CareTrust REIT, Inc. [CTRE] Filings

10-Q 1 ctre-20240630.htm 10-Q ctre-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36181

CareTrust REIT, Inc.

(Exact name of registrant as specified in its charter)


Maryland						46-3999490
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

905 Calle Amanecer, Suite 300, San Clemente, CA						92673
(Address of principal executive offices)						(Zip Code)

(949) 542-3130

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CTRE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of July 31, 2024, there were 154,209,269 shares of common stock outstanding.

Table of Contents

INDEX


PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37

Item 5.	Other Information	38
Item 6.	Exhibits	38
	Signatures	39

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CARETRUST REIT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)


	June 30, 2024		December 31, 2023
Assets:
Real estate investments, net	$	1,706,231	$	1,567,119
Other real estate related investments (including accrued interest of $3,540 as of June 30, 2024 and $1,727 as of December 31, 2023)	433,532		180,368
Assets held for sale	28,753		15,011
Cash and cash equivalents	495,134		294,448

Accounts and other receivables	1,096		395
Prepaid expenses and other assets, net	30,502		23,337
Deferred financing costs, net	3,506		4,160
Total assets	$	2,698,754	$	2,084,838
Liabilities and Equity:
Senior unsecured notes payable, net	$	396,483	$	396,039
Senior unsecured term loan, net	199,665		199,559

Secured borrowing	75,000		—
Accounts payable, accrued liabilities and deferred rent liabilities	37,112		33,992
Dividends payable	44,721		36,531
Total liabilities	752,981		666,121
Commitments and contingencies (Note 12)
Equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock, $0.01 par value; 500,000,000 shares authorized, 153,881,933 and 129,992,796 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	1,539		1,300
Additional paid-in capital	2,456,187		1,883,147
Cumulative distributions in excess of earnings	(514,037)		(467,628)
Total stockholders’ equity	1,943,689		1,416,819
Noncontrolling interests	2,084		1,898
Total equity	1,945,773		1,418,717
Total liabilities and equity	$	2,698,754	$	2,084,838

See accompanying notes to condensed consolidated financial statements.

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CARETRUST REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Rental income	$	55,407	$	47,745	$	108,909	$	93,908


Interest and other income	13,484		3,808		23,052		8,251
Total revenues	68,891		51,553		131,961		102,159
Expenses:
Depreciation and amortization	13,860		12,716		27,308		24,954
Interest expense	8,679		11,040		16,907		20,867
Property taxes	1,976		1,390		3,777		2,270

Impairment of real estate investments	25,711		21,392		28,455		23,278


Property operating expenses	255		658		915		1,621

General and administrative	6,136		4,718		12,974		9,779
Total expenses	56,617		51,914		90,336		82,769
Other loss:

Gain on sale of real estate, net	21		2,028		32		1,958

Unrealized loss on other real estate related investments, net	(1,877)		(2,151)		(2,489)		(2,605)
Total other loss	(1,856)		(123)		(2,457)		(647)
Net income (loss)	10,418		(484)		39,168		18,743
Net loss attributable to noncontrolling interests	(340)		—		(336)		—
Net income (loss) attributable to CareTrust REIT, Inc.	$	10,758	$	(484)	$	39,504	$	18,743

Earnings (loss) per common share attributable to CareTrust REIT, Inc:
Basic	$	0.07	$	(0.01)	$	0.28	$	0.19
Diluted	$	0.07	$	(0.01)	$	0.28	$	0.19
Weighted-average number of common shares:
Basic	144,895		99,117		138,866		99,090
Diluted	145,258		99,117		139,230		99,194

See accompanying notes to condensed consolidated financial statements.

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CARETRUST REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share and per share amounts)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Cumulative Distributions in Excess of Earnings		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance at December 31, 2023	129,992,796	$	1,300	$	1,883,147	$	(467,628)	$	1,416,819	$	1,898	$	1,418,717
Issuance of common stock, net	11,600,000	116		269,671		—		269,787		—		269,787
Vesting of stock-based compensation awards, net of shares withheld for employee taxes	119,369	1		(2,484)		—		(2,483)		—		(2,483)
Amortization of stock-based compensation	—	—		2,120		—		2,120		—		2,120
Common dividends ($0.29 per share)	—	—		—		(41,192)		(41,192)		—		(41,192)
Distributions to noncontrolling interests	—	—		—		—		—		(47)		(47)
Contributions from noncontrolling interests	—	—		—		—		—		444		444
Net income	—	—		—		28,746		28,746		4		28,750
Balance at March 31, 2024	141,712,165	1,417		2,152,454		(480,074)		1,673,797		2,299		1,676,096
Issuance of common stock, net	12,145,000	122		302,327		—		302,449		—		302,449
Vesting of stock-based compensation awards	24,768	—		—		—		—		—		—
Amortization of stock-based compensation	—	—		1,406		—		1,406		—		1,406
Common dividends ($0.29 per share)	—	—		—		(44,721)		(44,721)		—		(44,721)
Distributions to noncontrolling interests	—	—		—		—		—		(7)		(7)
Contributions from noncontrolling interests	—	—		—		—		—		132		132
Net income (loss)	—	—		—		10,758		10,758		(340)		10,418
Balance at June 30, 2024	153,881,933	$	1,539	$	2,456,187	$	(514,037)	$	1,943,689	$	2,084	$	1,945,773

See accompanying notes to condensed consolidated financial statements.

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CARETRUST REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share and per share amounts)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Cumulative Distributions in Excess of Earnings		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount
Balance at December 31, 2022	99,010,112	$	990	$	1,245,337	$	(396,954)	$	849,373	$	—	$	849,373

Vesting of stock-based compensation awards, net of shares withheld for employee taxes	87,978	1		(1,480)		—		(1,479)		—		(1,479)
Amortization of stock-based compensation	—	—		936		—		936		—		936
Common dividends ($0.28 per share)	—	—		—		(27,738)		(27,738)		—		(27,738)
Net income	—	—		—		19,227		19,227		—		19,227
Balance at March 31, 2023	99,098,090	991		1,244,793		(405,465)		840,319		—		840,319

Vesting of stock-based compensation awards	25,992	—		—		—		—		—		—
Amortization of stock-based compensation	—	—		924		—		924		—		924
Common dividends ($0.28 per share)	—	—		—		(27,737)		(27,737)		—		(27,737)
Net loss	—	—		—		(484)		(484)		—		(484)
Balance at June 30, 2023	99,124,082	$	991	$	1,245,717	$	(433,686)	$	813,022	$	—	$	813,022

See accompanying notes to condensed consolidated financial statements.

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CARETRUST REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	For the Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	39,168	$	18,743
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including below-market ground leases)	27,337		24,983
Amortization of deferred financing costs	1,228		1,217

Unrealized loss on other real estate related investments, net	2,489		2,605
Amortization of stock-based compensation	3,526		1,860
Straight-line rental income	14		14
Amortization of lease incentive	4		—
Amortization of below market rent	(1,150)		—

Noncash interest income	(1,813)		184
Gain on sale of real estate, net	(32)		(1,958)


Impairment of real estate investments	28,455		23,278


Change in operating assets and liabilities:
Accounts and other receivables	(719)		14
Prepaid expenses and other assets, net	(983)		(330)
Accounts payable, accrued liabilities and deferred rent liabilities	4,271		(3,624)
Net cash provided by operating activities	101,795		66,986
Cash flows from investing activities:
Acquisitions of real estate, net of deposits applied	(204,554)		(172,453)
Purchases of equipment, furniture and fixtures and improvements to real estate	(1,323)		(6,380)

Preferred equity investments	(9,000)		—
Investment in real estate related investments and other loans receivable	(244,825)		(27,262)
Principal payments received on real estate related investments and other loans receivable	—		15,287

Escrow deposits for potential acquisitions of real estate	(9,075)		(300)
Net proceeds from sales of real estate	140		14,464
Net cash used in investing activities	(468,637)		(176,644)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net	572,236		(629)


Proceeds from the secured borrowing	75,000		—
Borrowings under unsecured revolving credit facility	—		155,000






Payments of deferred financing costs	(24)		(21)
Net-settle adjustment on restricted stock	(2,483)		(1,479)
Dividends paid on common stock	(77,723)		(55,246)
Contributions from noncontrolling interests	576		—
Distributions to noncontrolling interests	(54)		—
Net cash provided by financing activities	567,528		97,625
Net increase (decrease) in cash and cash equivalents	200,686		(12,033)
Cash and cash equivalents as of the beginning of period	294,448		13,178
Cash and cash equivalents as of the end of period	$	495,134	$	1,145
Supplemental disclosures of cash flow information:
Interest paid	$	15,289	$	21,000
Supplemental schedule of noncash investing and financing activities:
Increase in dividends payable	$	8,190	$	294
Right-of-use asset obtained in exchange for new operating lease obligation	$	—	$	369


Transfer of pre-acquisition costs to acquired assets	$	58	$	—




Sale of real estate settled with note receivable	$	1,000	$	2,000

See accompanying notes to condensed consolidated financial statements.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

1. ORGANIZATION

Description of Business—CareTrust REIT, Inc.’s (“CareTrust REIT” or the “Company”) primary business consists of acquiring, financing, developing and owning real property to be leased to third-party tenants in the healthcare sector. As of June 30, 2024, the Company owned, directly or through joint ventures, and leased to independent operators 235 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 25,058 operational beds and units located in 30 states with the highest concentration of properties by rental income located in California and Texas. As of June 30, 2024, the Company also had other real estate related investments consisting of two preferred equity investments, 11 real estate secured loans receivable and four mezzanine loans receivable with a carrying value of $433.5 million.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation—The accompanying condensed consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In the opinion of management, all adjustments which are of a normal and recurring nature and considered necessary for a fair presentation of the results of the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year. The accompanying consolidated financial statements of the Company include the accounts of CareTrust REIT, its wholly-owned subsidiaries, and variable interest entities (“VIEs”) over which the Company exercises control. All intercompany transactions and account balances within the Company have been eliminated, and net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

Transfers of financial assets—The Company accounts for transfers of financial assets as sales when it has surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred. Transfers of financial assets that do not qualify for sale accounting are reported as collateralized borrowings. Accordingly, the related assets remain on the Company’s balance sheet and continue to be reported and accounted for as if the transfer had not occurred. Cash proceeds from these transfers are reported as liabilities, with attributable interest expense recognized over the life of the related transactions.

3. REAL ESTATE INVESTMENTS, NET

The following table summarizes the Company’s investment in owned properties, and properties held in consolidated joint ventures, held for use as of June 30, 2024 and December 31, 2023 (dollars in thousands):


	June 30, 2024		December 31, 2023
Land	$	326,089	$	279,276
Buildings and improvements	1,734,970		1,620,014
Integral equipment, furniture and fixtures	102,876		100,504
Identified intangible assets	5,283		5,283

Real estate investments	2,169,218		2,005,077
Accumulated depreciation and amortization	(462,987)		(437,958)

Real estate investments, net	$	1,706,231	$	1,567,119

As of June 30, 2024, all of the Company’s owned and held for investment facilities were leased to various operators under triple-net leases. During the second and third quarters of 2022, the Company entered into triple-net lease agreements for two of the Company’s facilities which are being repurposed to behavioral health facilities. All of the triple-net leases contain annual escalators based on the percentage change in the Consumer Price Index (“CPI”) (but not less than zero), some of which are subject to a cap, or fixed rent escalators. As of June 30, 2024, 20 facilities were held for sale. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales, for additional information.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

As of June 30, 2024, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, assets held for sale and assets being repurposed, was as follows (dollars in thousands):


Year	Amount
2024 (six months)	$	110,578
2025	223,997
2026	224,609
2027	220,960
2028	218,885
2029	214,524
Thereafter	980,405
Total	$	2,193,958

Tenant Purchase Options

Certain of the Company’s operators hold purchase options allowing them to acquire properties they currently lease from the Company. A summary of these purchase options is presented below (dollars in thousands):


Asset Type(1)	Properties	Lease Expiration	Option Period Open Date(2)		Option Type(3)	Current Cash Rent(4)


SNF	1	March 2029	4/1/2022	(5)	A / B(7)	$	858
SNF	4	November 2034	12/1/2024	(5)	A	3,988
SNF / Campus	2	October 2032	11/1/2026	(6)	B	3,314		(8)
SNF / Campus	1	May 2034	6/1/2027	(9)	B	1,293		(10)
SNF / Campus	1	May 2034	6/1/2028	(9)	B	1,293		(10)

(1) Excludes a purchase option on an 11 building SNF portfolio classified as held for sale as of June 30, 2024 and representing $5.1 million of current cash rent. The tenant is currently not eligible to elect the option.

(2) The Company has not received notice of exercise for the option periods that are currently open.

(3) Option type includes:

A - Fixed base price.

B - Fixed capitalization rate on lease revenue.

(4) Based on annualized cash revenue for contracts in place as of June 30, 2024.

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

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

(7) Purchase option reflects two option types.

(8) Purchase option provides for purchase of two of three facilities. The current cash rent shown is an average of the range of $3.2 million to $3.4 million.

(9) Purchase option window is open for nine months from the option period open date.

(10) Purchase option provides for purchase of one of five facilities. The current cash rent shown is an average of the range of $1.0 million to $1.6 million. If the operator exercises its option to extend the term of the master lease, beginning on June 1, 2036 and ending nine months thereafter, the operator will have a purchase option for all facilities then remaining in the master lease.

Rental Income

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


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Rental Income	2024		2023		2024		2023
Contractual rent due(1)	$	54,843	$	47,752	$	107,777	$	93,922
Straight-line rent	(7)		(7)		(14)		(14)
Amortization of lease incentive	(4)		—		(4)		—
Amortization of below-market lease intangible	575		—		1,150		—



Total	$	55,407	$	47,745	$	108,909	$	93,908

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

(1) Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company. For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received. Tenant operating expense reimbursements for the three months ended June 30, 2024 and 2023 were $1.9 million and $1.2 million, respectively. Tenant operating expense reimbursements for the six months ended June 30, 2024 and 2023 were $3.4 million and $1.9 million, respectively.

Recent Real Estate Acquisitions

The following table summarizes the Company’s acquisitions for the six months ended June 30, 2024 (dollars in thousands):


Type of Property	Purchase Price(1)		Initial Annual Cash Rent(2)		Number of Properties	Number of Beds/Units(3)
Skilled nursing	$	119,222	$	10,331	7	638
Multi-service campuses(4)	78,154		6,268		4	575
Assisted living(5)	11,036		1,022		1	86
Total	$	208,412	$	17,621	12	1,299

(1) Purchase price includes capitalized acquisition costs.

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

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

(4) Includes two multi-service campuses held through a joint venture. See Note 11, Variable Interest Entities, for additional information.

(5) Includes one ALF held through a joint venture. See Note 11, Variable Interest Entities, for additional information.

Lease Amendments and Terminations

New Bayshire Lease. On April 1, 2024, a new master lease with affiliates of Bayshire, LLC (“Bayshire”) commenced to lease one SNF that was previously under a short-term master lease until Bayshire received regulatory approval. The short-term master lease was terminated. The Bayshire master lease had a term of approximately 15 years at the date of the lease, with two five-year renewal options and 3% fixed rent escalators. Initial annual cash rent under the new Bayshire master lease was $2.6 million. The Bayshire lease provides for a rent deferral of $0.4 million in the first year to be repaid in 15 installments beginning in year two.

Amended Eduro Lease and Amended Ensign Lease. On March 1, 2024, operations of two SNFs in Colorado operated by affiliates of Eduro Healthcare, LLC (“Eduro”) were transferred to subsidiaries of The Ensign Group, Inc. (“Ensign”). In connection with the transfer, the Company partially terminated the Eduro master lease and amended one existing triple-net master lease with Ensign to include the two SNFs and extended the initial lease term by 15 years. The applicable Ensign master lease, as amended, had a remaining term at the date of amendment of approximately 20 years with two five-year renewal options and CPI-based rent escalators. Annual cash rent under the applicable Ensign master lease, as amended, increased by approximately $2.1 million and annual cash rent under the Eduro master lease, as amended, decreased by the same amount.

New Embassy Lease and Hillstone Lease Termination. On December 31, 2023, the Company terminated its master lease with affiliates of Hillstone Healthcare, Inc. (“Hillstone”). Effective January 1, 2024, in connection with the December 31, 2023 lease termination, one SNF was removed from the Hillstone master lease, was classified as held for sale as of March 31, 2024 and was sold during the three months ended June 30, 2024. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales, for additional information. In connection with the lease termination, the Company entered into a new triple-net master lease with a subsidiary of Embassy Healthcare Holdings, Inc. (“Embassy”) with respect to one multi-service campus. The Embassy lease has an initial term of approximately 10 years with two five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the lease is approximately $0.6 million and the master lease provides Embassy with a partial rent abatement until required authorizations with respect to the ALF portion of the facility are obtained and occupancy levels reach a certain percentage.

Noble VA Lease Termination and New Pennant Lease. Effective March 16, 2023, two ALFs in Wisconsin were removed from a master lease with affiliates of Noble VA Holdings (“Noble VA”) and the Company terminated the applicable Noble VA master lease. Annual cash rent under the applicable Noble VA master lease prior to lease termination was approximately $2.3 million. In connection with the lease termination, the Company entered into a new lease (the “New Pennant Lease”) with the Pennant Group, Inc. (“Pennant”) with respect to the two ALFs. The New Pennant Lease had an initial term at the date of the lease of approximately 15 years with two five-year renewal options and CPI-based rent escalators. Annual cash rent under the new lease was approximately $0.8 million and the master lease provides Pennant with three months deferred rent to be repaid before the expiration or termination of the lease.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

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

Impairment of Real Estate Investments Held for Sale

During the three and six months ended June 30, 2024, the Company recognized aggregate impairment charges 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 statements of operations. During the three and six months ended June 30, 2023, the Company recognized aggregate impairment charges of $21.4 million and $23.3 million, respectively, related to properties held for sale, which is reported in impairment of real estate investments in the condensed consolidated statements of operations.

As of June 30, 2024, there were 20 facilities classified as held for sale, all of which have been marked down to fair value less estimated costs to sell.

The fair values of the assets held for sale were based on estimated sales prices, which are considered to be Level 3 measurements within the fair value hierarchy. Estimated sales prices were determined using a market approach (comparable sales model), which relies on certain assumptions by management, including: (i) comparable market transactions, (ii) estimated prices per unit, and (iii) binding agreements for sales and non-binding offers to purchase from unrelated third-parties. There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations during the six months ended June 30, 2024, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $11,000 to $46,000, with a weighted average price per unit of $24,000. One property, with no bed rights, was reclassified to held for sale during the three months ended March 31, 2024. The Company disposed of this facility during the three months ended June 30, 2024 and recorded a gain on sale of approximately $21,000. For the Company’s impairment calculations during the six months ended June 30, 2023, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $18,000 to $35,000, with a weighted average price per unit of $21,000.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

Asset Sales and Held for Sale Reclassifications

The following table summarizes the Company’s dispositions for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Number of facilities	1		3		3		4
Net sales proceeds(1)	$	94	$	13,234	$	1,140	$	16,464
Net carrying value	73		11,206		1,108		14,506
Net gain on sale	$	21	$	2,028	$	32	$	1,958

(1) 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 sales proceeds for the three and six months ended June 30, 2023 includes $2.0 million of seller financing in connection with the sale of one ALF in June 2023.

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


	Net Carrying Value		Number of Facilities
December 31, 2023	$	15,011	14
Additions to assets held for sale	43,305		9
Assets sold	(1,108)		(3)
Impairment of real estate held for sale	(28,455)		—

June 30, 2024	$	28,753	20

December 31, 2022	$	12,291	5
Additions to assets held for sale	47,047		14
Assets sold	(14,506)		(4)
Impairment of real estate held for sale	(23,278)		—

June 30, 2023	$	21,554	15

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

5. OTHER REAL ESTATE RELATED AND OTHER INVESTMENTS

As of June 30, 2024 and December 31, 2023, the Company’s other real estate related investments consisted of the following (dollar amounts in thousands):


	Facility Count and Type										As of June 30, 2024
Loans Receivable, at Fair Value:	SNF	Campus	ALF	ILF	Principal Balance as of June 30, 2024		Fair Value as of June 30, 2024		Fair Value as of December 31, 2023		Weighted Average Contractual Interest Rate(1), (2)		Maturity Date
Mortgage secured loans receivable	38	4	4	1	$	357,872	$	348,552	$	156,769	9.1	%	5/31/2025 - 6/29/2033
Mezzanine loans receivable	40	3	2	—	77,165		74,099		21,799		12.8	%	7/25/2027 - 6/30/2032
					$	435,037	$	422,651	$	178,568
(1) Rates are net of subservicing fee, if applicable.
(2) Three mortgage secured loans receivable and two mezzanine loans receivable use term secured overnight financing rate (“SOFR”), which are subject to a floor for certain of the loans. Term SOFR used as of June 30, 2024 was 5.34%.
	Facility Count and Type										As of June 30, 2024
Other Investments:	SNF	Campus	ALF	ILF	Principal Balance as of June 30, 2024		Book Value as of June 30, 2024		Book Value as of December 31, 2023		Weighted Average Contractual Interest Rate		Maturity Date
Preferred equity	8	3	—	—	10,782		10,881		1,801		11.7	%	N/A
Total					$	10,782	$	10,881	$	1,801

The following table summarizes the Company’s other real estate related investments activity for the six months ended June 30, 2024 and 2023 (dollars in thousands):


	Six Months Ended June 30,
	2024		2023
Origination of other real estate related investments	$	253,840	$	28,243
Accrued interest, net	1,813		(184)
Unrealized loss on other real estate related investments, net	(2,489)		(2,605)
Prepayments of other real estate related investments	—		(15,000)
Net change in other real estate related investments	$	253,164	$	10,454

2024 Other Real Estate Related Investment Transactions

On January 1, 2024, the Company closed on the sale of one ALF. In connection with the sale, the Company provided affiliates of the purchaser of the property with a $1.0 million mortgage loan which bears interest at a rate of 9.0%. The mortgage loan is secured by the ALF and is set to mature on January 1, 2027. The mortgage loan may be prepaid in whole before the maturity date. The Company elected the fair value option for the mortgage loan.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

On January 25, 2024, the Company extended a $9.8 million mezzanine loan for a portfolio of ten SNFs located in Missouri secured by a pledge of membership interests in an up-tier holding company of the borrower group. The Company participated in the loan alongside a co-lender pursuant to a participation agreement entered into between the Company and the co-lender. Pursuant to such agreement, the Company provided $9.8 million in mezzanine loan proceeds and the co-lender provided the remaining $10.2 million of loan proceeds. As a participant in the loan, and subject to limited exceptions, the Company is entitled to receive its proportionate share of loan payments made by the borrower with each co-lender’s proportionate share being given equal weight. The loan bears interest at term SOFR plus 8.75%, with a term SOFR floor of 6%, payable monthly and net of a 0.75% subservicing fee. Commencing on February 1, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on July 25, 2027, with two six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 1% to 2% of the loan plus unpaid interest payments equal to 24 months (less the amount of monthly interest payments made by the borrower through the date of prepayment). The Company elected the fair value option for the mezzanine loan.

On February 1, 2024, the Company extended a $7.4 million mezzanine loan for one SNF located in California secured by a pledge of membership interests in an up-tier holding company of the borrower group. The loan bears interest at 11.5%, payable monthly. The mezzanine loan is set to mature on January 31, 2029, and may not (subject to certain limited exceptions) be prepaid prior to the date that is 18 months following the loan closing. The Company elected the fair value option for the mezzanine loan.

On February 2, 2024, the Company extended a $35.0 million mezzanine loan for a portfolio of 15 SNFs located in Virginia secured by a pledge of membership interests in an up-tier holding company of the borrower group. The Company participated in the loan alongside a co-lender pursuant to a participation agreement entered into between the Company and the co-lender. Pursuant to such agreement, the Company provided $35.0 million in mezzanine loan proceeds and the co-lender provided the remaining $50.0 million of loan proceeds. As a participant in the loan, and subject to limited exceptions, the Company is entitled to receive its proportionate share of loan payments made by the borrower with each co-lender’s proportionate share being given equal weight. The loan bears interest at term SOFR plus 8.75%, with a term SOFR floor of 6%, payable monthly and net of a 0.75% subservicing fee. Commencing on February 2, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on August 1, 2027, with two six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 1% to 2% of the loan plus unpaid interest payments equal to 18 months (less the amount of monthly interest payments made by the borrower through the date of prepayment). The Company elected the fair value option for the mezzanine loan.

On May 1, 2024, the Company extended a $26.7 million mortgage loan to a skilled nursing real estate owner. The mortgage loan is secured by two SNFs and bears interest at a rate of 9.1%, payable monthly. The mortgage loan is set to mature on May 1, 2031 and includes a one year extension option. The mortgage loan may not be prepaid prior to July 31, 2029, subject to certain limited exceptions. The mortgage loan includes a purchase option with an exercise window that opens during the initial 90-day period of each of the 4th, 5th and 6th loan years, with the purchase option price for the facilities being calculated by dividing the amount of the then annual base rent by an agreed upon lease yield. The Company elected the fair value option for the mortgage loan.

On June 3, 2024, the Company extended a $165.0 million mortgage loan to a regional health care real estate owner. The mortgage loan is secured by eight SNFs located in North Carolina and bears interest at a rate of SOFR plus 4.25%, with a term SOFR floor of 5.15%, payable monthly and net of a 0.25% subservicing fee. Commencing on June 1, 2027, monthly principal payments will be due. The mortgage loan is set to mature on June 1, 2029, and includes two six-month extension options. The mortgage loan may not be prepaid prior to June 1, 2026, subject to certain limited exceptions. The Company elected the fair value option for the mortgage loan. Concurrently with closing, KeyBank National Association purchased a $75.0 million participation in the mortgage loan from the Company. See Note 7, Debt, for additional information.

In addition, on June 3, 2024, the Company funded a $9.0 million preferred equity investment in an uptier parent entity of the borrower under the $165.0 million mortgage loan described above. The Company's initial contractual yield on its preferred equity investment is 11%. Prepayment of the preferred equity investment is restricted, subject to certain carveouts, prior to the senior mortgage loan being paid off in full.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

Other Loans Receivables

As of June 30, 2024 and December 31, 2023, the Company’s other loans receivable, included in prepaid expenses and other assets, net on the Company’s condensed consolidated balance sheets, consisted of the following (dollars in thousands):


							As of June 30, 2024
Investment	Principal Balance as of June 30, 2024		Book Value as of June 30, 2024		Book Value as of December 31, 2023		Weighted Average Contractual Interest Rate		Maturity Date
Other loans receivable	$	18,079	$	18,145	$	17,156	8.8	%	6/30/2024 - 4/26/2027
Expected credit loss	—		(2,094)		(2,094)
Total	$	18,079	$	16,051	$	15,062

The following table summarizes the Company’s other loans receivable activity for the six months ended June 30, 2024 and 2023 (dollars in thousands):


	Six Months Ended June 30,
	2024		2023
Origination of loans receivable	$	985	$	1,019
Principal payments	—		(287)
Accrued interest, net	4		1


Net change in other loans receivable	$	989	$	733

Expected credit losses and recoveries are recorded in provision for loan losses, net in the condensed consolidated statements of operations. During both the six months ended June 30, 2024 and 2023, the Company had no additional expected credit loss and did not consider any loan receivable investments to be impaired.

The following table summarizes the interest and other income recognized from the Company’s loans receivable and other investments during the three and six months ended June 30, 2024 and 2023 (dollars in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Investment	2024		2023		2024		2023
Mortgage secured loans receivable	$	5,544	$	2,762	$	9,316	$	5,466
Mezzanine loans receivable	2,494		695		4,389		2,278

Preferred equity investment	144		—		212		—
Other loans receivable	338		160		669		316
Other(1)	4,964		191		8,466		191
Total	$	13,484	$	3,808	$	23,052	$	8,251

(1) Other income is comprised of interest income on money market funds.

6. FAIR VALUE MEASUREMENTS

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. GAAP guidance defines three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

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(Unaudited)

Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. The Company does not expect that changes in classifications between levels will be frequent.

Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s assets measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):


	Level 1		Level 2		Level 3		Balance as of June 30, 2024
Assets:
Mortgage secured loans receivable	$	—	$	—	$	348,552	$	348,552
Mezzanine loans receivable	—		—		74,099		74,099
Total	$	—	$	—	$	422,651	$	422,651


	Level 1		Level 2		Level 3		Balance as of December 31, 2023
Assets:
Mortgage secured loans receivable	$	—	$	—	$	156,769	$	156,769
Mezzanine loans receivable	—		—		21,799		21,799
Total	$	—	$	—	$	178,568	$	178,568

The following table details the Company’s assets measured at fair value on a recurring basis using Level 3 inputs (dollars in thousands):


	Investments in Real Estate Secured Loans		Investments in Mezzanine Loans
Balance at December 31, 2023	$	156,769	$	21,799
Loan originations	192,675		52,165
Accrued interest, net	1,147		585
Unrealized loss on other real estate related investments, net	(2,039)		(450)

Balance as of June 30, 2024	$	348,552	$	74,099

Real estate secured and mezzanine loans receivable: The fair values of the secured and mezzanine loans receivables were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. As such, the Company classifies each instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms. During the three and six months ended June 30, 2024, the Company recorded an unrealized loss of $2.4 million and $3.2 million, respectively, on the Company’s secured and mezzanine loans receivable due to rising interest rates, partially offset by unrealized gains of $0.5 million and $0.7 million, respectively, due to increases in expected cash flows on floating rate loans. Future changes in market interest rates or collateral value could materially impact the estimated discounted cash flows that are used to determine the fair value of the secured and mezzanine loans receivable. As of June 30, 2024 and December 31, 2023, the Company did not have any loans that were 90 days or more past due.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

The following table shows the quantitative information about unobservable inputs related to the Level 3 fair value measurements comprising the investments in secured and mezzanine loans receivables as of June 30, 2024:

Type

Book Value as of June 30, 2024

Valuation Technique

Unobservable Inputs

Range

Mortgage secured loans receivable

348,552

Discounted cash flow

Discount Rate

9% - 16%

Mezzanine loans receivable

74,099

Discounted cash flow

Discount Rate

12% - 16%

For the six months ended June 30, 2024, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Disclosed at Fair Value

Considerable judgment is necessary to estimate the fair value disclosure of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the face value, carrying amount and fair value of the Company’s preferred equity investments and the Notes (as defined in Note 7, Debt, below) as of June 30, 2024 and December 31, 2023 is as follows (dollars in thousands):


		June 30, 2024						December 31, 2023
	Level	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial assets:
Preferred equity investments	3	$	10,782	$	10,881	$	10,881	$	1,782	$	1,801	$	1,801

Financial liabilities:
Senior unsecured notes payable	2	$	400,000	$	396,483	$	367,840	$	400,000	$	396,039	$	362,500

Cash and cash equivalents, accounts and other receivables, accounts payable, and accrued liabilities: The carrying values for these instruments approximate their fair values due to the short-term nature of these instruments.

Preferred equity investments: The fair value of the preferred equity investments was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. The Company utilized discount rates of 11% to 15% in its fair value calculation. As such, the Company classifies these instruments as Level 3.

Senior unsecured notes payable: The fair value of the Notes was determined using third-party quotes derived from orderly trades.

Unsecured revolving credit facility and senior unsecured term loan: The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates and spreads for similar debt arrangements.

Secured borrowing: The fair value approximates the carrying value as the interest rates are variable and approximate prevailing market interest rates and spreads for similar debt arrangements.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

7. DEBT

The following table summarizes the balance of the Company’s indebtedness as of June 30, 2024 and December 31, 2023 (dollars in thousands):


	June 30, 2024						December 31, 2023
	Principal Amount		Deferred Loan Fees		Carrying Amount		Principal Amount		Deferred Loan Fees		Carrying Amount
Senior unsecured notes payable	$	400,000	$	(3,517)	$	396,483	$	400,000	$	(3,961)	$	396,039
Senior unsecured term loan	200,000		(335)		199,665		200,000		(441)		199,559
Unsecured revolving credit facility(1)	—		—		—		—		—		—
Secured borrowing(2)	75,000		—		75,000		—		—		—
	$	675,000	$	(3,852)	$	671,148	$	600,000	$	(4,402)	$	595,598

(1) Deferred financing fees are included in deferred financing costs, net on the balance sheet, and not reflected as a reduction to the unsecured revolving credit facility.

(2) See Note 5, Other Real Estate Related and Other Investments, for more information on the secured borrowing.

Senior Unsecured Notes Payable

2028 Senior Notes. On June 17, 2021, the Company’s wholly owned subsidiary, CTR Partnership, L.P. (the “Operating Partnership”), and its wholly owned subsidiary, CareTrust Capital Corp. (together with the Operating Partnership, the “Issuers”), completed a private offering of $400.0 million aggregate principal amount of 3.875% Senior Notes due 2028 (the “Notes”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended. The Notes were issued at par, resulting in gross proceeds of $400.0 million and net proceeds of approximately $393.8 million after deducting underwriting fees and other offering expenses. The Notes mature on June 30, 2028. The Notes accrue interest at a rate of 3.875% per annum payable semiannually in arrears on June 30 and December 30 of each year, commencing on December 30, 2021.

The Issuers may redeem some or all of the Notes at any time prior to March 30, 2028 at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date, plus a “make-whole” premium. At any time on or after March 30, 2028, the Issuers may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes redeemed plus accrued interest on the Notes, if any, to, but not including, the redemption date. If certain changes of control of the Company occur, the Issuers will be required to make an offer to holders of the Notes to repurchase their Notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by the Company and all of CareTrust’s existing and future subsidiaries (other than the Issuers) that guarantee obligations under the Amended Credit Facility (as defined below); provided, however, that such guarantees are subject to automatic release under certain customary circumstances.

The indenture governing the Notes contains customary covenants such as limiting the ability of the Company and its restricted subsidiaries to: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; enter into transactions with affiliates; merge or consolidate or sell all or substantially all of their assets; and create restrictions on the ability of the Issuers and their restricted subsidiaries to pay dividends or other amounts to the Issuers. The indenture governing the Notes also requires the Company and its restricted subsidiaries to maintain a specified ratio of unencumbered assets to unsecured indebtedness. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The indenture governing the Notes also contains customary events of default.

As of June 30, 2024, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

Unsecured Revolving Credit Facility and Term Loan

On December 16, 2022, the Operating Partnership, as the borrower, the Company, as guarantor, CareTrust GP, LLC, and certain of the Operating Partnership’s wholly owned subsidiaries, entered into a second amended and restated credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender (as amended from time to time, the “Second Amended Credit Agreement”). The Second Amended Credit Agreement, which amends and restates the Company’s amended and restated credit and guaranty agreement, dated as of February 8, 2019 (as amended, the “Prior Credit Agreement”) provides for: (i) an unsecured revolving credit facility (the “Revolving Facility”) with revolving commitments in an aggregate principal amount of $600.0 million, including a letter of credit subfacility for 10% of the then available revolving commitments and a swingline loan subfacility for 10% of the then available revolving commitments and (ii) the continuation of the unsecured term loan credit facility which was previously extended under the Prior Credit Agreement (the “Term Loan” and together with the Revolving Facility, the “Second Amended Credit Facility”) in an aggregate principal amount of $200.0 million. Future borrowings under the Second Amended Credit Facility will be used for working capital purposes, for capital expenditures, to fund acquisitions and for general corporate purposes.

On October 10, 2023, the Operating Partnership, the Company, CareTrust GP, LLC, certain of the Operating Partnership’s wholly owned subsidiaries and KeyBank National Association entered into the First Amendment to the Second Amended Credit Agreement (the “First Amendment”). The First Amendment restates the definition of Consolidated Total Asset Value to include net proceeds from at-the-market forward commitments executed but not yet closed as of the relevant date as if such proceeds had actually been received.

The interest rates applicable to loans under the Revolving Facility are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.10% to 0.55% per annum or Adjusted Term SOFR or Adjusted Daily Simple SOFR (each as defined in the Second Amended Credit Agreement) plus a margin ranging from 1.10% to 1.55% per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt). The interest rates applicable to loans under the Term Loan are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.50% to 1.20% per annum or Adjusted Term SOFR or Adjusted Daily Simple SOFR plus a margin ranging from 1.50% to 2.20% per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt). In addition, the Operating Partnership will pay a facility fee on the revolving commitments under the Revolving Facility ranging from 0.15% to 0.35% per annum, based on the debt to asset value ratio of the Company and its consolidated subsidiaries (unless the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt and the Operating Partnership elects to decrease the applicable margin as described above, in which case the Operating Partnership will pay a facility fee on the revolving commitments ranging from 0.125% to 0.30% per annum based on the credit ratings of the Company’s senior long-term unsecured debt). As of June 30, 2024, the Operating Partnership had $200.0 million of borrowings outstanding under the Term Loan and no borrowings outstanding under the Revolving Facility.

The Revolving Facility has a maturity date of February 9, 2027, and includes, at the sole discretion of the Operating Partnership, two six-month extension options. The Term Loan has a maturity date of February 8, 2026.

The Second Amended Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Second Amended Credit Agreement (other than the Operating Partnership). The Second Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend organizational documents and pay certain dividends and other restricted payments. The Second Amended Credit Agreement requires the Company to comply with financial maintenance covenants to be tested quarterly, consisting of a maximum debt to asset value ratio, a minimum fixed charge coverage ratio, a minimum tangible net worth, a maximum cash distributions to operating income ratio, a maximum secured debt to asset value ratio, a maximum secured recourse debt to asset value ratio, a maximum unsecured debt to unencumbered properties asset value ratio, a minimum unsecured interest coverage ratio and a minimum rent coverage ratio. The Second Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Second Amended Credit Facility or other material indebtedness, the failure to satisfy certain covenants (including the financial maintenance covenants), the occurrence of change of control and specified events of bankruptcy and insolvency.

As of June 30, 2024, the Company was in compliance with all applicable financial covenants under the Second Amended Credit Agreement.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

Secured Borrowing

On June 3, 2024, KeyBank National Association purchased a $75.0 million undivided participation interest in a $165.0 million mortgage loan from the Company (see Note 5, Other Real Estate Related and Other Investments, for additional information), which bears interest at a rate of SOFR, with a term SOFR floor of 3.00%, plus 2.5% or 2.25%, depending on the debt yield of the loan, and payable monthly. As the transaction did not qualify as a sale in accordance with GAAP, the Company recorded the participation interest as a secured borrowing in the amount of $75.0 million in the condensed consolidated balance sheet. The participating interest may be prepaid in whole before the maturity date for an exit fee of up to 0.50% of the loan plus unpaid interest. The participation interest provides for a put option, subject to certain restrictions, and a call option for the then-outstanding loan amount plus accrued and unpaid interest. As of June 30, 2024, the interest rate in effect for the secured borrowing was 7.83%. On July 30, 2024, the Company exercised the call option on the $75.0 million secured borrowing. See Note 14, Subsequent Events, for additional information.

8. EQUITY

Common Stock

At-The-Market Offering—On May 6, 2024, the Company entered into a new equity distribution agreement to issue and sell, from time to time, up to $500.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “New ATM Program”) and terminated its previous $500.0 million “at-the-market” equity offering program (the “Previous ATM Program” and together with the New ATM Program, the “ATM Program”). In addition to the issuance and sale of shares of its common stock, the ATM Program also provides for the ability to enter into one or more forward sales agreements (each, an “ATM forward contract”) with sales agents for the sale of the Company’s shares of common stock under the ATM Program.

In the event the Company enters into an ATM forward contract to sell shares of common stock pursuant to the ATM Program, the Company would expect to fully physically settle forward equity sales by delivery of shares of common stock to the forward purchaser and receive cash proceeds upon one or more settlement dates, which are typically a one-year term, at the Company’s discretion, prior to the final settlement date, at which time the Company would expect to receive aggregate net cash proceeds at settlement equal to the number of shares sold on a forward basis multiplied by the relevant forward price per share. The weighted average forward sale price that the Company would expect to receive upon physical settlement would be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends through the settlement.

The following table summarizes the ATM Program activity for the three and six months ended June 30, 2024 (in thousands, except per share amounts):


	For the Three Months Ended		For the Six Months Ended
	June 30, 2024		June 30, 2024
Number of shares	12,145		23,745
Average sales price per share	$	25.24	$	24.42
Gross proceeds(1)	$	306,534	$	579,767

(1) Total gross proceeds is before $3.8 million and $7.2 million of commissions paid to the sales agents during the three and six months ended June 30, 2024, respectively, under the ATM Program.

During the three and six months ended June 30, 2023, the Company executed forward equity sales under the ATM Program with a financial institution acting as a forward purchaser to sell 6,736,089 shares of common stock at a weighted average sales price of $19.71 per share before commissions and offering expenses. The Company did not receive any proceeds from the sales of its shares of common stock by the forward sellers. As of June 30, 2023, the Company had not settled any portion of these forward equity sales. No forward equity sales were executed or settled under the ATM Program during the three and six months ended June 30, 2024, and there were no outstanding ATM forward contracts that had not settled as of June 30, 2024.

As of June 30, 2024, the Company had $193.5 million available for future issuances under the New ATM Program.

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

Dividends on Common Stock—The following table summarizes the cash dividends per share of common stock declared by the Company’s board of directors for the first six months of 2024 (dollars in thousands, except per share amounts):


	For the Three Months Ended
	March 31, 2024		June 30, 2024
Dividends declared per share	$	0.29	$	0.29
Dividends payment date	April 15, 2024		July 15, 2024
Dividends payable as of record date	$	41,192	$	44,721
Dividends record date	March 28, 2024		June 28, 2024

9. STOCK-BASED COMPENSATION

All stock-based awards are subject to the terms of the CareTrust REIT, Inc. and CTR Partnership, L.P. Incentive Award Plan (the “Plan”). The Plan provides for the granting of stock-based compensation, including stock options, restricted stock, performance awards, restricted stock units, relative total stockholder return based stock awards and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company. Under the Plan, 5,000,000 shares have been authorized for awards.

Under the Plan, restricted stock awards (“RSAs”) vest in equal annual installments over a three year period for the RSAs granted after 2020 and a four year period for the RSAs granted in 2020. RSAs granted to non-employee members of the board of directors (“Board Awards”) vest in full on the earlier to occur of the Company’s next Annual Meeting of Stockholders or one year. Performance stock awards (“PSAs”) granted were subject to both time and performance based conditions and vested over a one-to-three year period for PSAs granted in 2021 and over a one-to-four year period for PSAs granted in 2020. The amount of such PSAs that ultimately vested was dependent on the Company’s Normalized Funds from Operations (“NFFO”) per share, as defined by the Compensation Committee, meeting or exceeding a specified per share amount for the applicable vesting period. Relative total shareholder return units (“TSR Units”) granted are subject to both time and market based conditions and cliff vest after a three-year period. The amount of such market awards that will ultimately vest is dependent on the Company’s total shareholder return (“TSR”) performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs and will range from 0% to 200% of the TSR Units initially granted. The RSAs and Board Awards are valued on the date of grant based on the closing price of the Company’s common stock, while the TSR Units are valued on the date of grant using a Monte Carlo valuation model. The vesting of certain awards may accelerate, as defined in the grant agreement, upon retirement, a change in control or other events.

The following table summarizes the status of the restricted stock award and performance award activity for the six months ended June 30, 2024:


	Shares	Weighted Average Share Price
Unvested balance at December 31, 2023	510,596	$	21.01
Granted:


Board Awards	21,712	23.95
Vested	(169,811)	20.67
Forfeited	(35,161)	20.48
Unvested balance at June 30, 2024	327,336	$	21.43

As of June 30, 2024, the weighted-average remaining vesting period of such awards was 1.7 years.

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


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Stock-based compensation expense	$	1,406	$	924	$	3,526	$	1,860

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

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CARETRUST REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

(Unaudited)

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

As of June 30, 2024, there was $7.4 million of unamortized stock-based compensation expense related to the unvested RSAs and TSR Units.

10. EARNINGS (LOSS) PER COMMON SHARE

The following table presents the calculation of basic and diluted earnings (loss) per common share attributable to CareTrust REIT, Inc. (“EPS”) for the Company’s common stock for the three and six months ended June 30, 2024 and 2023, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS (amounts in thousands, except per share amounts):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Net income (loss) attributable to CareTrust REIT, Inc.	$	10,758	$	(484)	$	39,504	$	18,743
Less: Net income allocated to participating securities	(95)		(89)		(191)		(178)
Numerator for basic and diluted earnings available to common stockholders	$	10,663	$	(573)	$	39,313	$	18,565
Denominator:
Weighted-average basic common shares outstanding	144,895		99,117		138,866		99,090
Dilutive potential common shares - TSR Units	363		—		364		90
Dilutive potential common shares - forward equity agreements	—		—		—		14
Weighted-average diluted common shares outstanding	145,258