What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-06 · 142 added, 127 removed, 332 unchanged (45% of the section changed)

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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 located in the United States (“U.S.”) and the United Kingdom (“U.K.”).

As of June 30, 2025, we owned, directly or indirectly in consolidated joint ventures, and leased to independent operators 400 skilled nursing facilities (“SNFs”), multi-service campuses, U.K.

As of September 30, 2025, we owned, directly or indirectly in consolidated joint ventures, and leased to independent operators 399 skilled nursing facilities (“SNFs”), multi-service campuses, U.K.

care homes, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 36,192 operational beds and units located in 32 states and the U.K.

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and Tennessee.

As of June 30, 2025, we also had other real estate related investments consisting of four preferred equity investments, 14 real estate secured loans receivable and five mezzanine loans receivable with a carrying value of $840.9 million and one financing receivable with a carrying value of $97.3 million.

As of September 30, 2025, we also had other real estate related investments consisting of four preferred equity investments, 15 real estate secured loans receivable and five mezzanine loans receivable with a carrying value of $871.3 million and one financing receivable with a carrying value of $98.1 million.

Recent Developments

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Recent macroeconomic conditions, particularly market uncertainty, immigration restrictions and changes to immigration enforcement policy, changes to the U.S.

healthcare system, declining consumer sentiment, inflation (including higher supply costs and shortages), effects of global tariffs, elevated interest rates and related changes to consumer spending, has adversely impacted and could continue to adversely impact our tenants’ ability to meet some of their financial obligations to us.

healthcare system, shutdown of the federal government, declining consumer sentiment, inflation (including higher supply costs and shortages), effects of global tariffs, elevated interest rates and related changes to consumer spending, has adversely impacted and could continue to adversely impact our tenants’ ability to meet some of their financial obligations to us.

Higher interest rates and market volatility have also increased our costs of capital to finance acquisitions and increased our borrowing costs.

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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.

As a result of impacts experienced by our operators due to recent market trends and uncertainties, the ability of some of our tenants and borrowers to meet their financial obligations to us in full has been negatively impacted.

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

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

During the three months ended June 30, 2025, we collected 99.7% of contractual rents and interest due from our operators and borrowers excluding cash deposits.

During the three months ended September 30, 2025, we collected 100% of contractual rents and interest due from our operators and borrowers exclusive of properties held-for-sale.

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

Regulatory Updates

During the third quarter of 2025, both Idaho and North Carolina implemented Medicaid reimbursement rate reductions that could adversely impact the operations of the tenants of our SNFs located in those states.

In Idaho, the Department of Health and Welfare enacted a 4% across-the-board rate cut in response to an $80 million budget shortfall.

In North Carolina, the Department of Health and Human Services reduced provider reimbursement rates by 3% to 10%, effective October 1, 2025, following a $319 million funding gap in the state’s Medicaid rebase.

These reductions disproportionately affect skilled nursing, hospice, behavioral health, and intermediate care services for individuals with intellectual and developmental disabilities.

The rate cuts could adversely impact our tenants’ ability to meet some of their financial obligations to us.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”), a comprehensive budget reconciliation package reshaping federal policy across numerous sectors of the American economy, including taxation, healthcare, social safety nets, immigration, and education.

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Notably, however, the bill did not include previously proposed cuts to Medicaid reimbursement rates for SNFs, which is expected to provide continued stability for many of our tenants, particularly those operating in states with high Medicaid census.

In addition, the OBBBA placed a moratorium through September 30, 2034 on implementation or enforcement of the federal minimum staffing standards for long-term care facilities finalized by CMS on May 10, 2024, which reduces near-term compliance risk and cost pressure associated with those staffing rations.

While the long-term impact of the legislation will depend on subsequent rule making and state-level implementation, we believe the bill’s passage reduces near-term reimbursement risk and supports the financial health of our operator base.

We continue to monitor regulatory developments closely and remain engaged with our tenants to assess the operational and financial implications of this and other legislative actions.

In April 2025, the Centers for Medicare and Medicaid Services (“CMS”) proposed a payment rate update to SNF reimbursements for fiscal 2026, which includes a net increase of 2.8% in Medicare Part A payments to SNFs.

In July 2024, CMS approved its payment rate update to SNF reimbursements for fiscal year 2025, which includes a net increase of 4.2%, or approximately $1.4 billion, in Medicare Part A payments to SNFs.

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

In April 2025, a U.S.

District Court vacated a CMS final rule regarding minimum staffing requirements, which was previously issued on April 22, 2024 and consisted of three core staffing requirements:

In July 2025, the Centers for Medicare and Medicaid Services (“CMS”) approved its payment rate update to SNF reimbursements for fiscal year 2026, which includes a net increase of 3.2% in Medicare Part A payments to SNFs, a slight increase from the proposed rate, which was 2.8%.

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

In April 2025, the U.S.

District Court for the Northern District of Texas vacated a CMS final rule regarding minimum staffing requirements, which was previously issued on May 10, 2024 and consisted of three core staffing requirements:

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

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however, no funding for the additional staff would be provided.

An appeal of this decision is pending.

On October 13, 2023, California Senate Bill No.

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Recent Investments

The following table summarizes our acquisitions from January 1, 2025 through August 6, 2025 (dollars in thousands):

The following table summarizes our acquisitions from January 1, 2025 through September 30, 2025 (dollars in thousands):

Type of Property Purchase Price (1)

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See Note 4, Real Estate Investments, Net , and Note 13, Variable Interest Entities , for additional information.

(5) Represents U.K.

(5) Includes U.K.

Care Homes acquired in connection with the Acquisition.

See Note 3, Acquisitions , for additional information.

On July 31, 2025, the Company swapped 10 U.K.

On July 31, 2025, we swapped 10 U.K.

Care Homes for six U.K.

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The amounts shown above are inclusive of this asset swap.

See Note 16, Subsequent Events , for additional information.

See Note 5, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales , for additional information.

(6) Includes two multi-service campuses held through joint ventures.

See Note 4, Real Estate Investments, Net , Note 13, Variable Interest Entities, and Note 16, Subsequent Events , for additional information.

The following table summarizes our other real estate related investments from January 1, 2025 through August 6, 2025 (dollars in thousands):

See Note 4, Real Estate Investments, Net , and Note 13, Variable Interest Entities , for additional information.

The following table summarizes our other real estate related investments from January 1, 2025 through September 30, 2025 (dollars in thousands):

Investment Type Investment Annual Initial Interest Income (1)

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Total $ 77,868 $ 8,009 11 1,548

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

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

For floating rate loans, interest income has been calculated using the benchmark rate at loan origination.

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Financing Activity

On May 30, 2025, the Operating Partnership entered into a first amendment to the Third Amended Credit Agreement (the “First Amendment to the Third Amended Credit Agreement”).

The First Amendment to the Third Amended Credit Agreement provides for an unsecured term loan facility (the “Term Loan Facility”) with term loan commitments in an aggregate principal amount of $500.0 million in addition to the Third Amended Revolving Facility.

Subsequent to June 30, 2025, we paid off the entire outstanding balance of the secured notes payable.

We also paid off and terminated the secured revolving credit facilities, which were assumed in connection with the Acquisition.

In connection with the payoff of the secured revolving credit facilities, we settled the outstanding interest rate caps.

We funded the payoffs with cash on hand and $65.0 million in net borrowings under the Third Amended Revolving Facility.

On July 10, 2025, we entered into two interest rate swaps, with a notional amount of $250.0 million each, to hedge the variable cash flows associated with the Term Loan Facility.

In July 2025, we paid off the entire outstanding balance of the secured notes payable and paid off and terminated the secured revolving credit facilities, which were each assumed in connection with the Acquisition.

In connection with the payoff of the secured revolving credit facilities, we terminated the outstanding interest rate caps.

We funded the payoffs with cash on hand and $65.0 million in net borrowings under the Third Amended Revolving Facility (as defined below).

On July 10, 2025, we entered into two interest rate swaps, with a notional amount of $250.0 million each, to hedge the variable cash flows associated with the Term Loan Facility (as defined below).

The interest rate swaps convert the Term Loan Facility’s Term SOFR rate to an effective fixed interest rate of 3.5%.

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Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the term of the agreements without exchange of the underlying notional amount.

Public Offering of Common Stock

On August 14, 2025, we completed an underwritten public offering of 23.0 million newly issued shares of our common stock at a price per share of $32.00, resulting in gross proceeds of $736.0 million.

We used a portion of the proceeds to pay down the outstanding revolving credit facility and intend to use the remaining proceeds to fund acquisitions.

At-The-Market Offering of Common Stock

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

There were no outstanding ATM forward contracts that had not settled as of June 30, 2025.

There were no outstanding ATM forward contracts that had not settled as of September 30, 2025.

In the event we enter into an ATM forward contract to sell shares of common stock pursuant to the ATM Program, we 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 our discretion, prior to the final settlement date, at which time we 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 we 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.

The following tables summarize the ATM Program activity for the three and six months ended June 30, 2025 and 2024 (in thousands, except per share amounts).

For the Three Months Ended For the Six Months Ended

June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

The following tables summarize the ATM Program activity for the three and nine months ended September 30, 2025 and 2024 (in thousands, except per share amounts).

Three Months Ended September 30,

Nine Months Ended September 30,

2025 2024 2025 2024

Number of shares — 17,241 12,608 40,986

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$ — $ 500,085 $ 369,871 $ 1,079,852

(1) Total gross proceeds is before $4.4 million and $3.8 million of commissions paid to the sales agents during the three months ended June 30, 2025 and 2024, respectively, under the ATM Program.

Total gross proceeds is before $4.6 million and $7.2 million of commissions paid to the sales agents during the six months ended June 30, 2025 and 2024, respectively, under the ATM Program.

As of June 30, 2025, we had $380.1 million available for future issuances under the New ATM Program.

(1) Total gross proceeds is before $6.2 million of commissions paid to the sales agents during the three months ended September 30, 2024 under the ATM Program.

Total gross proceeds is before $4.6 million and $13.4 million of commissions paid to the sales agents during the nine months ended September 30, 2025 and 2024, respectively, under the ATM Program.

As of September 30, 2025, we had $380.1 million available for future issuances under the New ATM Program.

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

We did not recognize any impairment charges during the three and six months ended June 30, 2025.

During the three and six months ended June 30, 2024, we recognized an impairment charge of $25.7 million and $28.5 million, respectively, related to properties held for sale, which is reported in impairment of real estate investments in the condensed consolidated income statements.

During both the three and nine months ended September 30, 2025, we recognized an impairment charge of $0.5 million related to properties held for sale.

During the three and nine months ended September 30, 2024, we recognized impairment charges of $8.4 million and $36.9 million, respectively, related to properties held for sale.

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

Asset Sales and Held for Sale Reclassifications

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

The following table summarizes our dispositions for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,

The following table summarizes our dispositions for the three and nine months ended September 30, 2025 and 2024 (dollars in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2025 2024 2025 2024

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Net carrying value 38,207 9,998 78,732 11,106

Net gain on sale $ — $ 21 $ 3,876 $ 32

(1) One non-operational previously impaired facility sold during the six months ended June 30, 2025 was not classified as held for sale as of December 31, 2024.

(2) Net sales proceeds for the six months ended June 30, 2024 includes $1.0 million of seller financing in connection with the sale of one ALF in January 2024.

Net (loss) gain on sale, net $ — $ (2,286) $ 3,876 $ (2,254)

(1) One non-operational previously impaired facility sold during the nine months ended September 30, 2025 was not classified as held for sale as of December 31, 2024.

(2) Net sales proceeds for the three and nine months ended September 30, 2025 includes non-cash consideration related to an asset exchange.

Net sales proceeds for the nine months ended September 30, 2024 includes $1.0 million of seller financing in connection with the sale of one ALF in January 2024.

Net sales proceeds for the three and nine months ended September 30, 2024 includes $2.8 million of liabilities assumed by the buyer in connection with the sale of 11 SNFs.

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

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Assets sold (78,732) (14)

June 30, 2025 $ 55,166 16

Impairment of real estate held for sale (452) —

September 30, 2025 $ 28,143 8

Results of Operations

Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025:

Three Months Ended September 30, 2025 Compared to Three Months Ended June 30, 2025:

Three Months Ended Increase

(Decrease) Percentage

June 30, 2025 March 31, 2025

September 30, 2025 June 30, 2025

(dollars in thousands)

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Property taxes and insurance 2,326 2,117 209 10 %

Impairment of real estate investments 452 — 452 *

Transaction costs 560 61 499 818 %

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General and administrative 15,420 12,549 2,871 23 %

Other income:

Gain on sale of real estate, net — 3,876 (3,876) (100) %

Other income (loss):

Loss on extinguishment of debt (390) — (390) *

Unrealized gain on other real estate related investments, net 3,603 1,968 1,635 83 %

Gain on foreign currency transaction 4,413 — 4,413 *

(Loss) gain on foreign currency transactions (298) 4,413 (4,711) (107) %

Income tax expense (2,077) (1,030) (1,047) 102 %

Net loss attributable to noncontrolling interests (643) (609) (34) 6 %

Net income (loss) attributable to noncontrolling interests 29 (643) 672 (105) %

• Not meaningful

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Three Months Ended Increase (Decrease)

(in thousands) June 30, 2025 March 31, 2025

(in thousands) September 30, 2025 June 30, 2025

Contractual cash rent $ 93,873 $ 81,383 $ 12,490

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For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received.

Total contractual rent increased by $12.6 million due to an $11.9 million increase in rental income from real estate investments made after December 31, 2024, including properties acquired in connection with the Acquisition, a $1.1 million increase in rental rates for our existing tenants, and an increase of $0.3 million related to the transfer of five facilities to new operators, partially offset by a $0.3 million decrease due to assets sold during the first quarter of 2025, a decrease of $0.3 million in tenant reimbursements and a $0.1 million decrease in rental income recognized related to certain tenants on a cash basis method of accounting.

Total contractual rent increased by $12.7 million due to a $10.9 million increase in rental income from real estate investments made after March 31, 2025, including properties acquired in connection with the Acquisition, a $1.0 million increase in rental rates for our existing tenants, an increase of $0.6 million related to the transfer of 12 facilities to new operators, and an increase of $0.2 million in tenant reimbursements.

Straight-line rent increased by $1.7 million related to the Acquisition.

Amortization of above and below market leases increased $3.8 million due to lease terminations in August 2025, which accelerated the amortization of the applicable below market lease intangibles.

Interest income from financing receivable.

Interest income from financing receivable did not change significantly during the quarter ended June 30, 2025 compared to the quarter ended March 31, 2025.

Interest income from financing receivable did not change significantly during the quarter ended September 30, 2025 compared to the quarter ended June 30, 2025.

Interest income from other real estate related investments and other income.

The $1.4 million, or 6%, increase in interest income from other real estate related investments and other income was primarily due to an increase of $1.5 million of interest earned on escrow deposits primarily related to the Acquisition, an increase of $0.4 million of interest income on new loan investments made after December 31, 2024, an increase of $0.2 million due to origination and extension fees, and an increase of $0.2 million related to the number of days in the quarter compared to the prior quarter, partially offset by a decrease of $0.7 million of interest earned on money market funds and a decrease of $0.2 million of interest income due to loans paid off after December 31, 2024.

The $1.7 million, or 7%, increase in interest income from other real estate related investments and other income was primarily due to an increase of $3.4 million of interest earned on money market funds, an increase of $1.4 million of interest income on new investments made after March 31, 2025, and an increase of $0.2 million related to the number of days in the quarter compared to the prior quarter, partially offset by a decrease of $3.1 million of interest earned on escrow deposits during the three months ended June 30, 2025, primarily related to the Acquisition, and a decrease of $0.2 million due to origination and extension fees during the three months ended June 30, 2025.

Depreciation and amortization.

The $3.4 million, or 19%, increase in depreciation and amortization was primarily due to an increase of $3.4 million due to acquisitions and capital improvements made after December 31, 2024, including related to properties acquired in connection with the Acquisition.

The $5.5 million, or 26%, increase in depreciation and amortization was primarily due to an increase of $3.3 million due to acquisitions and capital improvements made after March 31, 2025, including related to properties acquired in connection with the Acquisition, and $2.2 million of accelerated amortization of lease intangibles related to lease terminations in August 2025.

Interest expense.

Interest expense increased by approximately $6.4 million as detailed below:

Change in interest expense for the three months ended June 30, 2025 compared to the three months ended March 31, 2025

Interest expense decreased by approximately $0.4 million as detailed below:

Change in interest expense for the three months ended September 30, 2025 compared to the three months ended June 30, 2025

(in thousands)

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Increase due to new Term Loan Facility $ 3,492

Increase in outstanding borrowing amount for the Revolving Facility, net 2,084

Increase in outstanding borrowing due to debt assumed in the Acquisition 1,770

Other changes in interest expense (1)

Total increases to interest expense 3,628

Decreases to interest expense due to:

Decrease in outstanding borrowing amount for the Revolving Facility, net (3,384)

Decrease due to payoff of debt assumed in the Acquisition (660)

Total decreases to interest expense (4,044)

Total change to interest expense $ (416)

(1) Other changes in interest expense generally relate to changes to loan fee amortization.

Property taxes and insurance.

The $0.1 million, or 3%, increase in property taxes and insurance was primarily due to an increase of $0.3 million due to acquisitions made after December 31, 2024, partially offset by a decrease of $0.2 million related to reassessments.

The $0.2 million, or 10%, increase in property taxes and insurance was primarily due to an increase of $0.2 million due to acquisitions made after March 31, 2025 and an increase of $0.1 million due to reassessments, partially offset by a decrease of $0.1 million due to the transfer of certain properties to new operators that make direct tax payments.

Impairment of real estate investments.

During the three months ended September 30, 2025, we recognized impairment charges of $0.5 million related to properties classified as held for sale.

We did not recognize any impairment charges during the three months ended June 30, 2025.

Transaction costs.

During the three months ended September 30, 2025, we recognized $0.6 million of costs related to integrating the operations of Care REIT plc.

During the three months ended June 30, 2025, we recognized $0.1 million of non-capitalizable acquisition costs.

During the three months ended March 31, 2025, we recognized $0.9 million of unsuccessful acquisition pursuit costs that we classify as transaction costs.

Property operating expenses.

During the three months ended September 30, 2025, we recognized $0.3 million of property operating expenses related to assets we plan to sell or repurpose, re-tenant, or have sold.

During the three months ended June 30, 2025, we recognized $0.9 million of property operating expenses related to assets we plan to sell or repurpose, re-tenant, or have sold.

During the three months ended March 31, 2025, we recognized $0.5 million of property operating expenses related to assets we plan to sell or repurpose, re-tenant, or have sold, partially offset by $0.4 million in recoveries.

General and administrative expense.

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Three Months Ended Increase (Decrease)

(in thousands) June 30, 2025 March 31, 2025

(in thousands) September 30, 2025 June 30, 2025

Incentive compensation $ 7,042 $ 3,424 $ 3,618

Cash compensation 2,636 2,003 633

Share-based compensation 2,493 3,026 (533)

Professional services 1,439 2,453 (1,014)

Cash compensation 2,003 2,090 (87)

Taxes and insurance 523 470 53

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General and administrative expense $ 15,420 $ 12,549 $ 2,871

Gain on sale of real estate, net.

During the three months ended March 31, 2025, we recorded a $3.9 million gain on sale of real estate related to the sale of three SNFs and one multi-service campus.

No properties were sold during the three months ended June 30, 2025.

Loss on extinguishment of debt.

During the three months ended September 30, 2025, we recorded a loss on extinguishment of debt of $0.4 million associated with the prepayment of the secured revolving credit facilities that were assumed in connection with the Acquisition.

No loss on extinguishment of debt was recognized during the three months ended June 30, 2025.

Unrealized gain on other real estate related investments, net.

During the three months ended June 30, 2025, we recorded $2.3 million of unrealized gains on our secured and mezzanine loans receivable, partially offset by unrealized losses of

$0.3 million, to bring the interest rates in line with market rates.

During the three months ended March 31, 2025, we recorded $1.8 million of unrealized gains on our secured and mezzanine loans receivable, partially offset by unrealized losses of $0.5 million, to bring the interest rates in line with market rates.

Gain on foreign currency transaction.

During the three months ended September 30, 2025, we recorded $4.1 million of unrealized gains on our secured and mezzanine loans receivable, partially offset by unrealized losses of $0.1 million to bring the interest rates in line with market rates and unrealized foreign currency loss of $0.4 million related to one mortgage loan receivable.

During the three months ended June 30, 2025, we recorded $2.3 million of unrealized gains on our secured and mezzanine loans receivable, partially offset by unrealized losses of $0.3 million, to bring the interest rates in line with market rates.

(Loss) gain on foreign currency transactions.

During the three months ended September 30, 2025, we recorded a $0.3 million foreign currency loss on cash paid in connection with the acquisition of Impact Health Partners LLP.

During the three months ended June 30, 2025, we recorded a $4.4 million foreign currency gain on cash paid to Care REIT shareholders in connection with the Care REIT Acquisition.

Income tax expense.

During the three months ended June 30, 2025, we recorded a $1.0 million income tax expense related to foreign withholding taxes related to taxable income in the U.K.

Net loss attributable to noncontrolling interests.

Net loss attributable to noncontrolling interests did not change significantly during the quarter ended June 30, 2025 compared to the quarter ended March 31, 2025.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024:

Six Months Ended Increase

During the three months ended September 30, 2025 and June 30, 2025, we recorded $2.1 million and $1.0 million of income tax expense, respectively, related to foreign withholding taxes related to taxable income in the U.K.

Net income (loss) attributable to noncontrolling interests.

Net income attributable to noncontrolling interests increased primarily due to accelerated amortization of lease intangibles related to the Covenant Care lease transitions.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024:

Nine Months Ended Increase

(Decrease) Percentage

June 30, 2025 June 30, 2024

September 30, 2025 September 30, 2024

(dollars in thousands)

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Other income (loss):

Gain on sale of real estate, net 3,876 32 3,844 *

Loss on extinguishment of debt (390) (657) 267 *

Gain (loss) on sale of real estate, net 3,876 (2,254) 6,130 *

Unrealized gain (loss) on other real estate related investments, net 6,858 (689) 7,547 *

Gain on foreign currency transaction 4,413 — 4,413 *

Gain on foreign currency transactions, net 4,115 — 4,115 *

Income tax expense (3,107) — (3,107) *

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Rental income increased by $95.9 million as detailed below:

Six Months Ended

Nine Months Ended

Increase (Decrease)

(in thousands) June 30, 2025 June 30, 2024

(in thousands) September 30, 2025 September 30, 2024

Contractual cash rent $ 243,756 $ 159,060 $ 84,696

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For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received.

Total contractual rent increased by $46.3 million due to a $46.7 million increase in rental income from real estate investments made after December 31, 2023, including properties acquired in connection with the Acquisition, a $3.3 million increase in rental rates for our existing tenants, a $0.9 million increase in tenant reimbursements, and an increase of $0.5 million related to the transfer of seven facilities to new operators, partially offset by a $3.5 million decrease in rental income recognized related to certain tenants on a cash basis method of accounting and a $1.6 million decrease in rental income related to dispositions made after December 31, 2023.

Total contractual rent increased by $86.1 million due to a $84.7 million increase in rental income from real estate investments made after December 31, 2023, including properties acquired in connection with the Acquisition, a $5.0 million increase in rental rates for our existing tenants, a $1.4 million increase in tenant reimbursements, and an increase of $1.4 million related to the transfer of 15 facilities to new operators, partially offset by a $3.7 million decrease in rental income recognized related to certain tenants on a cash basis method of accounting and a $2.7 million decrease in rental income related to dispositions made after December 31, 2023.

Straight-line rent increased by $5.2 million due to the Acquisition.

Amortization of

above and below market leases increased $4.8 million primarily due to lease terminations in August 2025, which accelerated the amortization of the applicable below market lease intangibles.

Interest income from financing receivable.

During the six months ended June 30, 2025, we recorded $5.7 million of interest income related to an investment classified as a financing receivable in December 2024.

During the nine months ended September 30, 2025, we recorded $8.6 million of interest income related to an investment classified as a financing receivable in December 2024.

Interest income from other real estate related investments and other income.

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Depreciation and amortization.

The $11.7 million, or 43%, increase in depreciation and amortization was primarily due to an increase of $14.6 million related to acquisitions and capital improvements made after December 31, 2023, partially offset by a decrease of $1.9 million due to classifying assets as held for sale after December 31, 2023, a decrease of $0.9 million due to assets becoming fully depreciated after December 31, 2023 and a decrease of $0.1 million due to the impairment of assets after December 31, 2023.

The $24.4 million, or 59%, increase in depreciation and amortization was primarily due to an increase of $26.0 million related to acquisitions and capital improvements made after December 31, 2023 and an increase of $2.3 million due to lease terminations in August 2025, which accelerated the amortization of the applicable in-place lease intangibles, partially offset by a decrease of $1.9 million due to the disposal of assets, a decrease of $1.2 million due to assets becoming fully depreciated after December 31, 2023 and a decrease of $ 0.8 million due to classifying assets as held for sale after December 31, 2023.

Interest expense.

Interest expense increased by $7.1 million as detailed below:

Change in interest expense for the six months ended June 30, 2025 compared to the six months ended June 30, 2024

Change in interest expense for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

(in thousands)

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Decrease due to prepayment of a prior term loan (10,086)

Other changes in interest expense (1)

Decrease due to prepayment of secured borrowing (932)

Total decreases to interest expense (11,018)

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Property taxes and insurance.

The $0.4 million, or 11%, increase in property taxes was due to a $1.0 million increase related to acquisitions made after December 31, 2023, partially offset by a decrease of $0.5 million due to reassessments and a decrease of $0.1 million due to the sale of three properties after December 31, 2023.

The $0.6 million, or 10%, increase in property taxes was due to a $1.8 million increase related to acquisitions made after December 31, 2023, partially offset by a decrease of $0.8 million due to reassessments, a decrease of $0.2 million due to properties that were sold after December 31, 2023 and a decrease of $0.2 million due to the transfer of certain properties to new operators that make direct tax payments.

Impairment of real estate investments.

During the six months ended June 30, 2024, we recognized impairment charges of $28.5 million related to properties classified as held for sale.

We did not recognize any impairment charges during the six months ended June 30, 2025.

During the nine months ended September 30, 2025, we recognized impairment charges of $0.5 million related to properties classified as held for sale.

During the nine months ended September 30, 2024, we recognized impairment charges of $30.4 million related to properties classified as held for sale, $4.4 million related to properties held for investment, and $2.1 million related to properties that were sold.

Transaction costs.

During the six months ended June 30, 2025, we recognized $0.9 million of transaction costs primarily related to unsuccessful acquisition pursuit costs that we classify as transaction costs.

We did not recognize any transaction costs during the six months ended June 30, 2024.

During the nine months ended September 30, 2025, we recognized $1.5 million of costs related to unsuccessful acquisition pursuit costs that we classify as transaction costs and costs related to integrating the operations of Care REIT plc.

We did not recognize any transaction costs during the nine months ended September 30, 2024.

Property operating expenses.

During the six months ended June 30, 2025, we recognized $1.4 million of property operating expenses related to assets we plan to sell or repurpose, re-tenant, or have sold, partially offset by $0.4 million in recoveries.

During the six months ended June 30, 2024, we recognized $0.9 million of property operating expenses related to assets we plan to sell or repurpose, re-tenant or have sold.

During the nine months ended September 30, 2025, we recognized $1.7 million of property operating expenses related to assets we plan to sell or repurpose, re-tenant, or have sold, partially offset by $0.4 million in recoveries.

During the nine months ended September 30, 2024, we recognized $4.4 million of property operating expenses related to assets we plan to sell or repurpose, re-tenant or have sold.

General and administrative expense.

General and administrative expense increased by $17.4 million as detailed below:

Six Months Ended

Nine Months Ended

Increase/(Decrease)

(in thousands) June 30, 2025 June 30, 2024

Share-based compensation $ 6,935 $ 3,526 $ 3,409

(in thousands) September 30, 2025 September 30, 2024

Incentive compensation $ 11,691 $ 5,500 $ 6,191

Share-based compensation 9,428 4,669 4,759

Cash compensation 6,730 4,878 1,852

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General and administrative expense $ 36,992 $ 19,637 $ 17,355

Loss on extinguishment of debt.

During the nine months ended September 30, 2025, we recorded a loss on extinguishment of debt of $0.4 million associated with the prepayment of the secured revolving credit facilities that were assumed in connection with the Acquisition.

During the nine months ended September 30, 2024, we recorded a $0.7 million loss on extinguishment of debt related to the exit fee associated with the call of the secured borrowing and the write-off of deferred financing costs associated with the prepayment of the Term Loan (as defined below).

Gain on sale of real estate, net.

During the six months ended June 30, 2025, we recorded a $3.9 million gain on sale of real estate related to the sale of three SNFs and one multi-service campus.

During the six months ended June 30, 2024, we recorded a $32,000 gain on sale of real estate, net related to the sale of two SNFs and one ALF.

During the nine months ended September 30, 2025, we recorded a $3.9 million gain on sale of real estate related to the sale of three SNFs and one multi-service campus.

During the nine months ended September 30, 2024, we recorded a $2.3 million loss on sale of real estate, net related to the sale of 13 SNFs and one ALF.

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

During the six months ended June 30, 2025, we recorded $4.1 million of unrealized gains on our secured and mezzanine loans receivable, partially offset by unrealized losses of $0.8 million, to bring the interest rates in line with market rates.

During the six months ended June 30, 2024, we recorded a $3.2

million unrealized loss on our secured and mezzanine loans receivable due to an increase in interest rates, partially offset by unrealized gains of $0.7 million due to an increase in expected cash flows on floating rate loans due to an increase in projected forward interest rates.

Gain on foreign currency transaction.

During the six months ended June 30, 2025, we recorded a $4.4 million foreign currency gain on cash paid to Care REIT shareholders in connection with the Care REIT Acquisition.

During the nine months ended September 30, 2025, we recorded $8.3 million of unrealized gains on our secured and mezzanine loans receivable, partially offset by unrealized losses of $1.0 million, to bring the interest rates in line with market rates and unrealized foreign currency loss of $0.4 million related to one mortgage loan receivable.

During the nine months ended September 30, 2024, we recorded a $7.3 million unrealized loss on our secured and mezzanine loans receivable due to an increase in interest rates during the first half of 2024, partially offset by unrealized gains of $6.6 million primarily due to a decrease in interest rates during the third quarter of 2024.

Gain on foreign currency transactions, net.

During the nine months ended September 30, 2025, we recorded a $4.4 million foreign currency gain on cash paid to Care REIT shareholders in connection with the Care REIT Acquisition, partially offset by a $0.3 million foreign currency loss on cash paid in connection with the acquisition of Impact Health Partners LLP.

Income tax expense.

During the six months ended June 30, 2025, we recorded a $1.0 million income tax expense related to foreign withholding taxes related to taxable income in the U.K.

During the nine months ended September 30, 2025, we recorded $3.1 million of income tax expense related to foreign withholding taxes related to taxable income in the U.K.

Net loss attributable to noncontrolling interests.

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

However, there can be no

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

As of June 30, 2025, we are in compliance with all debt covenants on our outstanding indebtedness.

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

As of September 30, 2025, we are in compliance with all debt covenants on our outstanding indebtedness.

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

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Net cash provided by operating activities $ 273,069 $ 169,043

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Cash and cash equivalents as of the end of period $ 712,480 $ 377,102

Net cash provided by operating activities increased for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Net cash provided by operating activities increased for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

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

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

The net increase of $70.4 million in cash provided by operating activities for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 is primarily due to an increase in rental income received, an increase in interest income received on our other real estate related investments, and a decrease in cash paid for interest expense, partially offset by an increase in cash paid for general and administrative expense.

Cash used in investing activities for the six months ended June 30, 2025 was primarily comprised of $842.8 million in acquisitions of real estate, investment in real estate related investments and other loans receivable and escrow deposits for potential acquisitions of real estate, $30.0 million in preferred equity investments and $6.8 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $44.4 million in net proceeds from the sale of real estate and $9.9 million in principal payments received from our other real estate related investments and other loans receivable.

Cash used in investing activities for the six months ended June 30, 2024 was primarily comprised of $458.5 million in acquisitions of real estate, investment in real estate related investments and other loans receivable and escrow deposits for potential acquisitions of real estate, $9.0 million in preferred equity investments and $1.3 million of purchases of equipment, furniture and fixtures and improvements to real estate.

Our cash flows provided by financing activities for the six months ended June 30, 2025 were primarily comprised of $500.0 million in net borrowings under our Third Amended Revolving Facility (as defined below), $365.3 million in net proceeds from the issuance of common stock and $6.9 million in contributions from noncontrolling interests, partially offset by $117.4 million in dividends paid, a $4.2 million payment of deferred financing costs, a $3.3 million net settlement adjustment on restricted stock and $2.2 million in distributions to noncontrolling interests.

Our cash flows provided by financing activities for the six months ended June 30, 2024 were primarily comprised of $572.2 million in net proceeds from the issuance of common stock, $75.0 million in proceeds from a secured borrowing and $0.6 million in contributions from noncontrolling interests, partially offset by $77.7 million in dividends paid and a $2.5 million net settlement adjustment on restricted stock.

The net increase of $104.0 million in cash provided by operating activities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 is primarily due to an increase in rental income received and an increase in interest income received on our other real estate related investments, partially offset by an increase in cash paid for general and administrative expense and an increase in cash paid for interest expense.

Cash used in investing activities for the nine months ended September 30, 2025 was primarily comprised of $915.6 million in acquisitions of real estate, investment in real estate related investments and other loans receivable and escrow deposits for potential acquisitions of real estate, $30.0 million in preferred equity investments and $10.0 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $44.4 million in net proceeds from the sale of real estate and $10.1 million in principal payments received from our other real estate related investments and other loans receivable.

Cash used in investing activities for the nine months ended September 30, 2024 was primarily comprised of $777.1 million in acquisitions of real estate, investment in real estate related investments and other loans receivable and escrow deposits for potential acquisitions of real estate, $52.0 million in preferred equity investments and $4.2 million of purchases of equipment, furniture and fixtures and improvements to real estate, partially offset by $5.1 million in net proceeds from the sale of real estate and $0.1 million in principal payments received on other loans receivable.

Our cash flows provided by financing activities for the nine months ended September 30, 2025 were primarily comprised of $1.1 billion in net proceeds from the issuance of common stock, $500.0 million in net borrowings under our Third Amended Revolving Facility (as defined below), and $7.1 million in contributions from noncontrolling interests, partially offset by a $256.2 million payment on the secured notes payable and secured revolving credit facilities, $184.5 million in dividends paid, a $4.6 million payment on extinguishment of debt and deferred financing costs, $3.8 million in distributions to noncontrolling interests and a $3.3 million net settlement adjustment on restricted stock.

Our cash flows provided by financing activities for the nine months ended September 30, 2024 were primarily comprised of $1.1 billion in net proceeds from the issuance of common stock, $75.0 million in proceeds from a secured borrowing and $1.2 million in contributions from noncontrolling interests, partially offset by a $200.0 million prepayment of the Term Loan, $122.4 million in dividends paid, a $75.0 million payment on the secured borrowing, a $2.5 million net settlement adjustment on restricted stock, and $0.4 million payment on extinguishment of debt and deferred financing costs.

Material Cash Requirements

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

As of June 30, 2025, we were in compliance with all applicable financial covenants under the indenture governing the Notes.

As of September 30, 2025, we were in compliance with all applicable financial covenants under the indenture governing the Notes.

See Note 8, Debt, to our condensed consolidated financial statements included in this report for further information about the Notes.

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As of June 30, 2025, we had $500.0 million of borrowings outstanding under the Term Loan Facility and no borrowings outstanding under the Third Amended Revolving Facility.

As of September 30, 2025, we had $500.0 million of borrowings outstanding under the Term Loan Facility and no borrowings outstanding under the Third Amended Revolving Facility.

The Third Amended Revolving Facility has a maturity date of February 9, 2029, and includes, at our sole discretion, two six-month extension options.

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The First Amendment to the Third Amended Credit Agreement also removed the SOFR credit spread adjustment applicable to loans under the Third Amended Revolving Facility bearing interest at Term SOFR or Daily Simple SOFR.

As of June 30, 2025, we were in compliance with all applicable financial covenants under the Third Amended Credit Agreement.

As of September 30, 2025, we were in compliance with all applicable financial covenants under the Third Amended Credit Agreement.

See Note 8, Debt, to our condensed consolidated financial statements included in this report for further information about the Third Amended Credit Agreement.

Debt assumed in connection with the Acquisition

On May 8, 2025, we closed the Care REIT Acquisition, by means of a court-sanctioned scheme of arrangement under Part 26 of the United Kingdom Companies Act of 2006, and assumed Care REIT’s liabilities of approximately $290.9 million.

The borrowings included three secured revolving credit facilities totaling an aggregate principal amount of approximately $240 million, of which approximately $159 million of borrowings was outstanding as of June 30, 2025.

The secured revolving credit facilities had maturity dates ranging between April 2026 and December 2029.

The borrowings also included approximately $51 million aggregate principal amount of 2.93% secured notes payable due December 2035 and approximately $52 million aggregate principal amount of 3.00% secured notes payable due June 2035.

On July 8, 2025, the secured notes payable were fully paid off.

In addition, on July 31, 2025, the secured revolving credit facilities were fully paid off and related outstanding interest rate caps were settled.

See Note 8, Debt , and Note 16, Subsequent Events , to our condensed consolidated financial statements included in this report for further information about the debt assumed in connection with the Acquisition and our repayment of this indebtedness.

As of June 30, 2025, we were in compliance with all applicable financial covenants under the borrowings assumed from the Acquisition.

Commitments and Contingencies

As of June 30, 2025, we had committed to fund expansions, construction, capital improvements and ESG incentives, which provides eligible triple-net tenants with monetary inducements to make sustainable improvements to our properties, at certain triple-net leased facilities totaling $9.9 million, of which $8.4 million is subject to rent increase at the time of funding.

As of September 30, 2025, we had committed to fund expansions, construction, capital improvements and ESG incentives, which provides eligible triple-net tenants with monetary inducements to make sustainable improvements to our properties, at certain triple-net leased facilities totaling $9.6 million, of which $8.7 million is subject to rent increase at the time of funding.

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

As of June 30, 2025, we have mortgage loan commitments of $8.7 million and non-real estate secured loan commitments of $11.9 million.

As of June 30, 2025, we have earn-out commitments of $10.8 million, $10.0 million of which are related to a purchase and sale agreement which provides for an earn-out obligation for one SNF in Virginia that was acquired during 2024.

As of September 30, 2025, we have mortgage loan commitments of $3.8 million and non-real estate secured loan commitments of $11.9 million.

As of September 30, 2025, we have earn-out commitments of $13.4 million, $10.0 million of which are related to a purchase and sale agreement which provides for an earn-out obligation for one SNF in Virginia that was acquired during 2024.

The $10.0 million earn-out is available, contingent on the operator achieving certain thresholds per the agreement, beginning in October 2025 through October 2026.

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

See Note 9, Equity and Redeemable Noncontrolling Interests, to our condensed consolidated financial statements included in this report for a summary of the cash dividends per share of our common stock declared by our board of directors for the three months ended June 30, 2025 .

Critical Accounting Policies and Estimates

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Please refer to “Critical Accounting Policies and Estimates” in the “Management’s Discussion and Analysis of Financial Condition and Results of Ope rations” section of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 12, 2025, for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no material changes in such critical accounting policies during the six months ended June 30, 2025.

There have been no material changes in such critical accounting policies during the nine months ended September 30, 2025.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis