CareTrust REIT, Inc. 10-Q

Item 1. Financial Statements. CARETRUST REIT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (Unaudited) March 31, 2024 December 31, 2023 Assets: Real estate investments, net $ 1,619,438 $ 1,567,119 Other real estate related investments (including accrued interest of $ 2,152 as of March 31, 2024 and $ 1,727 as of December 31, 2023) 233,346 180,368 Assets held for sale 12,483 15,011 Cash and cash equivalents 451,173 294,448 Accounts and other receivables 402 395 Prepaid expenses and other assets, net 27,749 23,337 Deferred financing costs, net 3,845 4,160 Total assets $ 2,348,436 $ 2,084,838 Liabilities and Equity: Senior unsecured notes payable, net $ 396,261 $ 396,039 Senior unsecured term loan, net 199,612 199,559 Accounts payable, accrued liabilities and deferred rent liabilities 35,275 33,992 Dividends payable 41,192 36,531 Total liabilities 672,340 666,121 Commitments and contingencies (Note 12) Equity: Preferred stock, $ 0.01 par value; 100,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023 — — Common stock, $ 0.01 par value; 500,000,000 shares authorized, 141,712,165 and 129,992,796 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 1,417 1,300 Additional paid-in capital 2,152,454 1,883,147 Cumulative distributions in excess of earnings ( 480,074 ) ( 467,628 ) Total stockholders’ equity 1,673,797 1,416,819 Noncontrolling interests 2,299 1,898 Total equity 1,676,096 1,418,717 Total liabilities and equity $ 2,348,436 $ 2,084,838 See accompanying notes to condensed consolidated financial statements. 1 Table of Contents CARETRUST REIT, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (in thousands, except per share amounts) (Unaudited) For the Three Months Ended March 31, 2024 2023 Revenues: Rental income $ 53,502 $ 46,163 Interest and other income 9,568 4,443 Total revenues 63,070 50,606 Expenses: Depreciation and amortization 13,448 12,238 Interest expense 8,228 9,827 Property taxes 1,801 880 Impairment of real estate investments 2,744 1,886 Property operating expenses 660 963 General and administrative 6,838 5,061 Total expenses 33,719 30,855 Other loss: Gain (loss) on sale of real estate, net 11 ( 70 ) Unrealized loss on other real estate related investments, net ( 612 ) ( 454 ) Total other loss ( 601 ) ( 524 ) Net income 28,750 19,227 Net income attributable to noncontrolling interests 4 — Net income attributable to CareTrust REIT, Inc. $ 28,746 $ 19,227 Earnings per common share attributable to CareTrust REIT, Inc: Basic $ 0.22 $ 0.19 Diluted $ 0.22 $ 0.19 Weighted-average number of common shares: Basic 132,836 99,063 Diluted 133,202 99,087 See accompanying notes to condensed consolidated financial statements. 2 Table of Contents CARETRUST REIT, INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except share and per share amounts) (Unaudited) Common Stock Additional Paid-in Capital Cumulative Distributions in Excess of Earnings Total Stockholders’ Equity Noncontrolling Interests Total Equity Shares Amount Balance at December 31, 2023 129,992,796 $ 1,300 $ 1,883,147 $ ( 467,628 ) $ 1,416,819 $ 1,898 $ 1,418,717 Issuance of common stock, net 11,600,000 116 269,671 — 269,787 — 269,787 Vesting of stock-based compensation awards, net of shares withheld for employee taxes 119,369 1 ( 2,484 ) — ( 2,483 ) — ( 2,483 ) Amortization of stock-based compensation — — 2,120 — 2,120 — 2,120 Common dividends ($ 0.29 per share) — — — ( 41,192 ) ( 41,192 ) — ( 41,192 ) Distributions to noncontrolling interests — — — — — ( 47 ) ( 47 ) Contributions from noncontrolling interests — — — — — 444 444 Net income — — — 28,746 28,746 4 28,750 Balance at March 31, 2024 141,712,165 $ 1,417 $ 2,152,454 $ ( 480,074 ) $ 1,673,797 $ 2,299 $ 1,676,096 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents CARETRUST REIT, INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (in thousands, except share and per share amounts) (Unaudited) Common Stock Additional Paid-in Capital Cumulative Distributions in Excess of Earnings Total Stockholders’ Equity Noncontrolling Interests Total Equity Shares Amount Balance at December 31, 2022 99,010,112 $ 990 $ 1,245,337 $ ( 396,954 ) $ 849,373 $ — $ 849,373 Vesting of stock-based compensation awards, net of shares withheld for employee taxes 87,978 1 ( 1,480 ) — ( 1,479 ) — ( 1,479 ) Amortization of stock-based compensation — — 936 — 936 — 936 Common dividends ($ 0.28 per share) — — — ( 27,738 ) ( 27,738 ) — ( 27,738 ) Net income — — — 19,227 19,227 — 19,227 Balance at March 31, 2023 99,098,090 $ 991 $ 1,244,793 $ ( 405,465 ) $ 840,319 $ — $ 840,319 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents CARETRUST REIT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) For the Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Net income $ 28,750 $ 19,227 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (including below-market ground leases) 13,462 12,252 Amortization of deferred financing costs 614 609 Unrealized losses on other real estate related investments, net 612 454 Amortization of stock-based compensation 2,120 936 Straight-line rental income 7 7 Amortization of below market rent ( 575 ) — Noncash interest income ( 425 ) 150 (Gain) loss on sale of real estate, net ( 11 ) 70 Impairment of real estate investments 2,744 1,886 Change in operating assets and liabilities: Accounts and other receivables ( 15 ) ( 33 ) Prepaid expenses and other assets, net ( 322 ) 61 Accounts payable, accrued liabilities and deferred rent liabilities 1,859 ( 499 ) Net cash provided by operating activities 48,820 35,120 Cash flows from investing activities: Acquisitions of real estate, net of deposits applied ( 66,619 ) — Purchases of equipment, furniture and fixtures and improvements to real estate ( 398 ) ( 2,019 ) Investment in real estate related investments and other loans receivable ( 52,165 ) — Principal payments received on real estate related investments and other loans receivable — 15,143 Escrow deposits for potential acquisitions of real estate ( 4,105 ) ( 17,172 ) Net proceeds from sales of real estate 46 3,230 Net cash used in investing activities ( 123,241 ) ( 818 ) Cash flows from financing activities: Proceeds from the issuance of common stock, net 269,787 ( 501 ) Borrowings under unsecured revolving credit facility — 10,000 Payments of deferred financing costs ( 24 ) ( 21 ) Net-settle adjustment on restricted stock ( 2,483 ) ( 1,479 ) Dividends paid on common stock ( 36,531 ) ( 27,409 ) Contributions from noncontrolling interests 444 — Distributions to noncontrolling interests ( 47 ) — 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 Supplemental disclosures of cash flow information: Interest paid $ 3,771 $ 6,671 Supplemental schedule of noncash investing and financing activities: Increase in dividends payable $ 4,661 $ 393 Right-of-use asset obtained in exchange for new operating lease obligation $ — $ 369 Transfer of pre-acquisition costs to acquired assets $ 5 $ — Sale of real estate settled with note receivable $ 1,000 $ — See accompanying notes to condensed consolidated financial statements. 5 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) 1. ORGANIZATION Description of Business— CareTrust REIT, Inc.’s (“CareTrust REIT” or the “Company”) primary business consists of acquiring, financing, developing and owning real property to be leased to third-party tenants in the healthcare sector. As of March 31, 2024, the Company owned directly or through a joint venture 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, the Company 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation —The accompanying condensed consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In the opinion of management, all adjustments which are of a normal and recurring nature and considered necessary for a fair presentation of the results of the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year. The accompanying consolidated financial statements of the Company include the accounts of CareTrust REIT, its wholly-owned subsidiaries, and variable interest entities (“VIEs”) over which the Company exercises control. All intercompany transactions and account balances within the Company have been eliminated, and net earnings are reduced by the portion of net earnings attributable to noncontrolling interests. 3. REAL ESTATE INVESTMENTS, NET The following table summarizes the Company’s investment in owned properties, and properties held in consolidated joint ventures, held for use as of March 31, 2024 and December 31, 2023 (dollars in thousands): March 31, 2024 December 31, 2023 Land $ 287,607 $ 279,276 Buildings and improvements 1,676,474 1,620,014 Integral equipment, furniture and fixtures 101,475 100,504 Identified intangible assets 5,283 5,283 Real estate investments 2,070,839 2,005,077 Accumulated depreciation and amortization ( 451,401 ) ( 437,958 ) Real estate investments, net $ 1,619,438 $ 1,567,119 As of March 31, 2024, 223 of the Company’s 228 facilities were leased to various operators under triple-net leases. All of these leases contain annual escalators based on the percentage change in the Consumer Price Index (“CPI”) (but not less than zero), some of which are subject to a cap, or fixed rent escalators. During the second and third quarters of 2022, the Company entered into triple-net lease agreements for two of the Company’s 228 facilities which are being repurposed to behavioral health facilities. Two of the Company’s 228 facilities are non-operational and are leased under a long term lease with rent commencing 12 months following lease commencement. In addition, as of March 31, 2024, one facility is non-operational and held for sale. As of March 31, 2024, 13 facilities were held for sale. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales, for additional information. 6 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) As of March 31, 2024, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, assets held for sale and assets being repurposed, was as follows (dollars in thousands): Year Amount 2024 (nine months) $ 156,186 2025 209,637 2026 209,418 2027 206,337 2028 204,172 2029 199,750 Thereafter 885,009 Total $ 2,070,509 Tenant Purchase Options Certain of the Company’s operators hold purchase options allowing them to acquire properties they currently lease from the Company. A summary of these purchase options is presented below (dollars in thousands): Asset Type (1) Properties Lease Expiration Option Period Open Date (2) Option Type (3) Current Cash Rent (4) SNF 1 March 2029 4/1/2022 (5) A / B (7) $ 832 SNF / Campus 1 October 2032 1/1/2024 (6) A 1,031 SNF 4 November 2034 12/1/2024 (5) A 3,988 SNF / Campus 2 October 2032 11/1/2026 (6) B 3,314 (8) (1) Excludes a purchase option on an 11 building SNF portfolio classified as held for sale as of March 31, 2024 and representing $ 5.1 million of current cash rent. The tenant is currently not eligible to elect the option. (2) The Company has not received notice of exercise for the option periods that are currently open. (3) Option type includes: A - Fixed base price. B - Fixed capitalization rate on lease revenue. (4) Based on annualized cash revenue for contracts in place as of March 31, 2024. (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) Purchase option provides for purchase of two of three facilities. The current cash rent shown is an average of the range of $ 3.2 million to $ 3.4 million. Rental Income The following table summarizes components of the Company’s rental income (dollars in thousands): For the Three Months Ended March 31, Rental Income 2024 2023 Contractual rent due (1) $ 52,934 $ 46,170 Straight-line rent ( 7 ) ( 7 ) Amortization of below-market lease intangible 575 — Total $ 53,502 $ 46,163 (1) Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company. For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received. Tenant operating expense reimbursements for the three months ended March 31, 2024 and 2023 were $ 1.5 million and $ 0.7 million, respectively. 7 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) Recent Real Estate Acquisitions The following table summarizes the Company’s acquisitions for the three months ended March 31, 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 17,277 1,553 1 94 Assisted living (4) 11,036 1,022 1 86 Total $ 66,624 $ 6,025 4 320 (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 the acquisition date. (4) Includes one ALF held through a joint venture. See Note 11, Variable Interest Entities , for additional information. Lease Amendments and Terminations New Embassy Lease and Hillstone Lease Termination. On December 31, 2023, the Company terminated its master lease with affiliates of Hillstone Healthcare, Inc. (“Hillstone”). Effective January 1, 2024, in connection with the December 31, 2023 lease termination, one SNF was removed from the Hillstone master lease and was subsequently classified as held for sale as of March 31, 2024. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales , for additional information. In connection with the lease termination, the Company entered into a new triple-net master lease with a subsidiary of Embassy Healthcare Holdings, Inc. (“Embassy”) with respect to one multi-service campus. The Embassy lease has an initial term of approximately 10 years with two five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the lease is approximately $ 0.6 million and the master lease provides Embassy with a partial rent abatement until required authorizations with respect to the ALF portion of the facility are obtained and occupancy levels reach a certain percentage. Amended Eduro Lease and Amended Ensign Lease. On March 1, 2024, operations of two SNFs in Colorado operated by affiliates of Eduro Healthcare, LLC (“Eduro”) were transferred to subsidiaries of The Ensign Group, Inc. (“Ensign”). In connection with the transfer, the Company partially terminated the Eduro master lease and amended one existing triple-net master lease with Ensign to include the two SNFs and extended the initial lease term by 15 years. The applicable Ensign master lease, as amended, had a remaining term at the date of amendment of approximately 20 years with two five-year renewal options and CPI-based rent escalators. Annual cash rent under the applicable Ensign master lease, as amended, increased by approximately $ 2.1 million and annual cash rent under the Eduro master lease, as amended, decreased by the same amount. 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 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 (the “New Pennant Lease”) with the Pennant Group, Inc. (“Pennant”) with respect to the two ALFs. The New 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. 4. IMPAIRMENT OF REAL ESTATE INVESTMENTS, ASSETS HELD FOR SALE AND ASSET SALES Impairment of Real Estate Investments Held for Sale During the three months ended March 31, 2024, the Company recognized aggregate impairment charges 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. During the three months ended March 31, 2023, the Company recognized aggregate impairment charges of $ 1.9 million related to properties held for sale, which is reported in impairment of real estate investments in the condensed consolidated income statements. 8 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) As of March 31, 2024, there were 13 facilities classified as held for sale, all of which have been marked down to fair value less estimated costs to sell. The fair values of the assets held for sale were based on estimated sales prices, which are considered to be Level 3 measurements within the fair value hierarchy. Estimated sales prices were determined using a market approach (comparable sales model), which relies on certain assumptions by management, including: (i) comparable market transactions, (ii) estimated prices per unit, and (iii) binding agreements for sales and non-binding offers to purchase from unrelated third-parties. There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations during the three months ended March 31, 2024, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $ 12,000 to $ 36,000 , with a weighted average price per unit of $ 16,000 . One property, with no bed rights, was reclassified to held for sale during the three months ended March 31, 2024. The Company plans to dispose of this facility and does not expect to receive a material amount upon disposition. For the Company’s impairment calculations during the three months ended March 31, 2023, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $ 20,000 to $ 85,000 , with a weighted average price per unit of $ 32,000 . Asset Sales and Held for Sale Reclassifications The following table summarizes the Company’s dispositions for the three months ended March 31, 2024 and 2023 (dollars in thousands): Three Months Ended March 31, 2024 2023 Number of facilities 2 1 Net sales proceeds (1) $ 1,046 $ 3,230 Net carrying value 1,035 3,300 Net gain (loss) on sale $ 11 $ ( 70 ) (1) Net sales proceeds includes $ 1.0 million of seller financing in connection with the sale of one ALF in January 2024. The following table summarizes the Company’s assets held for sale activity for the periods presented (dollars in thousands): Net Carrying Value Number of Facilities December 31, 2023 $ 15,011 14 Additions to assets held for sale 1,251 1 Assets sold ( 1,035 ) ( 2 ) Impairment of real estate held for sale ( 2,744 ) — March 31, 2024 $ 12,483 13 December 31, 2022 $ 12,291 5 Additions to assets held for sale 10,374 2 Assets sold ( 3,300 ) ( 1 ) Impairment of real estate held for sale ( 1,886 ) — March 31, 2023 $ 17,479 6 9 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) 5. OTHER REAL ESTATE RELATED AND OTHER INVESTMENTS As of March 31, 2024 and December 31, 2023, the Company’s other real estate related investments consisted of the following (dollar amounts in thousands): Facility Count and Type As of March 31, 2024 Loans Receivable, at Fair Value: SNF Campus ALF ILF Principal Balance as of March 31, 2024 Fair Value as of March 31, 2024 Fair Value as of December 31, 2023 Weighted Average Contractual Interest Rate Maturity Date Mortgage secured loans receivable 31 1 4 1 $ 166,197 $ 157,265 $ 156,769 8.9 % (1), (2) 5/31/2024 - 6/29/2033 Mezzanine loans receivable 40 3 2 — 77,165 74,276 21,799 12.8 % (1), (2) 7/25/2027 - 6/30/2032 $ 243,362 $ 231,541 $ 178,568 (1) Rates are net of subservicing fee, if applicable. (2) Two mortgage secured loans receivable and two mezzanine loans receivable use term secured overnight financing rate (“SOFR”), which are subject to a floor for certain of the loans. Term SOFR used as of March 31, 2024 was 5.33 %. Facility Count and Type As of March 31, 2024 Other Investments: SNF Campus ALF ILF Principal Balance as of March 31, 2024 Book Value as of March 31, 2024 Book Value as of December 31, 2023 Weighted Average Contractual Interest Rate Maturity Date Preferred Equity 3 — — — 1,782 1,805 1,801 15.0 % N/A Total $ 1,782 $ 1,805 $ 1,801 The following table summarizes the Company’s other real estate related investments activity for the three months ended March 31, 2024 and 2023 (dollars in thousands): Three Months Ended March 31, 2024 2023 Origination of other real estate related investments $ 53,165 $ — Accrued interest, net 425 ( 150 ) Unrealized losses on other real estate related investments, net ( 612 ) ( 454 ) Prepayments of other real estate related investments — ( 15,000 ) Net change in other real estate related investments $ 52,978 $ ( 15,604 ) 2024 Other Real Estate Related Investment Transactions On January 1, 2024, the Company closed on the sale of one ALF. In connection with the sale, the Company provided affiliates of the purchaser of the property with a $ 1.0 million mortgage loan which bears interest at a rate of 9.0 %. The mortgage loan is s ecured by the ALF and is set to mature on January 1, 2027. The mortgage loan may be prepaid in whole before the maturity date. The Company elected the fair value option for the mortgage loan. 10 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) On January 25, 2024, the Company extended a $ 9.8 million mezzanine loan for a portfolio of ten SNFs located in Missouri secured by a pledge of membership interests in an up-tier holding company of the borrower group. The Company participated in the loan alongside a co-lender pursuant to a participation agreement entered into between the Company and the co-lender. Pursuant to such agreement, the Company provided $ 9.8 million in mezzanine loan proceeds and the co-lender provided the remaining $ 10.2 million of loan proceeds. As a participant in the loan, and subject to limited exceptions, the Company is entitled to receive its proportionate share of loan payments made by the borrower with each co-lender’s proportionate share being given equal weight. The loan bears interest at term SOFR plus 8.75 %, with a term SOFR floor of 6 %, payable monthly and net of a 0.75 % subservicing fee. Commencing on February 1, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on July 25, 2027, with two six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 1 % to 2 % of the loan plus unpaid interest payments equal to 24 months (less the amount of monthly interest payments made by the borrower through the date of prepayment). The Company elected the fair value option for the mezzanine loan. On February 1, 2024, the Company extended a $ 7.4 million mezzanine loan for one SNF located in California secured by a pledge of membership interests in an up-tier holding company of the borrower group. The loan bears interest at 11.5 %, payable monthly. The mezzanine loan is set to mature on January 31, 2029, and may not (subject to certain limited exceptions) be prepaid prior to the date that is 18 months following the loan closing. The Company elected the fair value option for the mezzanine loan. On February 2, 2024, the Company extended a $ 35.0 million mezzanine loan for a portfilio of 15 SNFs located in Virginia secured by a pledge of membership interests in an up-tier holding company of the borrower group. The Company participated in the loan alongside a co-lender pursuant to a participation agreement entered into between the Company and the co-lender. Pursuant to such agreement, the Company provided $ 35.0 million in mezzanine loan proceeds and the co-lender provided the remaining $ 50.0 million of loan proceeds. As a participant in the loan, and subject to limited exceptions, the Company is entitled to receive its proportionate share of loan payments made by the borrower with each co-lender’s proportionate share being given equal weight. The loan bears interest at term SOFR plus 8.75 %, with a term SOFR floor of 6 %, payable monthly and net of a 0.75 % subservicing fee. Commencing on February 2, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on August 1, 2027, with two six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 1 % to 2 % of the loan plus unpaid interest payments equal to 18 months (less the amount of monthly interest payments made by the borrower through the date of prepayment). The Company elected the fair value option for the mezzanine loan. Other Loans Receivables As of March 31, 2024 and December 31, 2023, 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, 2024 Investment Principal Balance as of March 31, 2024 Book Value as of March 31, 2024 Book Value as of December 31, 2023 Weighted Average Contractual Interest Rate Maturity Date Other loans receivable $ 17,094 $ 17,156 $ 17,156 8.8 % 6/30/2024 - 5/31/2026 Expected credit loss — ( 2,094 ) ( 2,094 ) Total $ 17,094 $ 15,062 $ 15,062 11 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) The following table summarizes the Company’s other loans receivable activity for the three months ended March 31, 2024 and 2023 (dollars in thousands): Three Months Ended March 31, 2024 2023 Principal payments $ — $ ( 143 ) Accrued interest, net — ( 1 ) Net change in other loans receivable $ — $ ( 144 ) Expected credit losses and recoveries are recorded in provision for loan losses, net in the condensed consolidated income statements. During both the three months ended March 31, 2024 and 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, 2024 and 2023 (dollars in thousands): For the Three Months Ended March 31, Investment 2024 2023 Mortgage secured loans receivable $ 3,772 $ 2,704 Mezzanine loans receivable 1,895 1,583 Preferred equity investment 68 — Other loans receivable 331 156 Other (1) 3,502 — Total $ 9,568 $ 4,443 (1) Other income is comprised of interest income on money market funds. 6. FAIR VALUE MEASUREMENTS The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. GAAP guidance defines three levels of inputs that may be used to measure fair value: Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques. The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. The Company does not expect that changes in classifications between levels will be frequent. 12 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) Items Measured at Fair Value on a Recurring Basis The following table presents information about the Company’s assets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, 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, 2024 Assets: Mortgage secured loans receivable $ — $ — $ 157,265 $ 157,265 Mezzanine loans receivable — — 74,276 74,276 Total $ — $ — $ 231,541 $ 231,541 Level 1 Level 2 Level 3 Balance as of December 31, 2023 Assets: Mortgage secured loans receivable $ — $ — $ 156,769 $ 156,769 Mezzanine loans receivable — — 21,799 21,799 Total $ — $ — $ 178,568 $ 178,568 The following table details the Company’s assets measured at fair value on a recurring basis using Level 3 inputs (dollars in thousands): Investments in Real Estate Secured Loans Investments in Mezzanine Loans Balance at December 31, 2023 $ 156,769 $ 21,799 Loan originations 1,000 52,165 Accrued interest, net ( 193 ) 613 Unrealized losses on other real estate related investments, net ( 311 ) ( 301 ) Balance as of March 31, 2024 $ 157,265 $ 74,276 Real estate secured and mezzanine loans receivable: The fair value of the secured and mezzanine loans receivables were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. As such, the Company classifies each instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms. During the three months ended March 31, 2024, the C ompany recorded an unrealized loss of $ 0.8 million on the Company’s secured and mezzanine loans receivable due to rising interest rates, partially offset by unrealized gains of $ 0.2 million due to increases in expected cash flows on floating rate loans. 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, 2024 and December 31, 2023, the Company did no t have any loans that were 90 days or more past due. The following table shows the quantitative information about unobservable inputs related to the Level 3 fair value measurements comprising the investments in secured and mezzanine loans receivables as of March 31, 2024: Type Book Value as of March 31, 2024 Valuation Technique Unobservable Inputs Range Mortgage secured loans receivable $ 157,265 Discounted cash flow Discount Rate 9 % - 15 % Mezzanine loan receivable 74,276 Discounted cash flow Discount Rate 12 % - 15 % For the three months ended March 31, 2024, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy. 13 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) Items Disclosed at Fair Value Considerable judgment is necessary to estimate the fair value disclosure of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the face value, carrying amount and fair value of the preferred equity investment and the Notes (as defined in Note 7, Debt, below) as of March 31, 2024 and December 31, 2023 is as follows (dollars in thousands): March 31, 2024 December 31, 2023 Level Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value Financial assets: Preferred equity investment 3 $ 1,782 $ 1,805 $ 1,805 $ 1,782 $ 1,801 $ 1,801 Financial liabilities: Senior unsecured notes payable 2 $ 400,000 $ 396,261 $ 371,500 $ 400,000 $ 396,039 $ 362,500 Cash and cash equivalents, accounts and other receivables, accounts payable, and accrued liabilities: The carrying values for these instruments approximate their fair values due to the short-term nature of these instruments. Preferred equity investment: The fair value of the preferred equity investment was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. The Company utilized a discount rate of 15 % in its fair value calculation. As such, the Company classifies these instruments as Level 3. Senior unsecured notes payable: The fair value of the Notes was determined using third-party quotes derived from orderly trades. Unsecured revolving credit facility and senior unsecured term loan: The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates and spreads for similar debt arrangements. 7. DEBT The following table summarizes the balance of the Company’s indebtedness as of March 31, 2024 and December 31, 2023 (dollars in thousands): March 31, 2024 December 31, 2023 Principal Amount Deferred Loan Fees Carrying Amount Principal Amount Deferred Loan Fees Carrying Amount Senior unsecured notes payable $ 400,000 $ ( 3,739 ) $ 396,261 $ 400,000 $ ( 3,961 ) $ 396,039 Senior unsecured term loan 200,000 ( 388 ) 199,612 200,000 ( 441 ) 199,559 Unsecured revolving credit facility (1) — — — — — — $ 600,000 $ ( 4,127 ) $ 595,873 $ 600,000 $ ( 4,402 ) $ 595,598 (1) Deferred financing fees are included in deferred financing costs, net on the balance sheet, and not reflected as a reduction to the unsecured revolving credit facility. Senior Unsecured Notes Payable 2028 Senior Notes. On June 17, 2021, the Company’s wholly owned subsidiary, CTR Partnership, L.P. (the “Operating Partnership”), and its wholly owned subsidiary, CareTrust Capital Corp. (together with the Operating Partnership, the “Issuers”), completed a private offering of $ 400.0 million aggregate principal amount of 3.875 % Senior Notes due 2028 (the “Notes”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended. The Notes were issued at par, resulting in gross proceeds of $ 400.0 million and net proceeds of approximately $ 393.8 million after deducting underwriting fees and other offering expenses. The Notes mature on June 30, 2028. The Notes accrue interest at a rate of 3.875 % per annum payable semiannually in arrears on June 30 and December 30 of each year, commencing on December 30, 2021. 14 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) The Issuers may redeem some or all of the Notes at any time prior to March 30, 2028 at a price equal to 100 % of the principal amount of the Notes redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date, plus a “make-whole” premium. At any time on or after March 30, 2028, the Issuers may redeem some or all of the Notes at a redemption price equal to 100 % of the principal amount of the Notes redeemed plus accrued interest on the Notes, if any, to, but not including, the redemption date. In addition, at any time on or prior to June 30, 2024, up to 40 % of the aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings at a redemption price of 103.875 % of the aggregate principal amount of Notes to be redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date. If certain changes of control of the Company occur, the Issuers will be required to make an offer to holders of the Notes to repurchase their Notes at a price of 101 % of their principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date. The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by the Company and all of CareTrust’s existing and future subsidiaries (other than the Issuers) that guarantee obligations under the Amended Credit Facility (as defined below); provided, however, that such guarantees are subject to automatic release under certain customary circumstances. The indenture governing the Notes contains customary covenants such as limiting the ability of the Company and its restricted subsidiaries to: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; enter into transactions with affiliates; merge or consolidate or sell all or substantially all of their assets; and create restrictions on the ability of the Issuers and their restricted subsidiaries to pay dividends or other amounts to the Issuers. The indenture governing the Notes also requires the Company and its restricted subsidiaries to maintain a specified ratio of unencumbered assets to unsecured indebtedness. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The indenture governing the Notes also contains customary events of default. As of March 31, 2024, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes. Unsecured Revolving Credit Facility and Term Loan On December 16, 2022, the Operating Partnership, as the borrower, the Company, as guarantor, CareTrust GP, LLC, and certain of the Operating Partnership’s wholly owned subsidiaries, entered into a second amended and restated credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender (as amended from time to time, the “Second Amended Credit Agreement”). The Second Amended Credit Agreement, which amends and restates the Company’s amended and restated credit and guaranty agreement, dated as of February 8, 2019 (as amended, the “Prior Credit Agreement”) provides for: (i) an unsecured revolving credit facility (the “Revolving Facility”) with revolving commitments in an aggregate principal amount of $ 600.0 million, including a letter of credit subfacility for 10 % of the then available revolving commitments and a swingline loan subfacility for 10 % of the then available revolving commitments and (ii) the continuation of the unsecured term loan credit facility which was previously extended under the Prior Credit Agreement (the “Term Loan” and together with the Revolving Facility, the “Second Amended Credit Facility”) in an aggregate principal amount of $ 200.0 million. Future borrowings under the Second Amended Credit Facility will be used for working capital purposes, for capital expenditures, to fund acquisitions and for general corporate purposes. On October 10, 2023, the Operating Partnership, the Company, CareTrust GP, LLC, certain of the Operating Partnership’s wholly owned subsidiaries and KeyBank National Association entered into the First Amendment to the Second Amended Credit Agreement (the “First Amendment”). 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. 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 15 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) 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 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, 2024, the Operating Partnership had $ 200.0 million of borrowings 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 the sole discretion of the Operating Partnership, two six-month extension options. The Term Loan has a maturity date of February 8, 2026. The Second Amended Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Second Amended Credit Agreement (other than the Operating Partnership). The Second Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend organizational documents and pay certain dividends and other restricted payments. The Second Amended Credit Agreement requires the Company to comply with financial maintenance covenants to be tested quarterly, consisting of a maximum debt to asset value ratio, a minimum fixed charge coverage ratio, a minimum tangible net worth, a maximum cash distributions to operating income ratio, a maximum secured debt to asset value ratio, a maximum secured recourse debt to asset value ratio, a maximum unsecured debt to unencumbered properties asset value ratio, a minimum unsecured interest coverage ratio and a minimum rent coverage ratio. The Second Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Second Amended Credit Facility or other material indebtedness, the failure to satisfy certain covenants (including the financial maintenance covenants), the occurrence of change of control and specified events of bankruptcy and insolvency. As of March 31, 2024, the Company was in compliance with all applicable financial covenants under the Second Amended Credit Agreement. 8. EQUITY Common Stock At-The-Market Offering —On September 15, 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 “New ATM Program”) and terminated its 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 its 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 the Company’s shares of common stock under the ATM Program. 16 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) In the event the Company enters into an ATM forward contract to sell shares of common stock pursuant to the ATM Program, the Company would 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 the Company’s discretion, prior to the final settlement date, at which time the Company would 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 the Company would expect to receive upon physical settlement would 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 were no outstanding ATM forward contracts that had not settled as of March 31, 2024. 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. The following table summarizes 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) $ 273,233 (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, the Company had $ 0.9 million available for future issuances under the New ATM Program. 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 three months of 2024 (dollars in thousands, except per share amounts): For the Three Months Ended March 31, 2024 Dividends declared per share $ 0.29 Dividends payment date April 15, 2024 Dividends payable as of record date $ 41,192 Dividends record date March 28, 2024 9. STOCK-BASED COMPENSATION All stock-based awards are subject to the terms of the CareTrust REIT, Inc. and CTR Partnership, L.P. Incentive Award Plan (the “Plan”). The Plan provides for the granting of stock-based compensation, including stock options, restricted stock, performance awards, restricted stock units, relative total stockholder return based stock awards and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company. Under the Plan, 5,000,000 shares have been authorized for awards. 17 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) Under the Plan, restricted stock awards (“RSAs”) vest in equal annual installments over a three year period for the RSAs granted after 2020 and a four year period for the RSAs granted in 2020. RSAs granted to non-employee members of the board of directors (“Board Awards”) vest in full on the earlier to occur of the Company’s next Annual Meeting of Stockholders or one year . Performance stock awards (“PSAs”) granted were subject to both time and performance based conditions and vested over a one -to- three year period for PSAs granted in 2021 and over a one -to- four year period for PSAs granted in 2020. The amount of such PSAs that ultimately vested was dependent on the Company’s Normalized Funds from Operations (“NFFO”) per share, as defined by the Compensation Committee, meeting or exceeding a specified per share amount for the applicable vesting period. Relative total shareholder return units (“TSR Units”) granted are subject to both time and market based conditions and cliff vest after a three-year period. The amount of such market awards that will ultimately vest is dependent on the Company’s total shareholder return (“TSR”) performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs and will range from 0 % to 200 % of the TSR Units initially granted. The RSAs and Board Awards are valued on the date of grant based on the closing price of the Company’s common stock, while the TSR Units are valued on the date of grant using a Monte Carlo valuation model. The vesting of certain awards may accelerate, as defined in the grant agreement, upon retirement, a change in control or other events. The following table summarizes the status of the restricted stock award and performance award activity for the three months ended March 31, 2024: Shares Weighted Average Share Price Unvested balance at December 31, 2023 510,596 $ 21.01 Vested ( 145,043 ) 20.89 Forfeited ( 35,161 ) 20.48 Unvested balance at March 31, 2024 330,392 $ 21.12 As of March 31, 2024, the weighted-average remaining vesting period of such awards w as 1.9 years. The following table summarizes the stock-based compensation expense recognized for the periods presented (dollars in thousands): For the Three Months Ended March 31, 2024 2023 Stock-based compensation expense $ 2,120 $ 936 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. As of March 31, 2024, there was $ 7.9 million of unamortized stock-based compensation expense related to the unvested RSAs and TSR Units. 18 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) 10. EARNINGS PER COMMON SHARE The following table presents the calculation of basic and diluted earnings per common share attributable to CareTrust REIT, Inc. (“EPS”) for the Company’s common stock for the three months ended March 31, 2024 and 2023, 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, 2024 2023 Numerator: Net income attributable to CareTrust REIT, Inc. $ 28,746 $ 19,227 Less: Net income allocated to participating securities ( 96 ) ( 89 ) Numerator for basic and diluted earnings available to common stockholders $ 28,650 $ 19,138 Denominator: Weighted-average basic common shares outstanding 132,836 99,063 Dilutive potential common shares - TSR Units 366 24 Weighted-average diluted common shares outstanding 133,202 99,087 Earnings per common share attributable to CareTrust REIT, Inc., basic $ 0.22 $ 0.19 Earnings per common share attributable to CareTrust REIT, Inc., diluted $ 0.22 $ 0.19 Antidilutive unvested RSAs, TSR Units and PSAs excluded from the computation (1) 330 318 (1) For the three months ended March 31, 2024, RSAs are antidilutive. For the three months ended March 31, 2023, certain TSR Units and RSAs are antidilutive. 11. VARIABLE INTEREST ENTITIES Noncontrolling Interests —The Company has entered into multiple ventures with unrelated third parties to own real estate and has concluded that such ventures are VIEs. As the Company exercises power over and receives economic benefits from the VIEs, the Company is considered the primary beneficiary and consolidates the VIEs. Pursuant to the Company’s joint ventures (“JVs”), the Company typically contributes 97.5 % of the JV’s total investment amount and the Company receives 100 % of the preferred equity interest in the JV in exchange for 95 % of that total investment and a 50 % common equity interest in the JV in exchange for the remaining 2.5 % of that investment. The JV partner contributes the remaining 2.5 % of the JV’s total investment amount in exchange for a 50 % common ownership interest in the JV. As of March 31, 2024, the Company held three SNFs and one ALF in multiple VIEs. On January 3, 2024, the Company entered into a JV, pursuant to which the Company contributed $ 10.8 million into the JV that purchased one ALF located in California for $ 11.0 million. The JV partner contributed the remaining $ 0.2 million of the total investment. Total assets and total liabilities include VIE assets and liabilities as follows (dollars in thousands): March 31, 2024 December 31, 2023 Assets: Real estate investments, net $ 78,573 $ 68,106 Cash and cash equivalents 798 — Prepaid and other assets 4,480 2,800 Total assets 83,851 70,906 Liabilities: Accounts payable, accrued liabilities and deferred rent liabilities 7,067 7,239 Total liabilities $ 7,067 $ 7,239 19 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) 12. COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of business, which are not individually or in the aggregate anticipated to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Claims and lawsuits may include matters involving general or professional liability asserted against the Company’s tenants, which are the responsibility of the Company’s tenants and for which the Company is entitled to be indemnified by its tenants under the insurance and indemnification provisions in the applicable leases. In the normal course of business, the Company enters into various commitments, typically consisting of funding of capital expenditures and short-term working capital loans to existing tenants while they await licensure and certification or are conducting turnaround work in one or more of the Company’s properties. Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except for the facilities leased under certain master lease agreements, with subsidiaries of Ensign and Pennant, under which the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20 % of the Company’s initial investment in such property, subject to a corresponding rent increase at the time of funding. For the Company’s other triple-net master leases, the tenants also have the option to request capital expenditure funding that would generally be subject to a corresponding rent increase at the time of funding, which are subject to tenant compliance with the conditions to the Company’s approval and funding of their requests. The Company has also provided select tenants with strategic capital for facility upkeep and modernization. The Company’s Tenant Code of Conduct and Corporate Responsibility policy (the “Tenant ESG Program”) provides eligible triple-net tenants of the Company with monetary inducements to make sustainable improvements to the Company’s properties. Incentive options include a wide variety of opportunities for tenants to upgrade everything from energy and environmental systems to water-saving landscaping and more. The Company’s board of directors has authorized annual allocations of up to $ 500,000 to fund the Tenant ESG Program. The table below summarizes the Company’s existing, known commitments and contingencies as of March 31, 2024 (in thousands): Remaining Commitment Capital expenditures (1) $ 13,116 Mortgage loans (2) 4,700 $ 17,816 (1) As of March 31, 2024, the Company had committed to fund expansions, construction, capital improvements and ESG incentives 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. (2) One mortgage loan includes an earnout advance upon satisfaction of certain conditions. 13. 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. 20 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) Major operator concentration - The Company has operators from which it derived 10% or more of its revenue for the three months ended March 31, 2024 and 2023. The following table sets forth information regarding the Company’s major operators as of March 31, 2024 and 2023: Number of Facilities Number of Beds/Units Percentage of Total Revenue Operator SNF Campus ALF/ILF SNF Campus ALF/ILF Three Months Ended March 31, 2024 (1) Ensign (3) 85 8 7 9,024 997 661 30 % Priority Management Group 13 2 — 1,742 402 — 13 % March 31, 2023 (2) Ensign (3) 83 8 7 8,741 997 661 36 % Priority Management Group 13 2 — 1,742 402 — 17 % (1) The Company’s rental income and interest income on other real estate related investments, exclusive of operating expense reimbursements and adjustments for collectibility. (2) The Company’s rental income, exclusive of operating expense reimbursements and adjustments for collectibility. (3) Ensign is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. Ensign’s financial statements, as filed with the SEC, can be found at http://www.sec.gov. The Company has not verified this information through an independent investigation or otherwise. Major geographic concentration – The following table provides information regarding the Company’s concentrations with respect to certain states, from which the Company derived 10% or more of its revenue for the three months ended March 31, 2024 and 2023: Number of Facilities Number of Beds/Units Percentage of Total Revenue State SNF Campus ALF/ILF SNF Campus ALF/ILF Three Months Ended March 31, 2024 (1) CA 42 9 9 5,000 1,527 723 31 % TX 41 4 2 5,193 630 212 20 % March 31, 2023 (2) CA 27 8 5 3,048 1,359 437 28 % TX 38 3 3 4,849 536 242 23 % (1) Based on the Company’s rental income and interest income on other real estate related investments, exclusive of operating expense reimbursements and adjustments for collectibility. (2) Based on the Company’s rental income, exclusive of operating expense reimbursements and adjustments for collectibility. 14. SUBSEQUENT EVENTS The Company evaluates subsequent events in accordance with ASC 855, Subsequent Events . The Company evaluates subsequent events up until the date the condensed consolidated financial statements are issued. 21 Table of Contents CARETRUST REIT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Unaudited) Recent Acquisitions and Investment On April 1, 2024, the Company contributed $ 28.0 million to a JV that purchased two multi-service campuses located in California for $ 28.8 million. In exchange, the Company holds 100 % of the preferred equity interests in the JV and 50 % of the common equity interest in the JV. The JV partner contributed the remaining $ 0.8 million of the total investment in exchange for 50 % of the common equity interest in the JV. In connection with the acquisition of the facilities, the Company entered into a new master lease with affiliates of Bayshire, LLC (“Bayshire”). The new lease has an initial term of approximately 15 years, with two five-year renewal options. Initial annual cash rent under the lease is approximately $ 2.7 million, increasing to approximately $ 2.9 million in the second year and $ 3.1 million in the third year, with 2 % fixed annual escalators thereafter. The master lease provides for deferred rent in the first year of approximately $ 0.8 million. On April 1, 2024, the Company acquired one multi-service campus located in California for approximately $ 32.3 million, which includes estimated capitalized acquisition costs. In connection with the acquisition of the facility, the Company amended an existing master lease with affiliates of Bayshire. The Bayshire lease, as amended, has a remaining initial term of approximately 10 years, with two five-year renewal options. Annual cash rent under the amended lease increased by approximately $ 2.6 million, increasing to approximately $ 3.0 million in the second year with CPI-based annual escalators thereafter. On May 1, 2024, the Company extended a $ 26.7 million mortgage loan to a skilled nursing real estate owner. The mortgage loan is secured by two SNFs and bears interest at a rate of 9.1 %, payable monthly. The mortgage loan is set to mature on May 1, 2031 and includes a one year extension option. The mortgage loan may (subject to certain limited exceptions) not be prepaid prior to July 31, 2029. The mortgage loan includes a purchase option with an exercise window that opens during the initial 90-day period of each of the 4th, 5th and 6th loan years, with the purchase option price for the facilities being calculated by dividing the amount of the then annual base rent by an agreed upon lease yield. 22 Table of Contents