real estate related investments.

Operating cash outflows consist primarily of interest expense on our borrowings and general and administrative expenses.

The net increase of $1.4 million in cash provided by operating activities for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is primarily due to an increase in interest income received on our other real estate related investments, an increase in rental income received, and a decrease in cash paid for general and administrative expense, partially offset by an increase in cash paid for interest expense.

Cash used in investing activities for the nine months ended September 30, 2023 was primarily comprised of $253.3 million in acquisitions of real estate, investment in real estate related investments and other loans receivable and escrow deposits for potential acquisitions of real estate and $9.1 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $15.7 million of principal payments received from our other real estate related investments and other loans receivable and $14.5 million in net proceeds from real estate sales.

Cash used in investing activities for the nine months ended September 30, 2022 was primarily comprised of $171.6 million in acquisitions of real estate and investments in real estate related investments and other loans receivable and $5.5 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $34.1 million in net proceeds from real estate sales and $1.2 million of principal payments received from other loans receivable.

Our cash flows provided by financing activities for the nine months ended September 30, 2023 were primarily comprised of $319.0 million in net proceeds from the issuance of common stock and $1.1 million in contributions from noncontrolling interests, partially offset by $125.0 million in net payments under our Revolving Facility (as defined below), $83.1 million in dividends paid and a $1.5 million net settlement adjustment on restricted stock.

Our cash flows provided by financing activities for the nine months ended September 30, 2022 were primarily comprised of $100.0 million in net borrowings under our Prior Credit Agreement (as defined below), partially offset by $79.5 million in dividends paid and a $4.5 million net settlement adjustment on restricted stock.

The net increase of $13.7 million in cash provided by operating activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is primarily due to an increase in rental income received, an increase in interest income received on our other real estate related investments, and a decrease in cash paid for interest expense, partially offset by an increase in cash paid for general and administrative expense.

Cash used in investing activities for the three months ended March 31, 2024 was primarily comprised of $122.9 million in acquisitions of real estate, investment in real estate related investments and other loans receivable and escrow deposits for potential acquisitions of real estate and $0.4 million of purchases of equipment, furniture and fixtures and improvements to real estate.

Cash used in investing activities for the three months ended March 31, 2023 was primarily comprised of $17.2 million in escrow deposits for acquisitions of real estate and $2.0 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $15.1 million of principal payments received from our other real estate related investments and other loans receivable and $3.2 million in net proceeds from real estate sales.

Our cash flows provided by financing activities for the three months ended March 31, 2024 were primarily comprised of $269.8 million in net proceeds from the issuance of common stock and $0.4 million in contributions from noncontrolling interests, partially offset by $36.5 million in dividends paid and a $2.5 million net settlement adjustment on restricted stock.

Our cash flows used in financing activities for the three months ended March 31, 2023 were primarily comprised of $27.4 million in dividends paid, a $1.5 million net settlement adjustment on restricted stock and $0.5 million in costs paid for the issuance of common stock, partially offset by $10.0 million in borrowings under our Revolving Facility (as defined below).

Material Cash Requirements

7 unchanged sentences

The obligations under the Notes are guaranteed, jointly and severally, on an unsecured basis, by us and all of our subsidiaries (other than the Issuers) that guarantee obligations under the Second Amended Credit Facility (as defined below).

As of September 30, 2023, we were in compliance with all applicable financial covenants under the indenture governing the Notes.

As of March 31, 2024, we were in compliance with all applicable financial covenants under the indenture governing the Notes.

See Note 7, Debt, to our condensed consolidated financial statements included in this report for further information about the Notes.

1 unchanged sentence

On December 16, 2022, we, together with certain of our 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 (as amended from time to time, the “Second Amended Credit Agreement”).

The Operating Partnership is the borrower under the Second Amended Credit Agreement, and the obligations thereunder are guaranteed, jointly and severally, on an unsecured basis, by us and certain of our subsidiaries.

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

3 unchanged sentences

The First Amendment restates the definition of Consolidated Total Asset Value to include net proceeds from at-the-market forward commitments executed but not yet closed as of the relevant date as if such proceeds had actually been received.

As of September 30, 2023, we had $200.0 million outstanding under the Term Loan and no borrowings outstanding under the Revolving Facility.

As of March 31, 2024, we had $200.0 million outstanding under the Term Loan and no borrowings outstanding under the Revolving Facility.

The Revolving Facility has a maturity date of February 9, 2027, and includes, at our sole discretion, t wo six-month extension options.

3 unchanged sentences

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 our consolidated subsidiaries (unless we obtain certain specified investment grade ratings on our 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 off the credit ratings of our senior long-term unsecured debt).

As of September 30, 2023, we were in compliance with all applicable financial covenants under the Second Amended Credit Agreement.

As of March 31, 2024, we were in compliance with all applicable financial covenants under the Second Amended Credit Agreement.

See Note 7, Debt, to our condensed consolidated financial statements included in this report for further information about the Second Amended Credit Agreement.

Capital Expenditures

As of September 30, 2023, we had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totaling $11.8 million, of which $3.2 million is subject to rent increase at the time of funding.

As of March 31, 2024, we had committed to fund expansions, construction, capital improvements and ESG incentives, which provides eligible triple-net tenants with monetary inducements to make sustainable improvements to our properties, at certain triple-net leased facilities totaling $13.1 million, of which $4.9 million is subject to rent increase at the time of funding.

We expect to fund the capital expenditures in the next one to two years.

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We are required to pay dividends in order to maintain our REIT status and we expect to make quarterly dividend payments in cash with the annual dividend amount no less than 90% of our annual REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.

See Note 8, Equity, to our condensed consolidated financial statements included in this report for a summary of the cash dividends per share of our common stock declared by our board of directors for the three months ended September 30, 2023 .

See Note 8, Equity, to our condensed consolidated

financial statements included in this report for a summary of the cash dividends per share of our common stock declared by our board of directors for the three months ended March 31, 2024 .

Critical Accounting Policies and Estimates

5 unchanged sentences

Please refer to “Critical Accounting Policies and Estimates” in the “Management’s Discussion and Analysis of Financial Condition and Results of Ope rations” section of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 8, 2024, for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no material changes in such critical accounting policies during the nine months ended September 30, 2023.

There have been no material changes in such critical accounting policies during the three months ended March 31, 2024.

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 2. Management’s Discussion and Analysis