What changed in this filing

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Item 1. Business

2025-02-12 compared with 2024-02-08 · 294 added, 142 removed, 416 unchanged (51% of the section changed)

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 December 31, 2023, CareTrust REIT owned, directly or through joint ventures, and leased to independent operators, 226 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) (including facilities classified as held for sale) consisting of 23,928 operational beds and units located in 28 states with the highest concentration of properties by rental income located in California and Texas.

As of December 31, 2023, we also had other real estate related investments consisting of one preferred equity investment, eight real estate secured loans receivable and one mezzanine loan receivable with a carrying value of $180.4 million.

The following table summarizes the Company’s acquisitions from January 1, 2023 through February 8, 2024 (dollars in thousands):

Type of Property Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

As of December 31, 2024, CareTrust REIT owned, directly or in consolidated joint ventures, and leased to independent operators, 258 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) (including facilities classified as held for sale) consisting of 28,088 operational beds and units located in 32 states with the highest concentration of properties by rental income located in California and Texas.

As of December 31, 2024, we also had other real estate related investments consisting of three preferred equity investments, 15 real estate secured loans receivable and five mezzanine loans receivable with a carrying value of $795.2 million and one financing receivable with a carrying value of $96.0 million.

The following table summarizes our real estate investment portfolio as of December 31, 2024 (dollars in thousands):

Twelve Months Ended December 31, 2024

Owned Properties Number of Properties Number of Beds/Units Book Value as of December 31, 2024 Percentage of Book Value Rental Income Percentage of Total Revenue

Skilled nursing 192 20,930 $ 1,742,970 55 % $ 169,414 61 %

$ 169,181 $ 13,764 10 1,256

Multi-service campuses 30 4,272 408,045 13 % 43,372 16 %

Assisted living (5)

Assisted living / independent living 36 2,886 132,936 4 % 15,475 6 %

Total Owned Properties 258 28,088 $ 2,283,951 72 % $ 228,261 83 %

Financing Receivable Number of Properties Number of Beds/Units Book Value as of December 31, 2024 Percentage of Book Value Interest Income Percentage of Total Revenue

Skilled nursing / assisted living / independent living 46 3,820 $ 96,004 3 % $ 1,009 *

Total Financing Receivable 46 3,820 $ 96,004 3 % $ 1,009 *

Other Real Estate Related Investments Number of Properties Number of Beds/Units Book Value as of December 31, 2024 Percentage of Book Value Interest Income Percentage of Total Revenue

Mortgage Loans 87 8,434 $ 660,392 21 % $ 35,972 13 %

Mezzanine Loans (1)

46 5,643 80,612 2 % 9,456 3 %

Total $ 244,811 $ 20,197 16 1,751

(1) Purchase price includes capitalized acquisition costs.

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

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

(4) Includes three SNFs held through joint ventures.

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

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

See Note 14, Subsequent Events , for additional information.

The following table summarizes other real estate related investments by the Company from January 1, 2023 through February 8, 2024 (dollars in thousands):

Investment Type Investment Annual Initial Interest Income (1)

Number of Properties Number of Beds/Units (2)

Mortgage secured loans receivable $ 51,584 $ 4,806 9 772

Mezzanine loans receivable 52,165 7,119 N/A N/A

Preferred equity 1,782 267 N/A N/A

Preferred Equity 54,199 2 % 2,826 1 %

Total 133 14,077 $ 795,203 25 % $ 48,254 17 %

(1) Represents annualized acquisition-date interest income on any mortgage secured loans receivable and mezzanine loans, less subservicing fees, if applicable.

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

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

From January 1, 2023 through December 31, 2023, we sold one SNF and four ALFs for net proceeds of $18.3 million, resulting in a net gain on sale of property of $2.2 million.

Subsequent to December 31, 2023, we closed on the sale of one SNF and one ALF with an aggregate carrying value of $1.0 million, which approximated the net sales proceeds received.

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, as defined below).

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.

From time to time, we also partner with third-party institutional investors to invest in healthcare

real estate through joint ventures.

Pursuant to our joint ventures, we typically contribute 97.5% of the joint venture’s total investment amount and we receive 100% of the preferred equity interest in the joint venture in exchange for 95% of that total investment and a 50% common equity interest in the joint venture in exchange for the remaining 2.5% of that investment.

Our joint venture partner contributes the remaining 2.5% of the joint venture’s total investment amount in exchange for a 50% common equity interest in the joint venture.

Total Portfolio 437 45,985 $ 3,175,158 100 % $ 277,524 100 %

(1) If we also have extended mezzanine financing to an affiliate of the borrower under a mortgage loan receivable, the applicable facility counts are included in both respective totals.

* Represents less than 1%

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 facility (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, as defined below).

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

From time to time, we also partner with third-party institutional investors to invest in healthcare real estate in consolidated joint ventures.

Pursuant to our joint ventures,

we typically contribute at least 90% of the joint venture’s total investment amount and we receive 100% of the preferred equity interest in the joint venture and a 50% common equity interest in the joint venture.

Our joint venture partner contributes the remaining total investment amount in exchange for a 50% common equity interest in the joint venture.

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;

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

In addition, we actively monitor the clinical, regulatory and financial operating results of our tenants and borrowers, 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 and borrowers;

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.

Moreover, our tenants and borrowers 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 and borrowers on at least a monthly basis.

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.

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

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.

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To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.

Investment Activity

The following table summarizes our acquisitions from January 1, 2024 through February 12, 2025 (dollars in thousands):

Type of Facility Purchase Price (1)

Initial Annual Cash Rent (2)

Number of Properties Number of Beds/Units (3)

Skilled nursing (4)

$ 732,919 $ 67,924 43 4,632

Multi-service campuses (4)

90,639 7,467 5 683

Assisted living / independent living (4)

12,749 1,022 2 102

Total $ 836,307 $ 76,413 50 5,417

(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 facilities held in consolidated joint ventures.

See Note 3, Real Estate Investments, Net , and Note 12, Variable Interest Entities , for additional information.

The following table summarizes our financing receivable investment from January 1, 2024 through February 12, 2025 (dollars in thousands):

Investment Type Investment, at cost (1)

Initial Annual Interest Income (2)

Number of Properties Number of Beds/Units (3)

Financing receivable $ 95,723 $ 11,560 46 3,820

Total $ 95,723 $ 11,560 46 3,820

(1) Investment does not include transaction costs given they were expensed during the year ended December 31, 2024 as a result of our election to use the fair value option.

(2) Represents annualized acquisition-date interest income.

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

The following table summarizes our other real estate related investments from January 1, 2024 through February 12, 2025 (dollars in thousands):

Investment Type (1)

Investment Initial Annual Interest Income (2)

Number of Properties Number of Beds/Units (3)

Mortgage secured loans receivable $ 496,615 $ 44,210 50 5,172

Mezzanine loans receivable 63,676 8,636 29 3,763

Preferred equity 52,000 5,734 N/A N/A

Total $ 612,291 $ 58,580 79 8,935

(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 at loan origination.

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

From January 1, 2024 through December 31, 2024, we sold 13 SNFs and four ALFs for net proceeds of $17.7 million, resulting in a net loss on sale of real estate of $2.2 million.

Subsequent to December 31, 2024, we sold or disposed of three SNFs, one SNF Campus and one ALF, for which we expect to record an estimated gain on sale of real estate of $3.9 million.

The skilled nursing industry has evolved to meet the growing demand for post-acute and custodial healthcare services generated by an aging population, increasing life expectancies and the trend toward shifting of patient care to lower cost settings.

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According to the American Health Care Association, the nursing home industry was comprised of approximately 14,800 facilities as of July 2024, as compared with over 15,600 facilities as of July 2016.

We expect that the supply/demand imbalance in the skilled nursing industry will inc reasingly favor skilled nursing and assisted living providers due to the shift of patient care to lower cost settings and an aging population.

We expect that the supply/demand imbalance in the skilled nursing industry will increasingly favor skilled nursing and assisted living providers due to the shift of patient care to lower cost settings and an aging population.

• Increased Demand Driven by Aging Populations .

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According to the Centers for Medicare & Medicaid Services, nursing home care facilities and continuing care retirement expenditures are projected to grow from approximately $209.3 billion in 2023, which includes federal expenditures in response to the COVID-19 pandemic, to approximately $337.4 billion in 2032.

Although seniors housing and skilled nursing occupancy rates have declined during the COVID-19 pandemic, we believe that these trends in population will support an increasing demand for services in the long-term, which in turn will likely support an increasing demand for the services provided within our properties.

While most factors described above indicate projected growth for our industry, labor shortages and proposed minimum staffing requirements from the Centers for Medicare and Medicaid Services (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments — Regulatory Updates”) have led, and may continue to lead, to increased costs.

Additionally, elevated interest rates and volatility in the capital markets have limited the availability of debt capital, increased our costs of capital to finance acquisitions and increased our borrowing costs.

Further, our operators have experienced increased costs, liquidity constraints and financing difficulties due to the current market conditions, which could cause them to be unable or unwilling to make rental or interest payments when due.

Although seniors housing and skilled nursing occupancy rates declined during the COVID-19 pandemic, we believe that these trends in population will support an increasing demand for services in the long-term, which in turn will likely support an increasing demand for the services provided within our properties.

While most factors described above indicate projected growth for our industry, labor shortages and minimum staffing requirements from the Centers for Medicare and Medicaid Services (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments — Regulatory Updates”) have led, and may continue to lead, to increased costs.

Further, our operators have experienced increased costs due to inflation, elevated interest rates and related changes to consumer spending, including, but not limited to, an increase in individuals delaying or deferring moves to seniors housing, which could cause our operators to be unable or unwilling to make rental or interest payments when due.

It is difficult to predict the duration of the effects of these economic and market conditions on the industry.

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.

Portfolio Summary

We have a geographically diverse portfolio of properties, consisting of the following types as of December 31, 2023:

We have a geographically diverse portfolio, consisting of the following types of facilities as of December 31, 2024:

• Skilled Nursing Facilities.

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Charges for these services are generally paid from a combination of government reimbursement and private sources.

As of December 31, 2023, our portfolio included 151 SNFs (excluding 12 SNFs held for sale).

Included in the 151 SNFs are three SNFs held through joint ventures and one SNF which is non-operational.

As of December 31, 2024, our portfolio included 313 SNFs (excluding 3 SNFs held for sale), consisting of 189 owned facilities, 85 facilities related to our other real estate related investments and 39 facilities related to our financing receivable.

Included in the 189 owned SNFs are 31 SNFs held in consolidated joint ventures.

In addition, our portfolio includes 35 SNFs located on campuses that also have ALFs or ILFs, which we refer to as multi-service campuses (see below under “Multi-Service Campuses”).

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Since states often apply differing license classifications, and standards, regulatory requirements may differ significantly between states.

As of December 31, 2023, our portfolio included 34 ALFs (excluding two ALFs classified as held for sale), some of which also contain independent living and memory care units.

Included in the 34 ALFs are two facilities which are in the process of being repurposed and two facilities which are non-operational.

As of December 31, 2024, our portfolio included 51 ALFs (excluding 5 ALFs classified as held for sale and one facility which is non-operational), some of which also contain independent living and memory care units.

The 51 ALFs consist of 27 owned facilities, 19 facilities related to our other real estate related investments and 5 facilities related to our financing receivable.

Included in the 27 owned ALFs is one ALF held in a consolidated joint venture.

Assisted living facilities that are not on a multi-service campus are sometimes referred to as seniors housing.

• Independent Living Facilities .

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These facilities offer various services and amenities such as laundry, housekeeping, dining options/meal plans, exercise and wellness programs, transportation, social, cultural and recreational activities, on site security and emergency response programs.

As of December 31, 2023, our portfolio included two ILFs.

As of December 31, 2024, our portfolio included seven ILFs, consisting of three owned facilities, two facilities related to our other real estate related investments and two facilities related to our financing receivable.

Independent living facilities that are not on a multi-service campus are sometimes referred to as seniors housing.

• Multi-Service Campuses.

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We also refer to continuing care retirement communities as multi-service campuses.

These facilities are often marketed as an opportunity for residents to “age in place,” and tend to attract couples where the individuals may require or benefit

from differing levels of car e.

As of December 31, 2023, our portfolio included 25 facilities that we classify as multi-service campuses.

These facilities are often marketed as an opportunity for residents to “age in place,” and tend to attract couples where the individuals may require or benefit from differing levels of car e.

As of December 31, 2024, our portfolio included 35 facilities that we classify as multi-service campuses (excluding two multi-service campuses classified as held for sale), consisting of 28 owned facilities and seven facilities related to our other real estate related investments.

Included in the 28 owned facilities are two multi-service campuses held in consolidated joint ventures.

Our portfolio of SNFs, ALFs, ILFs and multi-service campuses is broadly diversified by geographic location throughout the United States, with concentrations in California and Texas based on rental income.

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As of December 31, 2024, we leased 97 facilities to subsidiaries of Ensign, which have a total of 10,160 operational beds.

We have leased a significant number of our properties to subsidiaries of Ensign on a triple-net basis under eight long-term leases, each with its own pool of properties, that have varying maturities and diversity in both property type and geography (each an “Ensign Master Lease” and collectively, the “Ensign Master Leases”).

We have leased a significant number of our properties to subsidiaries of Ensign on a triple-net basis under eight long-term leases, each with its own pool of properties, that have varying maturities and diversity in both facility type and geography (each an “Ensign Master Lease” and collectively, the “Ensign Master Leases”).

The Ensign Master Leases provide for initial terms in excess of ten years with staggered expiration dates and no purchase options.

At Ensign’s option, each Ensign Master Lease may be extended for up to three five-year renewal terms beyond the initial term and, if elected, the renewal will be effective for all of the leased property then subject to the applicable Ensign Master Lease.

During the year ended December 31, 2020, the Company acquired four additional facilities, which have a total of 620 operational beds, leased to subsidiaries of Ensign on a triple-net basis under two separate master lease agreements, each of which contains a purchase option.

As of December 31, 2023, annualized contractual rental income from the Ensign Master Leases was $63.8 million, and annualized contractual rental income from all Ensign leases was $67.8 million, representing 31% and 33% of total annualized contractual rental income, respectively.

Rent is escalated annually in June under the Ensign Master Leases, and in December for the four additional facilities leased to Ensign, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero) or 2.5%, and (2) the prior year’s rent.

At Ensign’s option, each Ensign Master Lease may be extended for up to three five-year renewal terms beyond the initial term and, if elected, the renewal will be effective for all of the leased facilities then subject to the applicable Ensign Master Lease.

The Ensign Master Leases are guaranteed by Ensign and contain cross-default provisions.

The obligations under the lease agreements for the four additional facilities are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases.

The obligations under the Ensign TX Master Leases for the four additional facilities are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases.

During the year ended December 31, 2024, the Company received written notice of Ensign’s intent to exercise the purchase option on these four facilities.

As a result, these four facilities have been classified as held for sale as of December 31, 2024.

During the year ended December 31, 2024, the Company, through a joint venture, acquired six facilities, which have a total of 586 operational beds, leased to subsidiaries of Ensign commencing on January 1, 2025, under a new triple-net master lease agreement (the “Ensign TN Master Lease”).

The obligations under the Ensign TN Master Lease are guaranteed by Ensign.

A default under the Ensign TN Master Lease constitutes a default under the Ensign Master Leases, but a default under the Ensign Master Leases and/or the Ensign TX Master Leases does not constitute a default under the Ensign TN Master Lease.

As of December 31, 2024, annualized contractual rental income from the Ensign Master Leases was $68.2 million, and annualized contractual rental income from all Ensign leases (except the Ensign TN Master Lease which had not commenced) was $72.3 million, representing 26% and 28% of total annualized contractual rental income, respectively.

Rent is escalated annually in June under the Ensign Master Leases, and in December under the Ensign TX Master Leases, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero) or 2.5%, and (2) the prior year’s rent.

Rent is escalated annually in January under the Ensign TN Master Lease by an amount equal to the lesser of (1) the product of (x) 2 and (y) the percentage change in the Consumer Price Index (“CPI”) (but not less than zero) or 2.5%, and (2) the prior year’s rent.

As of December 31, 2024, 14 of our properties were leased to affiliates of PACS Group, Inc.

(“PACS”) on a triple-net basis under one long-term lease (the “PACS Master Lease”), and have a total of 1,827 operational beds.

One of the facilities is included in assets held for sale as of December 31, 2024.

The PACS Master Lease commenced on October 26, 2017, and provides for an initial term of fifteen years, with two five-year renewal options.

During the year ended December 31, 2024, the Company, through a joint venture, acquired 11 facilities, which have a total of 1,186 operational beds, leased to subsidiaries of

PACS commencing on December 1, 2024, under a new triple-net master lease agreement (the “PACS TN Master Lease”).

The PACS TN Master lease has an initial term of 15 years, with two five-year renewal options and includes purchase options for up to 6 facilities.

As of December 31, 2024, annualized contractual rental income from the PACS Master Lease was $20.0 million (excluding the facility classified as held for sale), and annualized contractual rental income from all PACS leases was $37.9 million, representing 8% and 15% of total annualized contractual rental income, respectively.

Rent is escalated annually in November under the PACS Master Lease by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero) or 3%, and (2) the prior year’s rent.

Rent under the PACS TN Master Lease is escalated annually in December by an amount equal to the product of (1) the percentage change in the CPI and (2) the prior year’s rent (subject to a 2% floor and a 4% cap).

The PACS TN Master lease also provides rent abatement of $0.3 million in the first year.

As of December 31, 2024, 15 of our properties were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”), and have a total of 2,144 operational beds.

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As of December 31, 2024, annualized contractual rental income from the PMG Master Lease was $31.9 million, representing 12% of total annualized contractual rental income.

See “Risk Factors — Risks Related to Our Business and Operati ons — We are dependent on the healthcare operators that lease our properties to successfully operate their business and make contractual lease payments, and an event that materially and adversely affects their business, financial position or results of operations could materially and adversely affect our business, financial position or results of operations.”

See “Risk Factors — Risks Related to Our Business and Operations — We are dependent on the healthcare operators that lease our properties as well as the borrowers under our mortgage secured loans to successfully operate their business and make contractual payments, and an event that materially and adversely affects their business, financial position or results of operations could materially and adversely affect our business, financial position or results of operations.”

We monitor the creditworthiness of our tenants by evaluating the ability of the tenants to meet their lease obligations to us based on the tenants’ financial performance, including the evaluation of any guarantees of tenant lease obligations.

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We regularly review this information to calculate the above-described coverage metrics, to identify operational trends, to assess the operational and financial impact of the changes in the broader industry environment (including the potential impact of government reimbursement and regulatory changes), and to evaluate the management and performance of the tenants’ operations.

These metrics help us identify potential areas of concern relative to our tenants’ credit quality and ultimately the tenants’ ability to generate sufficient liquidity to meet their ongoing obligations, including their obligations to continue paying contractual rents due to us and satisfying other financial obligations to third parties, as prescribed by our triple-net leases.

We also monitor the creditworthiness of our borrowers and the ability of the borrowers to meet their loan obligations to us based on the borrowers’ financial performance.

Our monitoring process includes review of monthly financial statements and other operating data for each facility, quarterly review of borrower creditworthiness based on debt service coverage ratios and review of covenant compliance.

These metrics help us identify potential areas of concern relative to our tenants’ or borrowers’ credit quality and ultimately the tenants’ or borrowers’ ability to generate sufficient liquidity to meet their ongoing obligations, including their obligations to continue paying contractual rents and interest due to us and satisfying other financial obligations to third parties, as prescribed by our triple-net leases and loan agreements.

Owned Properties

Properties by Type:

The following table displays the geographic distribution of our facilities, excluding those held for sale, and the related number of beds and units available for occupancy by property type, as of December 31, 2023.

The following table displays the geographic distribution of our properties leased to third-party tenants, excluding those held for sale, and the related number of beds and units available for occupancy by facility type, as of December 31, 2024.

The number of beds or units that are operational may be less than the official licensed capacity.

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TX 43 5,414 38 4,726 3 476 2 212

26 2,740 26 2,740 — — — —

ID 17 1,396 16 1,327 1 69 — —

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CO 7 788 5 520 — — 2 268

OH 6 609 2 226 3 317 1 66

NC 6 493 4 390 — — 2 103

IA 5 354 3 185 2 169 — —

MI 5 255 — — — — 5 255

MD 5 431 2 187 1 108 2 136

NE 5 366 3 220 2 146 — —

OH 4 379 1 116 2 197 1 66

PA 4 597 4 597 — — — —

MT 3 260 3 260 — — — —

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MN 2 62 — — — — 2 62

NC 2 105 — — — — 2 105

NJ 2 98 — — — — 2 98

WI 2 89 — — — — 2 89

FL 1 80 — — — — 1 80

1 91 1 91 — — — —

GA 1 148 1 148 — — — —

KS 1 102 1 102 — — — —

MD 1 120 — — — — 1 120

MI 1 66 — — — — 1 66

MO 1 70 1 70 — — — —

ND 1 83 1 83 — — — —

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OR 1 53 1 53 — — — —

SC 1 108 1 108 — — — —

SD 1 81 1 81 — — — —

VA 1 125 1 125 — — — —

WV 1 67 — — 1 67 — —

Total 248 27,025 189 20,464 28 3,998 31 2,563

(1) Includes three SNFs with 385 beds held in consolidated joint ventures.

Occupancy by Property Type:

The following table displays occupancy by property type for each of the years ended December 31, 2023 and 2022.

(1) Includes facilities held in consolidated joint ventures.

See Note 3, Real Estate Investments, Net , and Note 12, Variable Interest Entities , for additional information.

Facility Type — Rental Income and Occupancy:

The following tables display the annual rental income and occupancy for each facility type leased to third-party tenants for the years ended December 31, 2024 and 2023 and total beds/units for each facility type as of December 31, 2024 and 2023.

Percentage occupancy in the below table is computed by dividing the average daily number of beds occupied by the total number of beds available for use during the periods indicated (beds are included in the computation following the date of acquisition, or through the date of disposition, only).

Year Ended December 31,

Property Type 2023 (1)

Facilities Leased to Tenants:

SNFs 75 % 73 %

Multi-Service Campuses 75 % 71 %

ALFs and ILFs 75 % 74 %

(1) Occupancy data excludes two facilities which are in the process of being repurposed, one non-operational SNF and two non-operational ALFs.

(2) Occupancy data excludes two facilities which are in the process of being repurposed and two non-operational ALFs.

(3) Occupancy data derived solely from information provided by our tenants without independent verification by us.

The leased facility financial performance data is presented one quarter in arrears.

Property Type — Rental Income:

The following tables display the annual rental income for each property type leased to third-party tenants for the years ended December 31, 2023 and 2022 and total beds/units for each property type as of December 31, 2023 and 2022.

For the Year Ended December 31, 2024 As of December 31, 2024

Property Type Rental Income

Facility Type Rental Income

(in thousands) Percent

Occupancy (1)

$ 169,414 74 % 79 % 20,930

Multi-Service Campuses (2)

43,372 19 % 79 % 4,272

ALFs and ILFs (2)

15,475 7 % 74 % 2,886

Total $ 228,261 100 % 28,088

(1) Includes three SNFs held in consolidated joint ventures.

(1) Occupancy data excludes one non-operational ALF.

Occupancy data derived solely from information provided by our tenants without independent verification by us.

The leased facility financial performance data is presented one quarter in arrears.

(2) Includes facilities held in consolidated joint ventures.

See Note 3, Real Estate Investments, Net , and Note 12, Variable Interest Entities , for additional information.

For the Year Ended December 31, 2023 As of December 31, 2023

Property Type Rental Income

Facility Type Rental Income

(in thousands) Percent

SNFs $ 135,701 72 % 16,193

Occupancy (1)

$ 145,589 73 % 75 % 17,366

Multi-Service Campuses 35,779 18 % 75 % 3,593

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Total $ 198,599 100 % 23,928

(1) Occupancy data excludes two facilities which are in the process of being repurposed, one non-operational SNF and two non-operational ALFs.

Occupancy data derived solely from information provided by our tenants without independent verification by us.

The leased facility financial performance data is presented one quarter in arrears.

(2) Includes facilities held in consolidated joint ventures.

See Note 3, Real Estate Investments, Net , and Note 12, Variable Interest Entities , for additional information.

Financing Receivable

During 2024, we invested in 46 properties through a sale and leaseback transaction.

We leased the properties back to an affiliate of the seller and provided the seller-lessee with purchase options.

We determined that the sale and leaseback transaction met the accounting criteria to be presented as financing receivable on our consolidated balance sheets and recorded the payments from these properties as interest income from financing receivable on our consolidated statements of operations.

See Note 2, Summary of Significant Accounting Policies, for additional information.

The following table provides information regarding our investment in the financing receivable during the year ended December 31, 2024 (dollars in thousands):

For The Year Ended December 31, 2024

Lease Maturity State Type of Properties

Number of Properties

Number of Beds/Units

Gross Investment (1)

Effective Interest Rate (2)

Interest Income from Financing Receivable

2039 IL SNF / Campus /ALF / ILF 46 3,820 $ 97,053 12.0 % $ 1,009

(1) Gross investment includes $1.3 million of transaction costs.

(2) We leased these facilities back to the seller under a 15-year contract, with two five-year renewal options.

The agreement provides for an initial contractual cash yield of 11.0% for the first three years, with annual CPI-based escalators beginning in year four, subject to a 3% cap.

The agreement provides for deferred payments equal to 2.0% of the contractual cash yield in the first year and 0.5% of the contractual cash yield in the second year.

At the time the seller-lessee exercises its purchase options, option proceeds will be used to repay any outstanding deferred payments as well as additional amounts such that we receive a contractual cash yield of 12.5% on our gross investment in the applicable properties through the option exercise date.

If any deferred amounts remain unpaid, beginning in year eight, the deferred amounts are to be repaid in 24 equal monthly payments.

The agreement provides the seller-lessee with options to purchase all facilities in separate tranches, with the first purchase option window beginning December 1, 2024.

We have not received notice of exercise for the purchase option period currently open.

See Note 5, Other Real Estate Related and Other Investments , for additional information.

Other Real Estate Related Investments

The following table summarizes our investments in mortgage loans, mezzanine loans and preferred equity investments (dollars in thousands):

Mortgage Loans For The Year Ended December 31, 2024

For The Year Ended December 31, 2023

Maturity Investment Year State Type of Properties

Principal Balance as of December 31, 2024

Wtd Avg Contractual Interest Rate Interest Income

Interest Income

2025 2022 / 2023 CA, GA, IN SNF $ 38,901 9.2% $ 3,791 $ 4,711

2026 2023 CA ALF / SNF 9,864 10.7% 1,069 169

2027 2022 / 2024 Mid-Atlantic, FL SNF / Campus 76,000 8.4% 6,476 6,368

2028 2023 FL SNF 15,727 9.0% 1,499 661

2029 2024 Various SNF / Campus / ALF / ILF 425,000 8.7% 18,432 —

2031 2024 TN SNF 26,675 9.1% 1,652 —

2033 2023 CA Campus / ILF 25,993 9.0% 2,378 1,209

2034 2024 CO, WA SNF 21,050 8.5% 226 —

2039 2024 MD SNF 19,190 9.4% 449 —

$ 658,400 8.8% $ 35,972 $ 13,118

Mezzanine Loans For The Year Ended December 31, 2024

For The Year Ended December 31, 2023

Maturity Investment Year State Type of Properties

Principal Balance as of December 31, 2024

Wtd Avg Contractual Interest Rate Interest Income

Interest Income

2027 2024 MO, VA SNF $ 44,800 14.0% $ 5,850 $ —

2029 2024 CA SNF 7,365 11.5% 788 —

2032 2022 Mid-Atlantic SNF / Campus 25,000 11.0% 2,796 2,778

2034 2024 MD Campus 5,122 13.0% 22 —

$ 82,287 12.8% $ 9,456 $ 2,778

Preferred Equity Investments For The Year Ended December 31, 2024

For The Year Ended December 31, 2023

Investment Year State Type of Properties

Principal Balance as of December 31, 2024

Wtd Avg Contractual Interest Rate Preferred Return

Preferred Return

2023 CA SNF $ 1,782 15.0% $ 272 $ 19

2024 NC SNF / Campus 9,000 11.0% 583 —

2024 Various SNF / Campus / ALF / ILF 43,000 11.0% 1,971 —

$ 53,782 11.1% $ 2,826 $ 19

Total Investments:

$ 794,469 $ 48,254 $ 15,915

Geographic Concentration — Rental Income:

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IL 6,996 3 % 6,975 4 %

CO 5,960 3 % 5,796 3 %

WA 5,041 2 % 4,893 2 %

CO 4,519 2 % 5,960 3 %

NC 3,479 2 % 505 *

IA 3,426 2 % 4,584 2 %

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NV 2,287 1 % 2,231 1 %

MI 2,069 1 % 3,003 2 %

TN 2,055 1 % — *

NM 1,925 1 % 1,083 1 %

GA 1,894 1 % 1,454 1 %

SD 1,810 1 % 972 *

MD 1,420 1 % 71 *

MO 1,341 1 % — *

VA 1,192 1 % — *

MN 1,133 * 1,100 1 %

NM 1,083 1 % 937 1 %

NE 1,045 * 1,020 1 %

SD 972 * 944 *

WV 776 * 751 *

WI 857 * 556 *

NC 505 * 1,172 1 %

WV 801 * 776 *

ND 498 * 475 *

OR 436 * 423 *

MD 71 * 247 *

FL 25 * 222 *

KS 233 * 511 *

MI 115 * 2,069 1 %

Total $ 228,261 100 % $ 198,599 100 %

* Represents less than 1%

(1) Includes three SNFs held in consolidated joint ventures.

(1) Includes facilities held in consolidated joint ventures.

See Note 3, Real Estate Investments, Net , and Note 12, Variable Interest Entities , for additional information.

Investment and Financing Policies

Our investment objectives are to increase cash flow, provide quarterly cash dividends, maximize the value of our properties and acquire properties with cash flow growth potential.

We intend to invest primarily in SNFs and seniors housing, including AL Fs and ILFs.

We are expanding our investments into behavioral health facilities and we may determine in the future to expand our investments to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.

We intend to invest primarily in SNFs and seniors housing, including AL Fs and ILFs, both domestically and internationally.

We may determine in the future to expand our investments to include behavioral health facilities, medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.

We may utilize the RIDEA structure for future acquisitions (see “Business Strategies - Diversify Asset Portfolio” below).

Our properties are located in 28 states and we intend to continue to acquire properties in other states throughout the United States.

Although our portfolio currently consists primarily of owned real property, we have also invested in joint ventures through which we own properties, as well as mortgage loans receivable and mezzanine loans.

Our owned properties are located in 32 states and we intend to continue to acquire properties in other states throughout the United States.

Although our portfolio currently consists primarily of owned real property, we have also invested in joint

ventures through which we own properties, as well as mortgage loans receivable, mezzanine loans and preferred equity investments.

We expect that our future investments may also include first mortgages, mezzanine debt and other securities issued by, or joint ventures with, REITs or other entities that own real estate consistent with our investment objectives.

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Geographically Diverse Property Portfolio.

Our properties are located in 28 different states, with concentrations in California and Texas base d on rental i ncome.

The properties in any one state do not account for more than 30% of our total rental income as of December 31, 2023.

Our portfolio of real estate held for investment, inclusive of our other real estate related investments and financing receivable, are located in 34 different states, with concentrations in California and Texas base d on annualized rental and interest i ncome.

The properties in any one state do not account for more than 22% of our annualized run rate revenue as of December 31, 2024.

We believe this geographic diversification will limit the effect of changes in any one market on our overall performance.

Long-Term, Triple-Net Lease Structure.

All of our owned properties (including properties we own through joint ventures, excluding one SNF which is non-operational), are leased to our tenants under long-term, triple-net leases, pursuant to which the operators are responsible for all facility maintenance and repair, insurance required in connection with the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

All of our owned properties (including properties we own in consolidated joint ventures), are leased to our tenants under long-term, triple-net leases, pursuant to which the operators are responsible for all facility maintenance and repair, insurance required in connection with the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

Financially Secure Primary Tenant.

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Investments in Joint Ventures .

From time to time, we partner with third-party institutional investors to invest in healthcare real estate through joint ventures.

Our joint venture partner contributes the remaining 2.5% of the joint venture’s total investment amount in exchange for a 50% common ownership interest in the joint venture.

From time to time, we partner with third-party institutional investors to invest in healthcare real estate in consolidated joint ventures.

Pursuant to our joint ventures, we typically contribute at least 90% of the joint venture’s total investment amount and we receive 100% of the preferred equity interest in the joint venture and a 50% common equity interest in the joint venture.

Our joint venture partner contributes the remaining total investment amount in exchange for a 50% common ownership interest in the joint venture.

These are investments that we typically consolidate as they are variable interest entities and as we are considered to be the primary beneficiary and have the power to direct the activities that most significantly impact the entity’s economic performance and have the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant.

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Our ability to access the capital markets provides us greater flexibility to manage our cost of capital and also offers us the ability to fund future acquisitions through the issuance of additional shares, including under our ATM Program (as defined below).

During the year ended December 31, 2023, we sold approximately 30.9 million shares at an average gross price of $20.86 for gross proceeds of approximately $643.8 million under our ATM Program to fund future acquisitions.

During the year ended December 31, 2024, we sold approximately 41.0 million shares at an average gross price of $26.35 for gross proceeds of approximately $1.1 billion under our ATM Program to fund current and future acquisitions.

In addition, on November 1, 2024, we completed an underwritten public offering of 15.9 million shares at a price of $32.00 for gross proceeds of approximately $507.8 million to fund current and future acquisitions.

Ability to Identify Talented Operators .

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Our management team’s experience gives us a key competitive advantage in objectively evaluating an operator’s financial position, care and service programs, operating efficiencies and likely business prospects.

Ability to Identify Strategic Borrowers .

Our ability to execute a strategic approach to lending has resulted in additional real estate acquisition opportunities.

As a result of our management team’s network of relationships and insight, we believe that our ability to originate loan investments to healthcare real estate owners has allowed us access to unique acquisition opportunities and contributed to our growth.

Experienced Management Team.

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Sedgwick has more than 24 years of experience in the skilled nursing and seniors housing industry.

Sedgwick’s President, Chief Operating Officer and Vice President duties regularly involved him in matters related to new investments, asset management, tenant relations, portfolio management, portfolio optimization, investor relations and capital markets activities for the Company.

Sedgwick’s President, Chief

Operating Officer and Vice President duties regularly involved him in matters related to new investments, asset management, tenant relations, portfolio management, portfolio optimization, investor relations and capital markets activities for the Company.

Prior to joining CareTrust, Mr.

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Diversify Asset Portfolio .

We diversify through the acquisition of new and existing facilities from third parties and the expansion and upgrade of current facilities and strategically investing in new developments with options to acquire the developments at stabilization.

We diversify through the acquisition of new and existing facilities from third parties and the expansion and upgrade of current facilities, by strategically investing in new developments with options to acquire the developments at stabilization.

In addition, we diversify through investing in high-quality borrowers, facility types and geography.

We employ what we believe to be a disciplined, opportunistic acquisition strategy with a focus on the acquisition of SNFs, ALFs and ILFs.

We may determine in the future to expand our investments to include behavioral health facilities, medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities.

As we acquire, or invest in, additional properties, we expect to further diversify by geography, asset class and tenant within the healthcare and healthcare-related sectors.

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We maintain a capital structure that provides the resources and flexibility to support the growth of our business.

We intend to maintain a mix of credit facility debt, unsecured debt and possibly secured mortgage debt, which, together with our anticipated ability to complete future equity financings, including issuances of our common stock via registered public offerings or under an at-the-market equity program, we expect will fund the growth of our property portfolio.

We intend to maintain a mix of credit facility debt, unsecured debt and possibly secured mortgage debt, which, together with our anticipated ability to complete future equity financings, including issuances of our common stock via registered public offerings or under our at-the-market equity program, we expect will fund the growth of our property portfolio.

Develop New Tenant Relationships.

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We believe there is a significant opportunity to be a capital source to healthcare operators, through the acquisition and leasing of healthcare properties to them that are consistent with our investment and financing strategy at appropriate risk-adjusted rates of return, which, due to size and other considerations, are not a focus for larger healthcare REITs.

We pursue acquisitions and strategic opportunities that meet our investing and financing strategy and that are attractively priced, including funding development of properties through preferred equity or construction loans and thereafter entering into sale and leaseback arrangements with such developers as well as other secured term financing and mezzanine lending.

We pursue acquisitions and strategic opportunities that meet our investing and financing strategy

and that are attractively priced, including funding development of properties through preferred equity or construction loans and thereafter entering into sale and leaseback arrangements with such developers as well as other secured term financing and mezzanine lending.

We utilize our management team’s operating experience, network of relationships and industry insight to identify both large and small quality operators in need of capital funding for future growth.

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We expect to structure these investments as either lease amendments that produce additional rents or as loans that are repaid by operators during the applicable lease term.

We have also assisted our

tenants with transitioning to lower emissions technologies through our tenant incentive program, where we support efficiency projects through our dedicated tenant capital expenditure budget, providing sustainability incentives rent-free.

We have also assisted our tenants with transitioning to lower emissions technologies through our tenant incentive program, where we support efficiency projects through our dedicated tenant capital expenditure budget, providing sustainability incentives rent-free.

Pursue Strategic Development Opportunities.

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We are committed to sustainable practices in our corporate offices and to providing tenant education, support and incentives to make sustainable improvements at our net-leased properties.

In 2023, we published our third annual Corporate Sustainability Report (our “ESG Report”) as part of our ongoing commitment to provide regular reporting on our environmental, social and governance (“ESG”) priorities.

In 2024, we published our fourth annual Corporate Sustainability Report (our “ESG Report”) as part of our ongoing commitment to provide regular reporting on our environmental, social and governance (“ESG”) priorities.

Our ESG Report outlines our high priority ESG initiatives and goals for our company and our property portfolio.

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The plan’s objective was to benchmark energy and water usage and the impact of our facilities on greenhouse gas emissions and climate change.

During 2021, we implemented the plan’s monitoring systems and began collecting data for this pilot group of 50 properties, increasing to 100 properties by the end of 2023.

During 2023, we added waste tracking for the 100 properties.

During 2021, we began collecting data and have increased our tracking since, adding waste tracking in 2023 and reaching a total of 105 tracked properties by the end of 2024.

We expect the data to help us identify the most promising opportunities for improvement in our portfolio, set informed ESG goals and measure progress over time.

In addition, as a landlord and capital supplier to a key segment of the healthcare industry, we intend to seek further opportunities to encourage and incentivize fair and healthy work environments for healthcare workers and suitable living conditions for patients and residents, and to promote diversity, inclusion and the ethical treatment of employees, residents, patients and others wherever our activities and influence can be felt.

In 2022, we prepared “green” lease language for our form master lease to add new ESG-specific requirements in lease agreements when amending or modifying existing lease relationships.

Our green lease strategy compliments our efforts to track

utility data across our portfolio and work with tenants to identify ESG building operation opportunities.

During 2024, we increased leases with ESG requirements by 10% from September 2023.

During 2023, we partnered with a third party to conduct a portfolio level physical climate risk assessment on all standing assets.

Physical risks assessed were heat, flood, precipitation, fire, and drought.

In the overall portfolio physical climate risk assessment, four risk categories were defined with a portfolio risk percentage provided for each category, addressing each physi cal risk.

In the overall portfolio physical climate risk assessment, four risk categories were defined with a portfolio risk percentage provided for each category, addressing each physical risk.

The climate risk assessment found that the highest risk for our portfolio was heat caused by higher temperatures.

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The survey found transitional risks for our tenants due to transitioning to a low carbon economy including increased material costs, volatility in utilities’ pricing, market preference for greener buildings, and higher insurance premiums.

Also in 2020, we published our Tenant Code of Conduct & Corporate Responsibility (our “Tenant ESG Program”).

Additionally, in 2023, we began tracking and engaging tenants to verify compliance with state-level energy benchmarking laws.

In 2024, we expanded these efforts to include properties subject to building performance standards laws, offering support to tenants as needed and continuing to monitor compliance.

During 2024, we enhanced climate risk management by preparing tenant communications to share results from physical climate risk assessments and by developing resources to address physical climate hazards, including a Resiliency Checklist and heat resilience rebate opportunities.

Additionally, towards the end of 2024, we distributed our second climate-related tenant survey, incorporating enhanced resiliency-focused questions for properties identified as having "extreme" physical risks, with response collection ongoing through 2025.

We have also published a Tenant Code of Conduct & Corporate Responsibility (our “Tenant ESG Program”).

The Tenant ESG Program provides our eligible triple-net tenants with monetary inducements to make sustainable improvements to our 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.

Incentive options include a wide variety of opportunities for tenants to upgrade everything from energy and environmental systems to water-saving landscaping and more.

Our board of directors has authorized annual allocations of up to $500,000 to fund the Tenant ESG Program.

As disclosed in our 2022 ESG Report, we tracked $567,304 in environmental improvements at our properties from September 2022 to September 2023.

The foregoing principles and additional ESG initiatives are reflected in our Environmental, Social and Governance policy adopted on October 29, 2021, and previously published Policy on Human Capital, Policy on Human Rights and Responsibilities, Policy on Environmental Sustainability and our proprietary Tenant ESG Program.

All of these policies are located on the Investor Relations section of our website at www.caretrustreit.com.

As disclosed in our 2023 ESG Report, we tracked $370,427 in environmental improvements at our properties during the year ended December 31, 2023.

In 2024, we utilized our utility data management software to identify the top 20 energy, water, and waste intensive properties and shared our findings with tenants in hopes that they would prioritize the top resource intensive properties for efficiency initiatives.

We have published our Environmental, Social and Governance policy, Policy on Human Capital, Policy on Human Rights and Responsibilities, Policy on Environmental Sustainability and information about our Tenant ESG Program on the Investor Relations section of our website at www.caretrustreit.com.

The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this report or any other document that we file with the SEC.

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The skills, experience and industry knowledge of key employees significantly benefit our performance.

We believe we offer competitive compensation (including salary, incentive bonus and equity) and benefits packages (including a 401(k) plan with a fixed employer contribution, Flexible Spending Accounts (FSAs), employer-funded employee assistance program (EAP), a generous vacation, holiday and personal time off policy, and an array of voluntary benefits options and other benefits for employees and their families).

benefits options and other benefits for employees and their families).

Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.

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We believe that employee turnover is costly in direct and indirect ways, and we are committed to employee retention and satisfac tion.

During the year ended December 31, 2023, we experienced turnover of three full-time employees, excluding our executive officers.

During the year ended December 31, 2024, we did not experience any turnover, including executive officers.

Training and Education.

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Government Regulation, Licensing and Enforcement

As operators of healthcare facilities, tenants of our healthcare properties are typically subject to extensive and complex federal, state and local healthcare laws and regulations relating to fraud and abuse practices, government reimbursement, licensure and certificate of need and similar laws governing the operation of healthcare facilities, and we expect that the healthcare industry, in general, will continue to face significant regulation and pressure in the areas of fraud, waste and abuse,

cost control, healthcare management and provision of services, among others.

These regulations are wide-ranging and can subject our tenants to civil, criminal and administrative sanctions.

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If the government proceeds criminally, a violation is a felony and may result in imprisonment for up to five years, fines of up to $25,000 and mandatory exclusion from participation in all federal health care programs.

If the government proceeds civilly, it may impose a civil monetary penalty of $50,000 per violation and an assessment of not more than three times the total amount of remuneration involved, and it may exclude the parties from participation in all federal health care programs.

If the government proceeds civilly, it may impose a civil monetary penalty of $50,000 per

violation and an assessment of not more than three times the total amount of remuneration involved, and it may exclude the parties from participation in all federal health care programs.

Violations of the Anti-Kickback Statute also serve as a basis for federal False Claims Act cases.

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government, or its agents and contractors, is liable for a civil penalty ranging from $5,500 to $11,000 per claim, plus three times the amount of damages sustained by the government.

Under the False Claims Act’s so-called “reverse false claims,” liability also could arise for “using” a false record or statement to “conceal,” “avoid” or “decrease” an “obligation” (which can include the retention of an overpayment) “to pay or transmit money or property to the government.” The False Claims Act also empowers and

provides incentives to private citizens (commonly referred to as qui tam relator or whistleblower) to file suit on the government’s behalf.

The qui tam relator’s share of the recovery can be between 15% and 25% in cases in which the government intervenes, and 25% to 30% in cases in which the government does not intervene.

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Reimbursement

Sources of revenue for our tenants include (and for our future tenants is expected to include), among other sources, governmental healthcare programs, such as the federal Medicare program and state Medicaid programs, and non-governmental payors, such as insurance carriers and health maintenance organizations.

payors, such as insurance carriers and health maintenance organizations.

As federal and state governments focus on healthcare reform initiatives, and as the federal government and many states face significant budget deficits, efforts to reduce costs by these payors will likely continue, which may result in reduced or slower growth in reimbursement for certain services provided by Ensign and our other tenants.

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Given the divided nature of Congress, it is unclear whether Congress will successfully expand health insurance coverage and assess alternative health care delivery and payment systems.

The Republican Party currently controls the United States House of Representatives (by a slim majority) and the Democratic Party currently controls the Senate (by a slim majority).

to this, healthcare reform legislation would likely require at least some support from both Republican and Democratic lawmakers to become law and it is uncertain whether any healthcare reform legislation will ultimately become law.

The Republican Party currently controls the United States Senate and the House of Representatives (by a slim majority).

Due to this, healthcare reform legislation would likely require at least some support from both Republican and Democratic lawmakers to become law and it is uncertain whether any healthcare reform legislation will ultimately become law.

We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on our business.

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As a result of the OIG report, CMS enforcement activity against SNF operators may increase, especially with regard to the reporting of potential abuse or neglect of SNF residents.

If any of our tenants or their employees are found to have violated any applicable reporting requirements, they may become subject to penalties or other sanctions up to and including loss of licensure.

In November 2023, CMS adopted a final rule implementing certain portions of the Affordable Care Act, requiring the disclosure of certain ownership, managerial, and other information regarding Medicare SNFs and Medicaid nursing facilities.

This final rule defines the term “real estate investment trust,” which sets the stage for Medicare SNFs to disclose whether each direct or indirect owning or managing entity is a real estate investment trust.

Further, in July 2024, CMS adopted a final rule expanding its ability to

impose penalties on SNFs for health and safety deficiencies/non-compliance.

This final rule allows for more per instance and per day civil monetary penalties to be imposed for such health and safety deficiencies/non-compliance, as appropriate.

If any of our tenants or their employees are found to have violated any applicable reporting or health and safety requirements, they may become subject to penalties or other sanctions up to and including loss of licensure.

A final rule adopted by CMS that implemented certain portions of the Affordable Care Act and requires the disclosure of certain ownership, managerial, and other information regarding Medicare SNFs and Medicaid nursing facilities, became effective on January 16, 2024.

The rule defines the term “real estate investment trust,” which sets the stage for Medicare SNFs to disclose whether each direct or indirect owning or managing entity is a real estate investment trust.

This may enable CMS and others to scrutinize more closely how direct and indirect ownership and management correlate with care outcomes and to determine which environments are more likely to deliver better care for residents and patients.

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The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”) regulates the privacy and security of certain health information (“Protected Health Information”) and requires entities subject to HIPAA to provide notification of breaches of Protected Health Information.

Entities subject to HIPAA include health plans, healthcare

clearinghouses, and most health care providers (including many of our tenants).

Entities subject to HIPAA include health plans, healthcare clearinghouses, and most health care providers (including many of our tenants).

Business associates of these entities who create, receive, maintain or transmit Protected Health Information are also subject to HIPAA.

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Some of these federal and state statutes may directly impact us.

Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property, such as us, may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property).

fines and damages for injuries to persons and adjacent property).

The cost of any required remediation, removal, fines or personal or property damages and the owner’s liability therefore could exceed or impair the value of the property and/or the assets of the owner.

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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.

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.

REIT Qualification

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federal income tax purposes beginning with our taxable year ended December 31, 2014.

Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, various complex

requirements under the Internal Revenue Code of 1986, as amended (the “Code”), relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels to our stockholders and the concentration of ownership of our capital stock.

Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code of 1986, as amended (the “Code”), relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels to our stockholders and the concentration of ownership of our capital stock.

We believe that we are organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that our manner of operation has and will enable us to continue to meet the requirements for qualification and taxation as a REIT.

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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-K

Item 1. Business