UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20192022
or
☐ 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,, CA92673
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code (949) (949) 542-3130
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 | |||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act.) Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $2.2 billion.$1.8 billion.
As of February 19, 2020,8, 2023, there were 95,468,76099,511,924 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the registrant’s 20202023 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the end of fiscal year 2019,2022, are incorporated by reference into Part III of this Report.
TABLE OF CONTENTS
| PART I | |||||||||
| Item 1. | |||||||||
| Item 1A. | |||||||||
| Item 1B. | |||||||||
| Item 2. | |||||||||
| Item 3. | |||||||||
| Item 4. | |||||||||
| PART II | |||||||||
| Item 5. | |||||||||
| Item 6. | |||||||||
| Item 7. | |||||||||
| Item 7A. | |||||||||
| Item 8. | |||||||||
| Item 9. | |||||||||
| Item 9A. | |||||||||
| Item 9B. | |||||||||
| PART III | |||||||||
| Item 10. | |||||||||
| Item 11. | |||||||||
| Item 12. | |||||||||
| Item 13. | |||||||||
| Item 14. | |||||||||
| PART IV | |||||||||
| Item 15. | |||||||||
| Item 16. | |||||||||
| Signatures | |||||||||
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STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding: future financing plans, business strategies, growth prospects and operating and financial performance; expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations.
Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to: (i) the impact of possible additional surges of COVID-19 infections or the risk of other pandemics, epidemics or infectious disease outbreaks, measures taken to prevent the spread of such outbreaks and the related impact on our business or the businesses of our tenants; (ii) the ability and willingness of our tenants to meet and/or perform their obligations under the triple-net leases we have entered into with them, including without limitation, their respective obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; (ii)(iii) the risk that we may have to incur additional impairment charges related to our assets held for sale if we are unable to sell such assets at the prices we expect; (iv) the ability of our tenants to comply with applicable laws, rules and regulations in the operation of the properties we lease to them; (iii)(v) the ability and willingness of our tenants to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, as well as any obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant; (iv)(vi) the availability of and the ability to identify (a) tenants who meet our credit and operating standards, and (b) suitable acquisition opportunities and the ability to acquire and lease the respective properties to such tenants on favorable terms; (v)(vii) the ability to generate sufficient cash flows to service our outstanding indebtedness; (vi)(viii) access to debt and equity capital markets; (vii)(ix) fluctuating interest rates; (viii)rates and inflation; (x) the ability to retain our key management personnel; (ix)(xi) the ability to maintain our status as a real estate investment trust (“REIT”); (x)(xii) changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; (xi)(xiii) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and (xii)(xiv) any additional factors included in this report, including in the section entitled “Risk Factors” in Item 1A of this Annual Report, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (“SEC”(the “SEC”), including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
Forward-looking statements speak only as of the date of this report. Except in the normal course of our public disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.
TENANT INFORMATION
This Annual Report on Form 10-K includes information regarding certain of our tenants that lease properties from us, some of which are not subject to SEC reporting requirements. The Ensign Group, Inc. (“Ensign”) isand The Pennant Group, Inc. (“Pennant”) are subject to the reporting requirements of the SEC and isare required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. You are encouraged to review Ensign’sEnsign and Pennant’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.
The information related to our tenants contained or referred to in this Annual Report on Form 10-K was provided to us by such tenants or derived from SEC filings or other publicly available information. We have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot provide any assurance of its accuracy. We are providing this data for informational purposes only.
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PART I
All references in this report to “CareTrust REIT,” the “Company,” “we,” “us” or “our” mean CareTrust REIT, Inc. together with its consolidated subsidiaries. Unless the context suggests otherwise, references to “CareTrust REIT, Inc.” mean the parent company without its subsidiaries.
ITEM 1.Business
Our Company
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. CareTrust REIT was formed on October 29, 2013 as a wholly owned subsidiary of Ensign with the intent to hold substantially all of Ensign’s real estate business, and became a separate and independent publicly-traded company on June 1, 2014 following the pro rata distribution of the outstanding shares of CareTrust REIT common stock to Ensign’s stockholders (the “Spin-Off”). As of December 31, 2019,2022, CareTrust REIT’s real estate portfolio consisted of 216 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”). Of these consisting of 22,831 operational beds and units located in28states with the highest concentration of properties 85 are leased to Ensign on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease”by rental income located in California, Texas, Louisiana, Idaho and collectively, the “Ensign Master Leases”) that have cross default provisions and are all guaranteed by Ensign. In addition, Ensign provides a guaranty on 11 properties that are leased to The Pennant Group, Inc. (“Pennant”) on a triple net basis under one long-term lease (the “Pennant Master Lease”).Arizona. As of December 31, 2019, the 85 facilities leased to Ensign had a total of 8,908 beds and units and are located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Texas, Utah and Washington, the 11 facilities leased to Pennant had a total of 1,151 beds and units and are located in Arizona, California, Nevada, Texas and Washington and the 120 remaining leased facilities had a total of 11,904 beds and units and are located in California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, Montana, New Mexico, North Carolina, North Dakota, Ohio, Oregon, South Dakota, Texas, Virginia, Washington, West Virginia and Wisconsin. We also own and operate one ILF which had a total of 168 units and is located in Texas. As of December 31, 2019,2022, we also had other real estate related investments consisting of one preferred equity investment totaling $3.8 millionthree real estate secured loans receivable and two mortgagemezzanine loans receivable with a carrying value of $29.5$156.4 million.
The following table summarizes the Company’s acquisitions from January 1, 2022 through February 9, 2023 (dollars in thousands):
| Type of Property | Purchase Price(1) | Initial Annual Cash Rent | Number of Properties | Number of Beds/Units(2) | |||||||||||||||||||
| Skilled nursing | $ | 8,918 | $ | 815 | 1 | 135 | |||||||||||||||||
| Multi-service campuses | 13,003 | 1,235 | 1 | 130 | |||||||||||||||||||
| Total | $ | 21,921 | $ | 2,050 | 2 | 265 | |||||||||||||||||
(1) Purchase price includes capitalized acquisition costs.
(2) The number of beds/units includes operating beds at the acquisition date.
The following table summarizes other real estate related investments by the Company from January 1, 2022 through February 9, 2023 (dollars in thousands):
| Investment Type | Investment | Annual Initial Interest Income(1) | Number of Properties | Number of Beds/Units(2) | ||||||||||||||||||||||
| Senior mortgage secured loan receivable | $ | 75,000 | $ | 6,281 | 18 | 1,796 | ||||||||||||||||||||
| Mezzanine loan receivable | 25,000 | 2,750 | N/A | N/A | ||||||||||||||||||||||
| Mortgage secured loan receivable | 22,250 | 1,891 | 5 | 600 | ||||||||||||||||||||||
| Mortgage secured loan receivable | 24,900 | 2,241 | 4 | 690 | ||||||||||||||||||||||
| Total | $ | 147,150 | $ | 13,163 | 27 | 3,086 | ||||||||||||||||||||
(1) Represents annualized acquisition-date interest income on any mortgage secured loans receivable and mezzanine loans, less subservicing fees, if applicable. For floating rate loans, interest income has been calculated using the benchmark rate floor.
(2) The number of beds/units includes operating beds at the investment date.
From January 1, 20192022 through February 20, 2020,December 31, 2022, we acquired eighteen skilled nursing facilities, foursold seven SNFs, five ALFs, one multi-service campusescampus and two assisted living facilities for approximately $352.8 million, which includes capitalized acquisition costs. These acquisitions are expectedone land parcel, resulting in a net loss on sale of property of $3.8 million. Subsequent to generate initial annual cash revenues of approximately $31.4 million and an initial blended yield of approximately 8.9%.December 31, 2022, we sold one ALF.
We generate revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the tenant is solely responsible for the costs related to the property (including property taxes, insurance, maintenance and repair costs and capital expenditures, subject to certain exceptions in the case of properties leased to Ensign)Ensign and Pennant). WeFrom time to time, we also extend secured mortgage loans to healthcare operators, secured by healthcare-related properties, and secured mezzanine loans to healthcare operators, secured by membership interests in healthcare-related properties. We conduct and manage our business as one operating segment for internal reporting and internal decision making purposes. We expect to grow our portfolio by pursuing opportunities to acquire additional properties that will be leased to a diverse group of local, regional and national healthcare providers, which may include Ensign and othernew or existing skilled nursing operators, as well as seniorseniors housing operators and related businesses. We also anticipate diversifying our portfolio over time, including by acquiring properties in different geographic markets, and in different asset classes. In addition, we actively monitor the clinical, regulatory and financial operating results of our tenants, and work to identify opportunities within their operations and
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markets that could improve their operating results at our facilities. We communicate such observations to our tenants; however, we have no contractual obligation to do so. Moreover, our tenants have sole discretion with respect to the day-to-day operation of the facilities they lease from us, and how and whether to implement any observation we may share with them. We also actively monitor the overall occupancy, skilled mix, and other operating metrics of our tenants on at least a monthly basis including, beginning in the quarter ended June 30, 2020, any stimulus funds received by each tenant. We have replaced tenants in the past, and may elect to replace tenants in the future, if they fail to meet the terms and conditions of their leases with us. In addition, we have, and may from time to time in the future, repurpose facilities for other uses, such as behavioral health. The replacement tenants may include tenants with whom we have had no prior landlord-tenant relationship as well as current tenants with whom we are comfortable expanding our relationships. We have also provided select tenants with strategic capital for facility upkeep and modernization, as well as short-term working capital loans when they are awaiting licensure and certification or conducting turnaround work in one or more of our properties, and we may continue to do so in the future. In addition, we periodically reassess the investments we have made and the tenant relationships we have entered into, and have selectively disposed of facilities or investments, or terminated such relationships, and we expect to continue making such reassessments and, where appropriate, taking such actions.
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014. We believe that we have been organized and have operated, and we intend to continue to operate, in a manner to qualify for taxation as a REIT. We operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held through CTR Partnership, L.P. (the “Operating Partnership”). The Operating Partnership is managed by CareTrust REIT’s wholly owned subsidiary, CareTrust GP, LLC, which is the sole general partner of the Operating Partnership. To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.
Our Industry
The skilled nursing industry has evolved to meet the growing demand for post-acute and custodial healthcare services generated by an aging population, increasing life expectancies and the trend toward shifting of patient care to lower cost settings. We believe this evolution has led to a number of favorable improvements in the industry, as described below:
•Shift of Patient Care to Lower Cost Alternatives. The growth of the senior population in the United States continues to increase healthcare costs. In response, federal and state governments have adopted cost-containment measures that encourage the treatment of patients in more cost-effective settings such as SNFs, for which the staffing requirements and associated costs are often significantly lower than acute care hospitals, inpatient rehabilitation facilities and other post-acute care settings. As a result, SNFs are generally serving a larger population of higher-acuity patients than in the past. The same trend is impacting ALFs, which are now generally serving some patients who previously would have received services at SNFs.
• | •Widening Supply and Demand Imbalance. The number of SNFs has declined modestly over the past several years. According to the American Health Care Association, the nursing home industry was comprised of approximately 15,200 facilities as of July 2022, as compared with over 15,600 facilities as of July 2016. We expect that the supply/demand imbalance in the skilled nursing industry will increasingly favor skilled nursing and assisted living providers due to the shift of patient care to lower cost settings and an aging population. •Increased Demand Driven by Aging Populations. As seniors account for a higher percentage of the total U.S. population, we believe the overall demand for skilled nursing services will increase. At present, the primary market demographic for skilled nursing services is individuals age 75 and older. The 2020 U.S. Census reported that there were over 56 million people in the United States in 2020 over the age of 65. The U.S. Census estimates this group to be one of the fastest growing segments of the United States population, projecting that it will almost double between 2020 and 2060. According to the Centers for Medicare & Medicaid Services, nursing home care facilities and continuing care retirement expenditures are projected to grow from approximately $196.8 billion in 2020, which includes federal expenditures in response to the COVID-19 pandemic, to approximately $273 billion in 2030. Although skilled nursing and seniors housing occupancy rates have declined during the COVID-19 pandemic, we believe that these trends in population will support an increasing demand for skilled nursing services in the long-term, which in turn will likely support an increasing demand for the services provided within our properties. 6 |
Portfolio Summary
We have a geographically diverse portfolio of properties, consisting of the following types:types as of December 31, 2022:
•Skilled Nursing Facilities. SNFs are licensed healthcare facilities that provide restorative, rehabilitative and nursing care for people not requiring the more extensive and sophisticated treatment available at acute care hospitals. Treatment programs include physical, occupational, speech, respiratory and other therapies, including sub-acute clinical protocols such as wound care and intravenous drug treatment. Charges for these services are generally paid from a combination of government reimbursement and private sources. As of December 31, 2022, our portfolio included 178 SNFs, 24 of which are located on campuses that also have ALFs or ILFs, which we refer to as multi-service campuses (see below under “Multi-Service Campuses”). •Assisted Living Facilities. ALFs are licensed healthcare facilities that provide personal care services, support and housing for those who need help with activities of daily living, such as bathing, eating and dressing, yet require limited medical care. The programs and services may include transportation, social activities, exercise and fitness programs, beauty or barber shop access, hobby and craft activities, community excursions, meals in a dining room setting and other activities sought by residents. These facilities are often apartment-like buildings with private residences ranging from single rooms to large apartments. Certain ALFs may offer higher levels of personal assistance for residents requiring memory care as a result of Alzheimer’s disease or other forms of dementia. The level of personal assistance that may be provided at ALFs is based in part on state regulations. Since states often apply differing license classifications, and standards, regulatory requirements may differ significantly between states. As of December 31, 2022, our portfolio included 36 ALFs, some of which also contain independent living and memory care units. Included in the 36 ALFs are five ALFs classified as held for sale as of December 31, 2022, two facilities which are in the process of being repurposed and two facilities which are non-operational. •Independent Living Facilities. ILFs, also known as retirement communities or senior apartments, are not healthcare facilities and are not licensed to provide healthcare services to residents. The facilities typically consist of entirely self-contained apartments, complete with their own kitchens, baths and individual living spaces, as well as parking for tenant vehicles. They are most often rented unfurnished, and generally can be personalized by the tenants, and are typically occupied by an individual or a couple over the age of 55. These facilities offer various services and amenities such as laundry, housekeeping, dining options/meal plans, exercise and wellness programs, transportation, social, cultural and recreational activities, on site security and emergency response programs. As of December 31, 2022, our portfolio included 2 ILFs. •Multi-Service Campuses. Multi-service campuses generally include some combination of co-located SNFs, ALFs, ILFs, and/or memory care units all housed at a single location and operated as a continuum of care. We also refer to continuing care retirement communities as multi-service campuses. These facilities are often marketed as an opportunity for residents to “age in place,” and tend to attract couples where the individuals may require or benefit from differing levels of care. As of December 31, 2022, our portfolio included 24 facilities that we classify as multi-service campuses. |
Our portfolio of SNFs, ALFs, ILFs and ILFsmulti-service campuses is broadly diversified by geographic location throughout the United States, with concentrations in California, Texas, California,Louisiana, Idaho and Louisiana.Arizona based on rental income.
Significant Master Leases
As of December 31, 2022, we leased 94 facilities to subsidiaries of Ensign, which have a total of 10,399 operational beds. We have leased a significant number of our properties to subsidiaries of Ensign pursuant to the Ensign Master Leases, which consist ofon a triple-net basis under eight triple-netlong-term leases, each with its own pool of properties, that have varying maturities and diversity in both property type and geography. Thegeography (each an “Ensign Master Lease” and collectively, the “Ensign Master Leases”). The Ensign Master Leases provide for initial terms in excess of ten years with staggered expiration dates and no purchase options. At Ensign’s option, each Ensign Master Lease may be extended for up to three five yearfive-year renewal terms beyond the initial term and, if elected, the renewal will be effective for all of the leased property then subject to the applicable Ensign Master Lease. The rent isDuring the year ended December 31, 2020, the Company acquired four additional facilities leased to subsidiaries of Ensign on a fixed component that was initially set near the timetriple-net basis under two separate master lease agreements, each of the Spin-Off.which contains a purchase option. As of December 31, 2019, the2022, annualized revenuescontractual rental income from the Ensign Master Leases were $53.4 million.was $62.3 million, and annualized contractual rental income from all Ensign leases was $66.2 million, representing 33% and 35% of total annualized contractual rental income, respectively. Rent is escalated annually in June under the Ensign Master Leases, and in December for the four additional facilities leased to Ensign, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero) or 2.5%, and (2) the prior year’s rent. The Ensign Master Leases are guaranteed by Ensign.
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As of December 31, 2019 Ensign and Pennant represented 32% and 5%2022, respectively, of the Company’s contractual rental income, exclusive of operating expense reimbursements, on an annualized run-rate basis.
See “Risk Factors - Risks Related to Our Business - We are dependent on Ensign and otherthe healthcare operators that lease our properties to successfully operate their business and make contractual lease payments, to us under leases, and an event that materially and adversely affects their business, financial position or results of operations could materially and adversely affect our business, financial position or results of operations.”
We monitor the creditworthiness of our tenants by evaluating the ability of the tenants to meet their lease obligations to us based on the tenants’ financial performance, including the evaluation of any guarantees of tenant lease obligations. The primary basis for our evaluation of the credit quality of our tenants (and more specifically the tenants’ ability to pay their rent obligations to us) is the tenants’ lease coverage ratios. These coverage ratios compare (i) earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) to rent coverage, and (ii) earnings before interest, income taxes, depreciation, amortization, rent and management fees (“EBITDARM”), to rent coverage. We utilize a standardized 5% management fee when we calculate lease coverage ratios. We obtain various financial and operational information from our tenants each month. We regularly review this information to calculate the above-described coverage metrics, to identify operational trends, to assess the operational and financial impact of the changes in the broader industry environment (including the potential impact of government reimbursement and regulatory changes), and to evaluate the management and performance of the tenant’stenants’ operations. These metrics help us identify potential areas of concern relative to our tenants’ credit quality and ultimately the tenants’ ability to generate sufficient liquidity to meet their ongoing obligations, including their obligations to continue paying contractual rents due to us and satisfying other financial obligations to third parties, as prescribed by our triple-net leases.
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Properties by Type:
The following table displays the geographic distribution of our facilities by property type and the related number of beds and units available for occupancy by asset class,property type, as of December 31, 2019.2022. The number of beds or units that are operational may be less than the official licensed capacity.
Total(1) | SNFs | Multi-Service Campuses | ALFs and ILFs(1) | |||||||||||||||||
| State | Properties | Beds/Units | Facilities | Beds | Campuses | Beds/Units | Facilities | Beds/Units | ||||||||||||
| TX | 38 | 4,725 | 32 | 3,960 | 2 | 355 | 4 | 410 | ||||||||||||
| CA | 34 | 4,015 | 25 | 2,847 | 4 | 759 | 5 | 409 | ||||||||||||
| ID | 16 | 1,358 | 15 | 1,289 | 1 | 69 | — | — | ||||||||||||
| IA | 15 | 986 | 13 | 815 | 2 | 171 | — | — | ||||||||||||
| OH | 13 | 1,270 | 9 | 720 | 4 | 550 | — | — | ||||||||||||
| WA | 12 | 1,080 | 11 | 980 | — | — | 1 | 100 | ||||||||||||
| UT | 12 | 1,306 | 10 | 1,179 | — | — | 2 | 127 | ||||||||||||
| AZ | 11 | 1,328 | 8 | 962 | — | — | 3 | 366 | ||||||||||||
| MI | 10 | 669 | 6 | 480 | — | — | 4 | 189 | ||||||||||||
| IL | 8 | 772 | 7 | 644 | 1 | 128 | — | — | ||||||||||||
| LA | 8 | 1,164 | 7 | 949 | 1 | 215 | — | — | ||||||||||||
| CO | 7 | 785 | 5 | 522 | — | — | 2 | 263 | ||||||||||||
| NE | 5 | 366 | 3 | 220 | 2 | 146 | — | — | ||||||||||||
| VA | 5 | 279 | — | — | — | — | 5 | 279 | ||||||||||||
| FL | 4 | 404 | — | — | — | — | 4 | 404 | ||||||||||||
| NV | 3 | 304 | 1 | 92 | — | — | 2 | 212 | ||||||||||||
| WI | 3 | 206 | — | — | — | — | 3 | 206 | ||||||||||||
| NC | 2 | 100 | — | — | — | — | 2 | 100 | ||||||||||||
| MN | 2 | 62 | — | — | — | — | 2 | 62 | ||||||||||||
| MT | 1 | 100 | 1 | 100 | — | — | — | — | ||||||||||||
| IN | 1 | 162 | — | — | — | — | 1 | 162 | ||||||||||||
| NM | 1 | 136 | 1 | 136 | — | — | — | — | ||||||||||||
| MD | 1 | 120 | — | — | — | — | 1 | 120 | ||||||||||||
| GA | 1 | 105 | 1 | 105 | — | — | — | — | ||||||||||||
| OR | 1 | 53 | 1 | 53 | — | — | — | — | ||||||||||||
| SD | 1 | 99 | 1 | 99 | — | — | — | — | ||||||||||||
| ND | 1 | 110 | 1 | 110 | — | — | — | — | ||||||||||||
| WV | 1 | 67 | — | — | 1 | 67 | — | — | ||||||||||||
| Total | 217 | 22,131 | 158 | 16,262 | 18 | 2,460 | 41 | 3,409 | ||||||||||||
| Total | SNFs | Multi-Service Campuses | ALFs and ILFs | |||||||||||||||||||||||||||||||||||
| State | Properties | Beds/Units | Facilities | Beds | Campuses | Beds/Units | Facilities | Beds/Units | ||||||||||||||||||||||||||||||
| TX | 44 | 5,627 | 38 | 4,849 | 3 | 536 | 3 | 242 | ||||||||||||||||||||||||||||||
| CA | 40 | 4,844 | 27 | 3,048 | 8 | 1,359 | 5 | 437 | ||||||||||||||||||||||||||||||
| ID | 17 | 1,474 | 16 | 1,405 | 1 | 69 | — | — | ||||||||||||||||||||||||||||||
| IA | 15 | 970 | 13 | 801 | 2 | 169 | — | — | ||||||||||||||||||||||||||||||
| UT | 13 | 1,374 | 9 | 913 | 1 | 272 | 3 | 189 | ||||||||||||||||||||||||||||||
| AZ | 11 | 1,340 | 8 | 971 | — | — | 3 | 369 | ||||||||||||||||||||||||||||||
| WA | 10 | 936 | 9 | 839 | — | — | 1 | 97 | ||||||||||||||||||||||||||||||
| IL | 9 | 916 | 7 | 642 | 2 | 274 | — | — | ||||||||||||||||||||||||||||||
| LA | 8 | 1,164 | 7 | 949 | 1 | 215 | — | — | ||||||||||||||||||||||||||||||
| CO | 7 | 779 | 5 | 511 | — | — | 2 | 268 | ||||||||||||||||||||||||||||||
| OH | 6 | 612 | 3 | 256 | 3 | 356 | — | — | ||||||||||||||||||||||||||||||
| NE | 5 | 366 | 3 | 220 | 2 | 146 | — | — | ||||||||||||||||||||||||||||||
| FL | 4 | 420 | — | — | — | — | 4 | 420 | ||||||||||||||||||||||||||||||
| MI | 4 | 189 | — | — | — | — | 4 | 189 | ||||||||||||||||||||||||||||||
| NV | 3 | 304 | 1 | 92 | — | — | 2 | 212 | ||||||||||||||||||||||||||||||
| MT | 3 | 259 | 3 | 259 | — | — | — | — | ||||||||||||||||||||||||||||||
| WI | 3 | 206 | — | — | — | — | 3 | 206 | ||||||||||||||||||||||||||||||
| MN | 2 | 62 | — | — | — | — | 2 | 62 | ||||||||||||||||||||||||||||||
| NC | 2 | 104 | — | — | — | — | 2 | 104 | ||||||||||||||||||||||||||||||
| NJ | 2 | 98 | — | — | — | — | 2 | 98 | ||||||||||||||||||||||||||||||
| IN | 1 | 162 | — | — | — | — | 1 | 162 | ||||||||||||||||||||||||||||||
| MD | 1 | 120 | — | — | — | — | 1 | 120 | ||||||||||||||||||||||||||||||
| NM | 1 | 116 | 1 | 116 | — | — | — | — | ||||||||||||||||||||||||||||||
| GA | 1 | 105 | 1 | 105 | — | — | — | — | ||||||||||||||||||||||||||||||
| ND | 1 | 83 | 1 | 83 | — | — | — | — | ||||||||||||||||||||||||||||||
| SD | 1 | 81 | 1 | 81 | — | — | — | — | ||||||||||||||||||||||||||||||
| WV | 1 | 67 | — | — | 1 | 67 | — | — | ||||||||||||||||||||||||||||||
| OR | 1 | 53 | 1 | 53 | — | — | — | — | ||||||||||||||||||||||||||||||
| Total | 216 | 22,831 | 154 | 16,193 | 24 | 3,463 | 38 | 3,175 | ||||||||||||||||||||||||||||||
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Occupancy by Property Type:
The following table displays occupancy by property type for each of the years ended December 31, 20192022 and 2018.2021. Percentage occupancy in the below table is computed by dividing the average daily number of beds occupied by the total number of beds available for use during the periods indicated (beds of acquired facilities are included in the computation following the date of acquisition, or through the date of disposition, only).
| Year Ended December 31, | ||||
| Property Type | 2019 | 2018 | ||
Facilities Leased to Tenants: (1) | ||||
| SNFs | 78 | % | 77 | % |
| Multi-Service Campuses | 76 | % | 77 | % |
| ALFs and ILFs | 83 | % | 84 | % |
Facilities Operated by CareTrust REIT:(2) | ||||
| ILFs | 89 | % | 83 | % |
| Year Ended December 31, | |||||||||||
| Property Type | 2022(1) | 2021(2) | |||||||||
Facilities Leased to Tenants: (3) | |||||||||||
| SNFs | 73 | % | 69 | % | |||||||
| Multi-Service Campuses | 71 | % | 66 | % | |||||||
| ALFs and ILFs | 74 | % | 73 | % | |||||||
(1) Occupancy data excludes two facilities which are in the process of being repurposed and two non-operational ALFs while we identify an operator.
(2) Occupancy data excludes two non-operational ALFs while we identify an operator.
(3) Occupancy data derived solely from information provided by our tenants without independent verification by us. The leased facility financial performance data is presented one quarter in arrears.
Property Type - Rental Income:
The following tables display the annual rental income and total beds/units for each property type leased to third-party tenants for the years ended December 31, 20192022 and 2018.2021 and total beds/units for each property type as of December 31, 2022 and 2021.
| For the Year Ended December 31, 2022 | As of December 31, 2022 | |||||||||||||
| Property Type | Rental Income (in thousands) | Percent of Total | Total Beds/ Units | |||||||||||
| SNFs | $ | 135,701 | 72 | % | 16,193 | |||||||||
| Multi-Service Campuses | 33,149 | 18 | % | 3,463 | ||||||||||
| ALFs and ILFs | 18,656 | 10 | % | 3,175 | ||||||||||
| Total | $ | 187,506 | 100 | % | 22,831 | |||||||||
| For the Year Ended December 31, 2021 | As of December 31, 2021 | |||||||||||||
| Property Type | Rental Income (in thousands) | Percent of Total | Total Beds/ Units | |||||||||||
| SNFs | $ | 133,380 | 70 | % | 16,614 | |||||||||
| Multi-Service Campuses | 30,440 | 16 | % | 3,545 | ||||||||||
| ALFs and ILFs | 26,375 | 14 | % | 3,491 | ||||||||||
| Total | $ | 190,195 | 100 | % | 23,650 | |||||||||
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| For the Year Ended December 31, 2019 | |||||||
| Property Type | Rental Income (in thousands) | Percent of Total | Total Beds/ Units | ||||
| SNFs | $ | 115,362 | 74 | % | 16,262 | ||
| Multi-Service Campuses | 18,109 | 12 | % | 2,460 | |||
| ALFs and ILFs | 22,196 | 14 | % | 3,241 | |||
Total(1) | $ | 155,667 | 100 | % | 21,963 | ||
| For the Year Ended December 31, 2018 | |||||||
| Property Type | Rental Income (in thousands) | Percent of Total | Total Beds/ Units | ||||
| SNFs | $ | 102,555 | 73 | % | 13,698 | ||
| Multi-Service Campuses | 15,543 | 11 | % | 2,521 | |||
| ALFs and ILFs | 21,975 | 16 | % | 2,867 | |||
| Total | $ | 140,073 | 100 | % | 19,086 | ||
Geographic Concentration - Rental Income:
The following table displays the geographic distribution of annual rental income for properties leased to third-party tenants for the years ended December 31, 20192022 and 2018 (in thousands, except percentages)2021 (dollars in thousands).
| For the Year Ended December 31, 2022 | For the Year Ended December 31, 2021 | ||||||||||||||||
State | Rental Income | Percent of Total | Rental Income | Percent of Total | |||||||||||||
| CA | $ | 51,553 | 27 | % | $ | 47,304 | 25 | % | |||||||||
| TX | 41,021 | 22 | % | 38,127 | 20 | % | |||||||||||
| LA | 17,092 | 9 | % | 16,322 | 9 | % | |||||||||||
| ID | 14,446 | 8 | % | 13,917 | 7 | % | |||||||||||
| AZ | 12,968 | 7 | % | 12,652 | 7 | % | |||||||||||
| UT | 7,612 | 4 | % | 7,453 | 4 | % | |||||||||||
| IL | 6,074 | 3 | % | 4,893 | 3 | % | |||||||||||
| CO | 5,796 | 3 | % | 5,642 | 3 | % | |||||||||||
| IA | 5,318 | 3 | % | 5,322 | 3 | % | |||||||||||
| WA | 4,793 | 3 | % | 4,936 | 3 | % | |||||||||||
| OH | 4,128 | 2 | % | 9,071 | 5 | % | |||||||||||
| MI | 3,003 | 2 | % | 3,081 | 2 | % | |||||||||||
| MT | 2,188 | 1 | % | 2,128 | 1 | % | |||||||||||
| NV | 2,177 | 1 | % | 2,123 | 1 | % | |||||||||||
| NC | 1,172 | 1 | % | 1,135 | 1 | % | |||||||||||
| MN | 1,064 | 1 | % | 1,038 | 1 | % | |||||||||||
| NE | 995 | 1 | % | 970 | * | ||||||||||||
| GA | 944 | 1 | % | 949 | * | ||||||||||||
| SD | 944 | 1 | % | 917 | * | ||||||||||||
| NM | 937 | * | 1,023 | * | |||||||||||||
| WV | 751 | * | 727 | * | |||||||||||||
| VA | 539 | * | 3,449 | 2 | % | ||||||||||||
| WI | 520 | * | 3,045 | 2 | % | ||||||||||||
| ND | 461 | * | 448 | * | |||||||||||||
| OR | 411 | * | 399 | * | |||||||||||||
| MD | 247 | * | 588 | * | |||||||||||||
| FL | 222 | * | 1,681 | 1 | % | ||||||||||||
| IN | 130 | * | 855 | * | |||||||||||||
| Total | $ | 187,506 | 100 | % | $ | 190,195 | 100 | % | |||||||||
| For the Year Ended December 31, 2019 | For the Year Ended December 31, 2018 | ||||||||||
State | Rental Income(1) | Percent of Total | Rental Income | Percent of Total | |||||||
| CA | $ | 35,297 | 23 | % | $ | 26,897 | 19 | % | |||
| TX | 32,364 | 21 | % | 26,567 | 19 | % | |||||
| LA | 15,880 | 10 | % | — | — | % | |||||
| AZ | 12,461 | 8 | % | 9,125 | 7 | % | |||||
| ID | 11,717 | 8 | % | 10,770 | 8 | % | |||||
| UT | 6,740 | 4 | % | 6,125 | 4 | % | |||||
| MI | 6,007 | 4 | % | 6,004 | 4 | % | |||||
| CO | 5,485 | 4 | % | 4,192 | 3 | % | |||||
| WA | 5,145 | 3 | % | 6,353 | 5 | % | |||||
| IL | 4,725 | 3 | % | 3,792 | 3 | % | |||||
| VA | 3,171 | 2 | % | 3,137 | 2 | % | |||||
| IA | 2,815 | 2 | % | 5,805 | 4 | % | |||||
| WI | 2,535 | 2 | % | 2,850 | 2 | % | |||||
| NV | 2,091 | 1 | % | 1,038 | 1 | % | |||||
| NC | 1,097 | 1 | % | 1,069 | 1 | % | |||||
| NM | 987 | 1 | % | 1,046 | 1 | % | |||||
| OH | 964 | 1 | % | 17,300 | 12 | % | |||||
| NE | 956 | 1 | % | 1,396 | 1 | % | |||||
| SD | 886 | 1 | % | 395 | — | % | |||||
| IN | 760 | — | % | 937 | 1 | % | |||||
| MN | 577 | — | % | 1,275 | 1 | % | |||||
| MT | 550 | — | % | 495 | — | % | |||||
| FL | 550 | — | % | 1,527 | 1 | % | |||||
| GA | 485 | — | % | 880 | 1 | % | |||||
| ND | 433 | — | % | 80 | — | % | |||||
| WV | 384 | — | % | 115 | — | % | |||||
| OR | 376 | — | % | 368 | — | % | |||||
| MD | 229 | — | % | 535 | — | % | |||||
| Total | $ | 155,667 | 100 | % | $ | 140,073 | 100 | % | |||
Investment and Financing Policies
Our investment objectives are to increase cash flow, provide quarterly cash dividends, maximize the value of our properties and acquire properties with cash flow growth potential. We intend to invest primarily in SNFs and seniors housing,
including ALFsALFs and ILFs, althoughILFs. We are expanding our investments into behavioral health facilities and we may determine in the future to expand our investments to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities. Our properties are located in 28 statesstates and we intend to continue to acquire properties in other states throughout the United States. Although our portfolio currently consists primarily of owned real property, future investments may include first mortgages, mezzanine debt and other securities issued by, or joint ventures with, REITs or other entities that own real estate consistent with our investment objectives.
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Our Competitive Strengths
We believe that our ability to acquire, integrate and improve facilities is a direct result of the following key competitive strengths:
Geographically Diverse Property Portfolio. Our properties are located in 28 different states, with concentrations in California, Texas, CaliforniaLouisiana, Idaho and Louisiana.Arizona based on rental income. The properties in any one state do not account for more than 21%than 27% of our total beds and unitsrental income as of December 31, 2019.2022. We believe this geographic diversification will limit the effect of changes in any one market on our overall performance.
Long-Term, Triple-Net Lease Structure. All of our properties, (except for the one ILF that we own and operate)except two properties under a short-term lease, are leased to our tenants under long-term, triple-net leases, pursuant to which the operators are responsible for all facility maintenance and repair, insurance required in connection with the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.
Financially Secure Primary Tenant. Ensign is an established provider of healthcare services with strong financial performance and accounted for 38%35% of our 20192022 rental income, exclusive of operating expense reimbursements. Ensign is subject to the reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. Ensign’s publicly available filings can be found at the SEC’s website at www.sec.gov.
Ability to Identify Talented Operators. We have purchased 130 properties since the Spin-Off through December 31, 2019 and have increased total rental revenue from $41.2 million for the year ended December 31, 2013, the last full fiscal year prior to theSpin-Off, to $155.7 million for the year ended December 31, 2019, which has resulted in a reduction in Ensign’s share of our rental revenues from 100% for the year ended December 31, 2013 to approximately38% for the year ended December 31, 2019, in each case exclusive of operating expense reimbursements and for the year ended December 31, 2019, excluding the properties leased to Pennant pursuant to the Pennant Master Lease that is guaranteed by Ensign. As a result of our management team’s operating experience and network of relationships and insight, we believe that we are able to identify and pursue working relationships with qualified local, regional and national healthcare providers and seniors housing operators. We expect to continue our disciplined focus on pursuing investment opportunities, primarily with respect to stabilized assets but also some strategic investment in new and/or improving properties, while seeking dedicated and engaged operators who possess local market knowledge, have solid operating records and emphasize quality services and outcomes. We intend to support these operators by providing strategic capital for facility acquisition, upkeep and modernization. Our management team’s experience gives us a key competitive advantage in objectively evaluating an operator’s financial position, care and service programs, operating efficiencies and likely business prospects.
Experienced Management Team. Gregory K. Stapley,David M. Sedgwick was appointed as our President and Chief Executive Officer has extensive experienceeffective January 1, 2022. At the time of his appointment, Mr. Sedgwick was serving as our President, a role he had filled since February 2021, and he continues to hold that title. He previously served as our Chief Operating Officer from August 2018 through 2021, and as our Vice President-Operations from CareTrust’s launch as an independent public company in the real estate and healthcare industries.2014 to 2018. Mr. StapleySedgwick has more than 3020 years of experience in the acquisition, developmentskilled nursing and dispositionseniors housing industry. Mr. Sedgwick’s President, Chief Operating Officer and Vice President duties regularly involved him in matters related to new investments, asset management, tenant relations, portfolio management, portfolio optimization, investor relations and capital markets activities for the Company. Prior to joining CareTrust, Mr. Sedgwick served as the Chief Human Capital Officer and President of real estate including healthcare facilities and office, retail and industrial properties, including nearly 15 yearsFacility Services at Ensign where he was instrumental in assembling the portfolio that we now lease back to Ensign. Mr. Sedgwick has been a licensed nursing home administrator since 2001.
Our Chief Financial Officer, William M. Wagner, has more than 25 years of accounting and finance experience, primarily in real estate, including more than 15 years of experience working extensively for REITs. Most notably, he worked for both Nationwide Health Properties, Inc., a healthcare REIT, and Sunstone Hotel Investors, Inc., a lodging REIT, serving as Senior Vice President and Chief Accounting Officer of each company prior to joining us as our Chief Financial Officer. David M. Sedgwick,
James B. Callister was appointed as our Chief Operating Officer, is a licensed nursing home administrator with more than 14 years of experience in skilled nursing operations, including turnaround operations,Executive Vice President effective July 2022 and trained over 100 Ensign nursing home administrators while he was Ensign’s Chief Human Capital Officer. Mark Lamb, our Chief Investment Officer iseffective December 31, 2022, succeeding Mark D. Lamb in that role. Mr. Callister continues to serve as Secretary, and previously served as General Counsel from February 2021 to July 2022. Prior to joining the Company, Mr. Callister worked as a licensedreal estate attorney and a partner at the law firm of Sherry Meyerhoff Hanson & Crance LLP and, before that, at the law firm of O’Melveny & Myers LLP. Since 2008, he has worked almost exclusively on healthcare REIT transactions, closing on acquisitions or financings of over 300 skilled nursing, home administrator with more than sixseniors housing, and independent living facilities. Mr. Callister has assisted in the structure, negotiating and closing of all of our acquisitions since our formation as a REIT. As an attorney, Mr. Callister worked for nearly 20 years serving as administratorin private practice representing and advising clients in a diverse array of healthcare facilities for Plum Healthcarereal estate transactions. Mr. Callister’s transactions-based legal experience has focused on the representation of publicly-traded REITs in the acquisition, disposition, leasing, and North American Healthcare, Inc.financing of healthcare-related properties. Mr. Callister holds a B.A. in History from Brigham Young University and more than eight years serving in acquisition and portfolio management capacities for various entities. Our executives have years of public company experience, including experience accessing both debt and equity capital markets to fund growth and maintain a flexible capital structure.
J.D. from the J. Reuben Clark Law School at Brigham Young University, where he graduated magna cum laude.
Flexible UPREIT Structure. We operate through an umbrella partnership, commonly referred to as an UPREIT structure, in which substantially all of our properties and assets are held through the Operating Partnership. Conducting business through the Operating Partnership will allowallows us flexibility in the manner in which we structure the acquisition of properties. In particular, an UPREIT structure enables us to acquire additional properties from sellers in exchange for limited
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partnership units, which provides property owners the opportunity to defer the tax consequences that would otherwise arise from a sale of their real properties and other assets to us. As a result, this structure allows us to acquire assets in a more efficient manner and may allow us to acquire assets that the owner would otherwise be unwilling to sell because of tax considerations.
Business Strategies
Our primary goal is to create long-term stockholder value through the payment of consistent cash dividends and the growth of our asset base. To achieve this goal, we intend to pursue a business strategy focused on opportunistic acquisitions and property diversification. We also intend to further develop our relationships with tenants and healthcare providers with a goal to progressively expand the mixture of tenants managing and operating our properties.
The key components of our business strategies include:
Diversify Asset Portfolio. We diversify through the acquisition of new and existing facilities from third parties and the expansion and upgrade of current facilities and strategically investing in new developments with options to acquire the developments at stabilization. We employ what we believe to be a disciplined, opportunistic acquisition strategy with a focus on the acquisition of SNFs, ALFs and ILFs,ILFs. We plan to expand our investments into behavioral health facilities and we may determine in the future to expand our acquisitionsinvestments to include medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities. As we acquire, or invest in, additional properties, we expect to further diversify by geography, asset class and tenant within the healthcare and healthcare-related sectors.
Maintain Balance Sheet Strength and Liquidity. We maintain a capital structure that provides the resources and flexibility to support the growth of our business. We intend to maintain a mix of credit facility debt, unsecured debt and possibly secured mortgage debt, which, together with our anticipated ability to complete future equity financings, including issuances of our common stock via registered public offerings or under an at-the-market equity program, we expect will fund the growth of our property portfolio.
Develop New Tenant Relationships. We cultivate new relationships with tenants and healthcare providers in order to expand the mix of tenants operating our properties and, in doing so, to reduce our dependence on Ensign.properties. We expect that this objective will be achieved over time as part of our overall strategy to acquire new properties and further diversify our portfolio of healthcare properties.
Provide Capital to Underserved Operators. We believe there is a significant opportunity to be a capital source to healthcare operators, through the acquisition and leasing of healthcare properties to them that are consistent with our investment and financing strategy at appropriate risk-adjusted rates of return, which, due to size and other considerations, are not a focus for larger healthcare REITs. We pursue acquisitions and strategic opportunities that meet our investing and financing strategy and that are attractively priced, including funding development of properties through preferred equity or construction loans and thereafter entering into sale and leaseback arrangements with such developers as well as other secured term financing and mezzanine lending. We utilize our management team’s operating experience, network of relationships and industry insight to identify both large and small quality operators in need of capital funding for future growth. In appropriate circumstances, we may negotiate with operators to acquire individual healthcare properties from those operators and then lease those properties back to the operators pursuant to long-term triple-net leases.
Fund Strategic Capital Improvements. We support operators by providing capital to them for a variety of purposes, including capital expenditures and facility modernization. We expect to structure these investments as either lease amendments that produce additional rents or as loans that are repaid by operators during the applicable lease term.
Pursue Strategic Development Opportunities. We work with operators and developers to identify strategic development opportunities. These opportunities may involve replacing or renovating facilities that may have become less competitive. We also identify new development opportunities that present attractive risk-adjusted returns. We may provide funding to the developer of a property in conjunction with entering into a sale leaseback transaction or an option to enter into a sale leaseback transaction for the property.
Competition
We compete for real property investments with other REITs, investment companies, private equity and hedge fund investors, sovereign funds, pension funds, healthcare operators, lenders and other institutional investors. Some of these competitors are significantly larger and have greater financial resources and lower costs of capital than us. Increased competition will make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. Our ability to compete is also impacted by national and local economic trends, availability of investment alternatives, availability and cost of capital, construction and renovation costs, existing laws and regulations, new legislation and population trends.
In addition, revenues from our properties are dependent on the ability of our tenants and operators to compete with other healthcare operators. Healthcare operators compete on a local and regional basis for residents and patients and their ability to
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successfully attract and retain residents and patients depends on key factors such as the number of facilities in the local market, the types of services available, the quality of care, reputation, age and appearance of each facility and the cost of care in each locality. Private, federal and state payment programs and the effect of other laws and regulations may also have a significant impact on the ability of our tenants and operators to compete successfully for residents and patients at the properties.
Sustainability and Corporate Social Responsibility
In 2022, we published our second annual Corporate Responsibility Report (our “ESG Report”) as part of our ongoing commitment to provide regular reporting on our environmental, social and governance (“ESG”) priorities. Our ESG Report outlines our high priority ESG initiatives and goals for our company and our property portfolio. In our 2022 ESG Report, we included a Global Reporting Initiative (“GRI”) Index in reference to the GRI Standards to further align with applicable global standards for sustainability reporting.
During 2020, with the assistance of Conservice ESG, our ESG consultant, we designed a monitoring plan to collect key environmental data from a pilot group of 50 of our net-leased properties. The plan’s objective was to begin benchmarking energy and water usage and the impact of our facilities on greenhouse gas emissions and climate change. During 2021, we implemented the plan’s monitoring systems and began collecting data for this pilot group of 50 properties, increasing to almost 100 properties by the end of 2022. We employ approximately 52expect the data to help us identify the most promising opportunities for improvement in our portfolio, set informed ESG goals and measure progress over time. In addition, as a landlord and capital supplier to a key segment of the healthcare industry, we will seek further opportunities to encourage and incentivize fair and healthy work environments for healthcare workers and suitable living conditions for patients and residents, and to promote diversity, inclusion and the ethical treatment of employees, residents, patients and others wherever our activities and influence can be felt.
Also in 2020, we published our Tenant Code of Conduct & Corporate Responsibility (our “Tenant ESG Program”). The Tenant ESG Program provides our eligible triple-net tenants with monetary inducements to make sustainable improvements to our properties. Incentive options include a wide variety of opportunities for tenants to upgrade everything from energy and environmental systems to water-saving landscaping and more. Our board of directors has authorized annual allocations of up to $500,000 to fund the Tenant ESG Program. As disclosed in our 2022 ESG Report, we tracked $260,000 in environmental improvements at our properties from August 2021 to October 2022.
In 2022, we created and implemented an ESG checklist to be used to review new potential acquisitions. The checklist will help our team better identify and address ESG-related risk and opportunities in each potential acquisition including how tenant-operators can track utility energy and water usage, whether properties are in parts of the country where the U.S. Department of Energy has helped enable energy data for benchmarking purposes and how tenants can grow, develop and enhance their own ESG policies. In addition, we created and implemented an ESG training program to train all employees on our ESG commitments to increase awareness.
The foregoing principles and additional ESG initiatives are reflected in our Environmental, Social and Governance policy adopted on October 29, 2021, and previously published Policy on Human Capital, Policy on Human Rights and Responsibilities, Policy on Environmental Sustainability and our proprietary Tenant ESG Program. All of these policies are located on the Investor Relations section of our website at www.caretrustreit.com. The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this report or any other document that we file with the SEC.
Governance
Our corporate governance structure was carefully crafted to align with the interests of our investors and other stakeholders with a core leadership team that has over 65 years of collective experience as operators and investors. The members of our board of directors each bring deep expertise in healthcare, real estate, investing, accounting, and/or business development. In this oversight role, our board of directors serves as the ultimate decision-making body of our company, except for those matters reserved to or shared with our stockholders.
Human Capital Resources
Our employees are the heart of our company. Our Policy on Human Capital reflects our commitment to the dignity and rights of all people, especially our employees and others whose professional lives may be impacted by our properties and business activities. It represents a critical commitment to, and investment in, the current and long-term health and well-being of
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our organization and its people. We believe our success depends on our ability to attract, develop and retain key personnel. Our core philosophies and policies in this regard include:
Compensation and Benefits. The skills, experience and industry knowledge of key employees significantly benefit our performance. We believe we offer competitive compensation (including salary, incentive bonus and equity) and benefits packages (including a 401(k) plan with a fixed employer contribution, Flexible Spending Accounts (FSAs), employer-funded employee assistance program (EAP), a generous vacation, holiday and personal time off policy, and an array of voluntary benefits options and other benefits for employees and their families). Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.
As of December 31, 2022, we employed 15 full-time employees (including our executive officers), none of whom is subject to a collective bargaining agreement. At the onset of the COVID-19 pandemic, we temporarily closed our corporate office and most of our employees were working remotely; however, we have since reopened our corporate office with continued workforce flexibility to promote employee safety.
Training and Education. CareTrust’s culture values continuous learning, improvement and professional development. This helps our employees to keep their skills current and to adapt to new responsibilities and emerging market needs. CareTrust provides financial support for professional associate dues and memberships, continuing education credits, and fees and travel expenses to attend relevant conferences and seminars.
Government Regulation, Licensing and Enforcement
Overview
As operators of healthcare facilities, tenants of our healthcare properties are typically subject to extensive and complex federal, state and local healthcare laws and regulations relating to fraud and abuse practices, government reimbursement, licensure and certificate of need and similar laws governing the operation of healthcare facilities, and we expect that the healthcare industry, in general, will continue to face increasedsignificant regulation and pressure in the areas of fraud, waste and abuse, cost control, healthcare management and provision of services, among others. These regulations are wide-ranging and can subject our tenants to civil, criminal and administrative sanctions. Affected tenants may find it increasingly difficult and costly to comply with this complex and evolving regulatory environment because of a relative lack of guidance in many areas as certain of our healthcare properties are subject to oversight from several government agencies and the laws maylegal requirements often vary from one jurisdiction to another. Changes in laws and regulations and reimbursement enforcement activity and regulatory non-compliance by our tenants could have a significant effect on their operations and financial condition, which in turn may adversely affect us, as detailed below and set forth under “Risk Factors - Risks Related to Our Business.”
The following is a discussion of certain laws and regulations generally applicable to our tenants (as operators of our healthcare facilitiesfacilities) and, in certain cases, to us.
There are various extremely complex federal and state laws and regulations governing healthcare providers’ relationships and arrangements and prohibiting fraudulent and abusive practices by such providers. These laws include, but are not limited to, (i) federal and state false claims acts, which, among other things, prohibit providers from filing false claims or making false statements to receive payment from Medicare, Medicaid or other federal or state healthcare programs, (ii) federal and state anti-kickback and fee-splitting statutes, including the Medicare and Medicaid anti-kickback statute, which prohibit the payment or receipt of remuneration to induce referrals or recommendations of healthcare items or services, (iii) federal and state physicianprovider self-referral laws (including the federal law commonly referred to as the “Stark Law”), which generally prohibit referrals by physicians and in some cases other providers to entities with which the physician or an immediate family member has a financial relationship, and (iv) the federal Civil Monetary Penalties Law, which prohibits, among other things, the knowing presentation of a false or fraudulent claim for certain healthcare services. Violations of healthcare fraud and abuse laws carry civil, criminal and administrative sanctions, including punitive sanctions, monetary penalties, imprisonment, denial of Medicare and Medicaid reimbursement and potential exclusion from Medicare, Medicaid or other federal or state healthcare programs. These laws are enforced by a variety of federal, state and local agencies and can also be enforced by private litigants through,
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among other things, federal and state false claims acts, which allow private litigants to bring qui tam or “whistleblower” actions. Ensign and our other tenants are (and many of our future tenants are expected to be) subject to these laws, and some of them may in the future become the subject of governmental enforcement actions if they fail to comply with applicable laws.
•State and Federal “Fraud and Abuse” Laws and Regulations. The Medicare and Medicaid anti-fraud and abuse amendments to the Social Security Act (the “Anti-Kickback Law”) make it a felony, subject to certain exceptions, for any person to engage in illegal remuneration arrangements with vendors, physicians and other health care providers for the referral of Medicare beneficiaries or Medicaid recipients. When a violation occurs, the government may proceed criminally or civilly. If the government proceeds criminally, a violation is a felony and may result in imprisonment for up to five years, fines of up to $25,000 and mandatory exclusion from participation in all federal health care programs. If the government proceeds civilly, it may impose a civil monetary penalty of $50,000 per violation and an assessment of not more than three times the total amount of remuneration involved, and it may exclude the parties from participation in all federal health care programs. Violations of the Anti-Kickback Statute also serve as a basis for federal False Claims Act cases. Many states have enacted laws similar to, and in some cases broader than, the Anti-Kickback Law. |
The scope of prohibited payments in the Anti-Kickback Law is broad. The U. S. Department of Health and Human Services (“HHS”) has promulgated regulations which describe certain “safe harbor” arrangements that will not be deemed to constitute violations of the Anti-Kickback Law. An arrangement that fits squarely into a safe harbor is immune from prosecution under the Anti-Kickback Statute. The safe harbors described in the regulations are narrow and do not cover a wide range of economic relationships which many SNFs, physicians and other health care providers consider to be legitimate business arrangements not prohibited by the statute. Because the regulations describe safe harbors and do not purport to describe comprehensively all lawful and unlawful economic arrangements or other relationships between health care providers and referral sources, health care providers entering into these arrangements or relationships may be required to alter them in order to ensure compliance with the Anti-Kickback Law and may be subject to significant liability should an arrangement that does not fully satisfy a safe harbor be determined to be illegal. On November 20, 2020, HHS promulgated significant new Anti-Kickback Law regulations, including changes to existing safe harbors and the creation of new safe harbors, in an effort to reduce regulatory burden and incentivize coordinated care, including value-based arrangements.
The False Claims Act provides that any person who “knowingly presents, or causes to be presented” a “false or fraudulent claim for payment or approval” to the U.S. government, or its agents and contractors, is liable for a civil penalty ranging from $5,500 to $11,000 per claim, plus three times the amount of damages sustained by the government. Under the False Claims Act’s so-called “reverse false claims,” liability also could arise for “using” a false record or statement to “conceal,” “avoid” or “decrease” an “obligation” (which can include the retention of an overpayment) “to pay or transmit money or property to the government.” The False Claims Act also empowers and provides incentives to private citizens (commonly referred to as qui tam relator or whistleblower) to file suit on the government’s behalf. The qui tam relator’s share of the recovery can be between 15% and 25% in cases in which the government intervenes, and 25% to 30% in cases in which the government does not intervene. Notably, the Affordable Care Act amended certain jurisdictional bars to the False Claims Act, effectively narrowing the “public disclosure bar” (which generally requires that a whistleblower suit not be based on publicly disclosed information) and expanding the “original source” exception (which generally permits a whistleblower suit based on publicly disclosed information if the whistleblower is the original source of that publicly disclosed information), thus potentially broadening the field of potential whistleblowers. • | 16 |
An entity that submits a claim for reimbursement in violation of the Stark Law must refund any amounts collected and may be: (1) subject to a civil penalty of up to $15,000 for each self-referred service; and (2) excluded from participation in federal health care programs. In addition, a physician or entity that has participated in a “scheme” to circumvent the operation of the Stark Law is subject to a civil penalty of up to $100,000 and possible exclusion from participation in federal health care programs.
Reimbursement
Sources of revenue for our tenants include (and for our future tenants is expected to include), among other sources, governmental healthcare programs, such as the federal Medicare program and state Medicaid programs, and non-governmental payors, such as insurance carriers and health maintenance organizations. As federal and state governments focus on healthcare reform initiatives, and as the federal government and many states face significant budget deficits, efforts to reduce costs by these payors will likely continue, which may result in reduced or slower growth in reimbursement for certain services provided by Ensign and our other tenants. Federal and state authorities are likely to continue to implement new and modified reimbursement methodologies, including value-based methodologies, that could have a negative impact on our tenants. Such changes to reimbursement methodologies could have a material impact on our tenants and we cannot provide assurances that the current revenue levels will be maintained under any future reimbursement arrangements. In addition, the impact of other
health care reform efforts, such as “Medicare for all”, or the provision of a new Medicare-like public option for consumers to receive health insurance, are impossible to predict.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”) serves as the primary vehicle for comprehensive healthcare reform in the United States. Efforts initiated by the previous administration and certain members of Congress to repeal or make significant changes to the Affordable Care Act, its implementation and/or its interpretation including the successful repeal of the penalty associated with the individual mandate of the Affordable Care Act, continue to cast uncertainty on the future of the Affordable Care Act. For example, on December 14, 2018, a U.S. District Court in Texas ruled the Affordable Care Act unconstitutional in its entirety. This decision was appealed, and on December 18, 2019, the Fifth Circuit Court of Appeals ruled that the Affordable Care Act’s individual mandate was unconstitutional but remanded the case for further analysis. The decision was appealed, and on June 17, 2021, the Supreme Court of the United States ruled that the plaintiffs lacked standing to challenge the Affordable Care Act’s minimum essential coverage provision. These types of challenges may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.
Given the divided nature of Congress, it is unclear whether Congress will successfully expand health insurance coverage and assess alternative health care delivery and payment systems. The Republican Party currently controls the United States House of Representatives (by a slim majority) and the Democratic Party currently controls the Senate (by a slim majority). Due to this, healthcare reform legislation would likely require at least some support from both Republican and Democratic lawmakers to become law and it is uncertain whether any healthcare reform legislation will ultimately become law. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on our business. If our tenants’ residents do not have insurance, it could adversely impact the tenants’ ability to satisfy their obligations to us. Expansion of health insurance coverage to more citizens could have a positive financial impact on our tenants and their ability to satisfy their obligations to us.
Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted, which also may impact our business. For instance, CMS is required to measure, track, and publish readmission rates of SNFs and to implement a value-based purchasing program for SNFs (the “SNF VBP Program”). The SNF VBP Program increases Medicare reimbursement rates for SNFs that achieve certain levels of quality performance measures developed by CMS, relative to other facilities. The value-based payments authorized by the SNF VBP Program are funded by reducing Medicare payment for all SNFs by 2% and redistributing up to 70% of those funds to high-performing SNFs. However, there is no assurance that payments made by CMS as a result of the SNF VBP Program will be sufficient to cover a facility’s costs. If Medicare reimbursement provided to our healthcare tenants is reduced under the SNF VBP Program, that reduction may have an adverse impact on the ability of our tenants to meet their obligations to us.
See “Risk Factors - Risks Related to Our Business - The impact of healthcareHealthcare reform legislation on us and our tenantsimpacts cannot accurately be predicted.”predicted and could adversely affect our results of operations” for additional risks related to changes in Medicare reimbursement.
Increased Government Oversight of Skilled Nursing Facilities
Section 1150B of the Social Security Act requires employees of federally funded long-term care facilities to immediately report any reasonable suspicion of a crime committed against a resident of that facility. Those reports must be submitted to at least one law enforcement agency and the applicable Centers for Medicare & Medicaid Services (“CMS”) Survey Agency. Covered individuals who fail to report under Section 1150B are subject to various penalties, including civil monetary penalties of up to $300,000 and possible exclusion from participation in any Federal health care program. Medicare regulations require
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SNFs to establish and implement written policies to ensure the reporting of crimes that occur in federally funded SNFs in accordance with Section 1150B.
In August 2017, the U.S. Department of Health & Human Services (“HHS”)HHS Office of Inspector General (“OIG”) issued a preliminary report regarding quality of care concerns by operators of SNFs. In its report, the OIG determined that CMS has inadequate procedures in place to ensure that incidents of potential abuse or neglect of Medicare beneficiaries residing in SNFs are identified and reported. The report was issued in connection with the OIG’s ongoing review of potential abuse and neglect of Medicare beneficiaries residing in SNFs.
As a result of the OIG report, CMS enforcement activity against SNF operators may increase, especially with regard to the reporting of potential abuse or neglect of SNF residents. If any of our tenants or their employees are found to have violated any applicable reporting requirements, they may become subject to penalties or other sanctions up to and including loss of licensure.
Healthcare Licensure and Certificate of Need
Our healthcare facilities are subject to extensive federal, state and local licensure, certification and inspection laws and regulations. In addition, various licenses and permits are required to operate SNFs ALFs, and ILFs,ALFs, dispense narcotics, operate pharmacies, handle radioactive materials and operate equipment. Many states require certain healthcare providers to obtain a certificate of need, which requires prior approval for the construction, modification and closure of certain healthcare facilities. The ability to obtain such approval and/or the approval process may impact some of our tenants’ abilities to expand or change their businesses. Any failure to comply with any of these laws, regulations, or standards could result in penalties which may include loss or restriction of license, loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from federal and state healthcare programs, or closure of the facility.
Privacy, Security and Data Breach Notification Laws
The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”) regulates the privacy and security of certain health information (“Protected Health Information”) and requires entities subject to HIPAA to provide notification of breaches of Protected Health Information. Entities subject to HIPAA include health plans, healthcare clearinghouses, and most health care providers (including somemany of our tenants). Business associates of these entities who create, receive, maintain or transmit Protected Health Information are also subject to HIPAA. Violations of the HIPAA requirements may result in civil monetary penalties of up to $50,000 per violation with a maximum civil penalty of $1.5 million in a calendar year for violations of the same requirement. However, a single breach or incident can result in violations of multiple requirements, resulting in possible penalties well in excess of $1.5 million. Breaches of unsecured Protected Health Information and other violations of HIPAA may have other material adverse consequences including material loss of business, business interruption, loss of patient or other critical data, regulatory enforcement, substantial legal liability and reputational harm. Certain violations of HIPAA can result in criminal penalties and enforcement.
Americans with Disabilities Act (the “ADA”)
Although most of our properties are not required to comply with the ADA because of certain “grandfather” provisions in the law, some of our properties must comply with the ADA and similar state or local laws to the extent that such properties are “public accommodations,” as defined in those statutes. These laws may require removal of barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. Under our triple-net lease structure, our tenants would generally be responsible for additional costs that may be required to make our facilities ADA-compliant. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants.
Environmental Matters
A wide variety of federal, state and local environmental and occupational health and safety laws and regulations affect healthcare facility operations. These complex federal and state statutes, and their enforcement, involve a myriad of regulations, many of which involve strict liability on the part of the potential offender. Some of these federal and state statutes may directly impact us. Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property, such as us, may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government
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fines and damages for injuries to persons and adjacent property). The cost of any required remediation, removal, fines or personal or property damages and the owner’s liability therefore could exceed or impair the value of the property and/or the assets of the owner. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, could reduce our revenues. See “Risk Factors - Risks Related to Our BusinessGeneral Risk Factors - Environmental compliance costs and liabilities associated with real estate properties owned by us may materially impair the value of those investments.properties owned by us.”
REIT Qualification
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014. Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code of 1986, as amended (the “Code”), relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels to our stockholders and the concentration of ownership of our capital stock. We believe that we are organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that our manner of operation has and will enable us to continue to meet the requirements for qualification and taxation as a REIT.
The Operating Partnership
We own substantially all of our assets and properties and conduct our operations through the Operating Partnership. We believe that conducting business through the Operating Partnership provides flexibility with respect to the manner in which we structure the acquisition of properties. In particular, an UPREIT structure enables us to acquire additional properties from sellers in tax deferred transactions. In these transactions, the seller would typically contribute its assets to the Operating Partnership in exchange for units of limited partnership interest in the Operating Partnership (“OP Units”). Holders of OP Units will have the right, after a 12-month holding period, to require the Operating Partnership to redeem any or all of such OP Units for cash based upon the fair market value of an equivalent number of shares of CareTrust REIT’s common stock at the time of the redemption. Alternatively, we may elect to acquire those OP Units in exchange for shares of our common stock on a one-for-one basis. The number of shares of common stock used to determine the redemption value of OP Units, and the number of shares issuable in exchange for OP Units, is subject to adjustment in the event of stock splits, stock dividends, distributions of warrants or stock rights, specified extraordinary distributions and similar events. The Operating Partnership is managed by our wholly owned subsidiary, CareTrust GP, LLC, which is the sole general partner of the Operating Partnership and owns one percent of its outstanding partnership interests. As of December 31, 2019,2022, CareTrust REIT is the only limited partner of the Operating Partnership, owning 99% of its outstanding partnership interests, and we have not issued OP Units to any other party.
The benefits of our UPREIT structure include the following:
•Access to capital. We believe the UPREIT structure provides us with access to capital for refinancing and growth. Because an UPREIT structure includes a partnership as well as a corporation, we can access the markets through the Operating Partnership issuing equity or debt as well as the corporation issuing capital stock or debt securities. Sources of capital include possible future issuances of debt or equity through public offerings or private placements. •Growth. The UPREIT structure allows stockholders, through their ownership of common stock, and the limited partners, through their ownership of OP Units, an opportunity to participate in future investments we may make in additional properties. • |
Tax deferral. The UPREIT structure provides property owners who transfer their real properties to the Operating Partnership in exchange for OP Units the opportunity to defer the tax consequences that otherwise would arise from a sale of their real properties and other assets to us or to a third party. As a result, this structure allows us to acquire assets in a more efficient manner and may allow us to acquire assets that the owner would otherwise be unwilling to sell because of tax considerations. |
Insurance
We maintain, or require in our leases that our tenants maintain, all applicable lines of insurance on our properties and their operations. The amount and scope of insurance coverage provided by our policies and the policies maintained by our tenants is customary for similarly situated companies in our industry. However, we cannot assure you that our tenants will maintain the required insurance coverages, and the failure by any of them to do so could have a material adverse effect on us. We also cannot assure you that we will continue to require the same levels of insurance coverage under our leases, including the Ensign Master Leases, that such insurance will be available at a reasonable cost in the future or that the insurance coverage provided will fully cover all losses on our properties upon the occurrence of a catastrophic event, nor can we assure you of the future financial viability of the insurers.
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Available Information
We file annual, quarterly and current reports, proxy statements and other information with SEC. The SEC maintains an internet site that contains these reports, and other information about issuers, like us, which file electronically with the SEC. The address of that site is http://www.sec.gov. We make available our reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports), and other information, free of charge, on the Investor Relations section of our website at www.caretrustreit.com. The information found on, or otherwise accessible through, our website is not incorporated by reference into, nor does it form a part of, this report or any other document that we file with the SEC.
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Risks Related to Our Business
We are dependent on the healthcare operators that lease our properties to successfully operate their businesses and make contractual lease payments, to us under their leases, and an event that materially and adversely affects their business, financial position or results of operations could materially and adversely affect our business, financial position or results of operationsoperations.
Ensign leases or provides a guaranty forfor a significant portion of our properties. As of December 31, 2019,2022, properties leased to Ensign under the Ensign Master Leases represented $53.4represented $66.2 million, or 32%35%, of ourtotal annualized contractual rental revenues, exclusive of operating expense reimbursements, on an annualized run-rate basis,income, and properties leased to Pennant under thethe Pennant Master Lease for which Ensign provides a guaranty (the “Pennant Guaranty”) represented $7.8$7.1 million, or 5%4%, of ourtotal annualized contractual rental revenues, exclusive of operating expense reimbursements, on an annualized run-rate basis. Theincome. Ensign’s inability or unwillingness of Ensign to meet its rentlease obligations under the Ensign Master Leases or its obligations pursuant to the Pennant Guaranty could materially adversely affect our
business, financial position or results of operations. In addition, theEnsign’s inability of Ensign to satisfy its other lease obligations under its leases, such as theincluding payment of insurance, taxes and utilities, could materially and adversely affect the condition of the properties leased to Ensign as well as Ensign’s business, financial position and results of operations. For these reasons,Accordingly, if Ensign were to experience a material and adverse effect on its business, financial position or results of operations, our business, financial position or results of operations could also be materially and adversely affected.
Further, due to our dependence on Ensign’s rental payments from Ensign for a substantial portion of our revenues, werental income may be limited inlimit our ability to enforce our rights under or to terminate, the Ensign Master Leases or the Pennant Guaranty. Failure by Ensign to comply with the terms of the Ensign Master Leasesleases or the Pennant Guaranty or to terminate the Ensign leases. Ensign’s failure to comply with its lease obligations or its obligations pursuant to the Pennant Guaranty, or with federal and state healthcare laws and regulations to which the leased properties are subject, could require us to find another lessee for such leased propertyproperties and there could beresult in a decrease in or cessation of rental payments. In such event, we may be unable to locate a suitable lessee at similar rental rates or at all, which would have the effect of reducingreduce our rental revenues.income.
We are subject to risks associated with public health crises, including the COVID-19 pandemic and other pandemics or epidemics.
We are subject to risks associated with public health crises and government measures to prevent the spread of infectious diseases, including the global health concerns related to the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted and is likely to further adversely impact nearly all aspects of healthcare reform legislationour business. Other public health crises, including any future epidemics or pandemic, could result in similar adverse impacts on us and our tenants cannot accurately be predicted and could adversely affect ourbusiness, results of operations.
•one or more of our tenants or borrowers could experience deteriorating financial conditions and be unable or unwilling to pay rent on time and in full (which has, and could continue to result from, among other reasons (i) increased operating costs and staffing requirements related to compliance with Centers for Disease Control and Prevention (“CDC”) protocols, (ii) decreased occupancy rates, (iii) increased scrutiny by regulators, (iv) potential repayments of relief funds received by tenants, (v) nursing or other staffing shortages; or (vi) decisions by elderly individuals to avoid or delay entrance into assisted living and other long-term care facilities);
•the possibility we may have to restructure tenants’ obligations and may not be able to do so on terms that are favorable to us;
•the potential need to recognize asset impairment charges or credit losses on our loans receivable if we determine that the full amount of our investments are not recoverable;
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•increased costs or delays that we have incurred, and may continue to incur, if we need to reposition or transition any of our currently-leased properties to another tenant or operator, which have adversely impacted, and may continue to adversely impact, our revenues and results of operations;
•risks related to lawsuits and regulatory enforcement actions related to pandemic outbreaks involving us, our tenants, operators or borrowers, including increases in the costs of business, negative publicity and/or further decreases in occupancy and/or profitability at our facilities;
•the expiration, or lack of enforcement, of liability immunity for health care providers in relation to a qualified pandemic under the Public Readiness and Emergency Preparedness Act (the “PREP Act”);
•complete or partial closures of, or other operational issues at, one or more of our properties are used as healthcare properties, we are impacted by the risks associated with healthcare reform. Legislative proposals are introducedresulting from government actions or proposed each year that would introduce major changes in the healthcare system, either nationally or at the state level. We cannot accurately predict whether any future legislative proposals will be adopted or, if adopted, what effect, if any, these proposals would havedirectives;
•limitations on our tenants and, thus, our business.
•our ability to us.continue to make cash distributions to our stockholders commensurate with historical levels; and
The extent to which alsothe COVID-19 pandemic, or other future health crises, may impact our business. For instance,business, results of operations, cash flows and financial condition depends on April 1, 2014, President Obama signedmany factors which are highly uncertain and are difficult to predict. These factors include, but are not limited to, the Protecting Accessduration and spread of any outbreak, the timing, distribution and efficacy of vaccines and other treatments, Unites States and foreign government actions to Medicare Act of 2014, which, among other things, requiresrespond to the CMSoutbreak, and how quickly and to measure, track,what extent normal operation conditions can resume.
Unstable market and publish readmission rates of SNFs by 2017 and implement a value-based purchasing program for SNFs (the “SNF VBP Program”), which commenced October 1, 2018. The SNF VBP Program increases Medicare reimbursement rates for SNFs that achieve certain levels of quality performance measures developed by CMS, relative to other facilities. The value-based payments authorized by the SNF VBP Program are funded by reducing Medicare payment for all SNFs by 2% and redistributing up to 70% of those funds to high-performing SNFs. However, there is no assurance that payments made by CMS as a result of the SNF VBP Program will be sufficient to cover a facility’s costs. If Medicare reimbursement provided to our healthcare tenants is reduced under the SNF VBP Program, that reductioneconomic conditions may have anserious adverse impact on the ability of our tenants to meet their obligations to us.
Global credit and other third-party payors. More generally,financial markets have experienced extreme volatility and because of the dynamic nature of the legislative and regulatory environment for health care products and services, and in light of existing federal budgetary concerns, we cannot predict the impact that broad-based, far-reaching legislative or regulatory changes could have on the U.S. economy, our business or that of our operators and tenants. The failure of any of our tenants to comply with these laws, requirements and regulations could materially and adversely affect their ability to meet their financial and contractual obligations to us.
Our tenants depend on reimbursement from government and other third-party payors and if reimbursement rates from such payors are reduced by future legislative reform, it could cause our tenants’ revenues to decline and could affect their ability to meet their obligations to us.
Sometimes, governmental payors freeze or reduce payments to healthcare providers, or provide annual reimbursement rate increases that are smaller than expected, due to budgetary and other pressures. Healthcare reimbursement will likely continue to be of significant importance to federal and state authorities. For example, the federal government and a number of states are currently managing budget deficits and, as a result, many states are focusing on the reduction of expenditures under their Medicaid programs, which may result in a freeze on Medicaid rates or a decrease in reimbursement rates for our tenants. The need to control Medicaid expenditures may be exacerbated by the potential for increased enrollment in Medicaid due to unemployment and declines in family incomes. These potential reductions could be compounded by the potential for federal cost-cutting efforts that could lead to reductions in reimbursement to our tenants under both the Medicaid and Medicare
programs. While we cannot make any assessment as to the ultimate timing or the effect that any future legislative reforms may have on our tenants’ costs of doing business and on the amount of reimbursement by government and other third-party payors, potential reductions in Medicaid and Medicare reimbursement, or in non-governmental third-party payor reimbursement, to our tenants could reduce the revenues of our tenants and their ability to meet their obligations to us.
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We receive substantially all of our income as rental payments under leases of our properties. We have no control over the success or failure of our tenants’ businesses and, at any time, any of our tenants may experience a downturn in its business that may weaken its financial condition. As a result, our tenants have in the past, and may in the future, fail to make rent payments when due, or our tenants may declare bankruptcy.
If a tenant is unable to comply with the terms of its lease, we may be forced to write off unpaid amounts due to us from the tenant, move to a cash basis method of accounting for recognizing rental revenuesincome from the tenant or otherwise modify the tenant’s lease with such tenant in ways that are unfavorable to us. Alternatively, the failure of a tenant to perform under a lease could require us to declare a default, repossess the property, find a suitable replacement tenant, hire third-party managers to operate the property or sell the property. See Note 2, Summary of Significant Accounting Policies and Note 3, Real Estate Investments, Net for further information.
If one or more of our tenants files for bankruptcy relief, the U.S. Bankruptcy Code provides that a debtor has the option to assume or reject the unexpired lease within a certain period of time. Any bankruptcy filing by or relating to one of our tenants could bar all efforts by us to collect pre-bankruptcy debts from that tenant or seize its property. A tenant bankruptcy could also delay our efforts to collect past due balances under the leases and could ultimately preclude collection of all or a portion of these sums. It is possible that we may recover substantially less than the full value of any unsecured claims we hold, if any, which may have a material adverse effect on our business, financial condition and results of operations, and our ability to make distributions to our stockholders. Furthermore, dealing with a tenant’s bankruptcy or other default may divert management’s attention and cause us to incur substantial legal and other costs. Additionally, because we lease many of our properties to healthcare providers who provide long-term custodial care to the elderly, evicting operators for failure to pay rent while the property is occupied typically involves specific procedural or regulatory requirements and may not be successful. Even if eviction is possible, we may determine not to do so due to reputational or other risks.
If we or our tenants terminate or do not renew thetheir leases for our properties,with us, we would attempt to reposition thosethe properties with another tenant or operator. Rental payments on such properties could decline or cease altogether while we reposition the properties with a suitable replacement tenant or operator and we may be required to fund certain expenses and obligations (e.g., real estate taxes, debt costs and maintenance expenses) to preserve the value of, and avoid the imposition of liens on, such properties while they are being repositioned.
Healthcare facilities are typically highly customized and may not be easily adapted to non-healthcare-related uses. The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure and security, are costly and at times tenant-specific. A new or replacement tenant to operate one or more of our healthcare facilities may require different features in a property, depending on that tenant’s particular operations. If a current tenant is unable to pay rent and vacates a property, we may incur substantial expenditures to modify a property before we are able to secure another tenant. Also, if the property needs to be renovated to accommodate multiple tenants, weSupply chain volatility and labor shortages may incur substantial expenditures before we are able to release the space.increase these construction costs. In addition, approvals of local authorities for suchany required modifications and/or renovations may be necessary, resulting in delays in transitioning a facility to a new tenant. These expenditures or renovations and delays could materially and adversely affect our business, financial condition or results of operations.
In addition, we may fail to identify suitable replacements or enter into leases or other arrangements with new tenants or operators on a timely basis or on terms as favorable to us as our current leases, if at all. OnceIf we experience a significant number of properties not under a lease due to the inability to find suitable replacement tenants or successfully reposition the property, our operating expenses could increase significantly. Even after a suitable replacement tenant or operator has taken over operation of a property, it may still take an extended period of time before such property is fully repositioned and value restored, if at all. Any of these results could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to stockholders.
The geographic concentration of some of our facilities could leave us vulnerable to an economic downturn, regulatory changes or acts of nature in those areas.
Our facilities located in Texas and Louisiana are especially susceptible to natural disasters such as hurricanes, tornadoes and flooding, and our facilities located in California are particularly susceptible to natural disasters such as fires, earthquakes
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and mudslides. These types of natural disasters will likely increase in number, scope and intensity as a result of climate change. Further, these acts of nature may cause disruption to our tenants, their employees and our facilities, which could have an adverse impact on our tenants’ patients and businesses. In order to provide patient care, for their patients, our tenants are dependent on consistent and reliable delivery of food, pharmaceuticals, utilities and other goods to our facilities, and the availability of employees to provide services at the facilities. If the power supply, delivery of goods or the ability of employees to reach our facilities is interrupted in any material respect due to a natural disaster or other reasons, it would have a significant impact on our facilities and our tenants’ businesses at those facilities. Furthermore, the impact, or impending threat, of a natural disaster may require that our tenants evacuate one or more facilities, which would be costly and would involve risks, including potentially fatal risks, for the patients at such facilities. The impact of disasters and similar events is inherently uncertain. Such events could harm our tenants’ patients and employees, severely damage or destroy one or more of our facilities, harm our tenants’ business, reputation and financial performance, or otherwise cause our tenants’ businesses to suffer in ways that we currently cannot predict.
In addition, to the extent that significant changes in the climate occur in areas where our properties are located, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties and could also require us to spend more on our new development properties without a corresponding increase in revenue.
We pursue property acquisitions of additional properties and seek other strategic opportunities in the ordinary course of our business, which may result in the use of a significant amountusage of management resources or significant costs, and we may not fully realize the potential benefits of such transactions.
We regularly review, potential transactionsevaluate, engage in order to maximize stockholder value. Wediscussions regarding, and pursue acquisitions of additional properties and seek acquisitions and other strategic opportunities in the ordinary course of business in order to maximize stockholder value. We may devote a significant amount of our business. Accordingly, we are often engagedmanagement resources to, and incur significant costs in evaluating potentialconnection with, such transactions, and other strategic alternatives. In addition, from time to time, we engage in discussions thatwhich may result in one or more transactions. Although there is uncertainty that any of these discussions willnot result in definitive agreements or the completion of any transaction we may devote a significant amount of our management resources to such a transaction, whichand could negatively impact our operations. We may incur significant costs in connection with seeking acquisitions or other strategic opportunities regardless of whether the transaction is completed and in combining our operations if such a transaction is completed. In addition, there is no assurance that we will fully realize the potential benefits of any past or future acquisition or strategic transaction.
Additionally, from time to time, we may invest in preferred equity interests in joint ventures. Our use of joint ventures may be subject to risks that may not be present with other ownership methods. Our joint ventures may involve property development, which presents additional risks that could render a development project less profitable or not profitable at all and, under certain circumstances, may prevent completion of development activities once undertaken.
Increased competition has resulted and may further result in lower net revenues for some of our tenants and may affect their ability to meet their financial and other contractual obligations to us.
The healthcare industry is highly competitive. The occupancy levels at, and results of operations from, our facilities are dependent on our ability and the ability of our tenants to compete with other tenants and operators on a number of different levels, including the quality of care provided, reputation, the physical appearance of a facility, price, the range of services offered, family preference, amenities, alternatives for healthcare delivery, the supply of competing properties, physicians, staff, referral sources, location, and the size and demographics of the population in the surrounding area. Operating expenses such as food, utilities, taxes, insurance and rent or debt service continue to increase. In addition, our tenants face an increasingly competitive labor market for skilled management personnel and nurses together with Medicaid reimbursement in some states that does not cover the full cost of caring for residents. Significant turnover, or a shortage of nurses or other trained personnel or general inflationary pressures on wages, may force tenants to enhance pay and benefits packages to compete effectively for skilled personnel, or to use more expensive contract personnel, but they may be unable to offset these added costs by increasing the rates charged to residents. Any increase in labor costs and other property operating expenses or any failure by our tenants to attract and retain qualified personnel could reduce the revenues of our tenants and their ability to meet their obligations to us.
Our tenants also compete with numerous other companies providing similar healthcare services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. We cannot be certain that our tenants will be able to achieve occupancy and rate levels, or manage their expenses, in a way that
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will enable them to meet all of their obligations to us. Further, many competing companies may have resources and attributes that are superior to those of our tenants. They may encounter increased competition that could limit their ability to maintain or attract residents or expand their businesses or to manage their expenses, either of which could adversely affect their ability to meet their obligations to us, potentially decreasing our revenues, impairing our assets, and/or increasing our collection and dispute costs.
In addition, if development of seniorseniors housing facilities outpaces demand for those assets in markets in which we are located, those markets may become saturated and our seniorseniors housing tenants and operators could experience decreased occupancy, which may affect their ability to meet their financial and other contractual obligations to us.
Required regulatory approvals can delay or prohibit transfers of our healthcare properties, which could result in periods in which we are unable to receive rent for such properties.
Our tenants that operate SNFs and other healthcare facilities must be licensed under applicable state law and, depending upon the type of facility, certified or approved as providers under the Medicare and/or Medicaid programs. Prior to the transfer of the operations of such healthcare properties to successor operators, the new operator generally must become licensed under state law and, in certain states, receive change of ownership approvals under certificate of need laws (which provide for a certification that the state has made a determination that a need exists for the beds located on the property) and, if applicable, file for a Medicare and Medicaid change of ownership (commonly referred to as a CHOW). If anownership. Upon termination or expiration of existing lease is terminatedleases, delays or expires and athe failure of the new tenant is found, then any delays in the new tenant receiving regulatory approvals from the applicable federal, state or local government agencies, or the inability to receive such approvals, may prolong the period during which we are unable to collect the applicable rent and the property may experience performance declines. We could also incur substantial additional expenses in connection with any licensing, receivership or change of ownership proceedings.
We may not be able to sell properties when we desire because real estate investments are relatively illiquid, which could materially and adversely affect our business, financial position or results of operations.
Real estate investments are generally cannot be sold quickly.illiquid. As a result, we may not be ableunable to vary our portfolio promptly in response to changes in the real estate market. A downturn in the real estate market could materially and adversely affect the value of our properties and our ability to sell such properties for acceptable prices or on other acceptable terms. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property or portfolio of properties. These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could materially and adversely affect our business, financial position or results of operations and our ability to pay dividends and make distributions.
We or our tenants may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expenses.
Our lease agreements with operators require that the tenant maintain general and professional liability insurance and comprehensive liability and hazard insurance. We maintain customary insurance for the one ILF that we own and operate. However, there are certain types of losses (including, but not limited to, losses arising from environmental conditions or of a catastrophic nature, such as earthquakes, wildfires, hurricanes and floods) that may be uninsurable or not economically insurable. In addition, from time to time insurance markets change, with carriers entering or exiting the general and professional liability, property and casualty, business interruption, employment practices and other lines of insurance for the healthcare industry upon which our tenants rely for protection from the effects of accidents or unanticipated claims, sometimes resulting in premium increases that make procuring customary coverages uneconomical. Insurance coverage may not be sufficientinsufficient to pay the full current market value or current replacement cost of aany loss. Inflation, changes in tort liability laws, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to protect a tenant in a liability claim or replace a property after such property has been damaged or destroyed. Under such circumstances, the insurance proceeds received might not be adequate to restore the economic position with respect to such tenant or property.
If one of our tenants experiences a material general or professional liability loss that is uninsured or that exceeds policy coverage limits, it may be unable to satisfy its lease payment obligations to us under its lease with us. If one of our properties experiences a loss that is uninsured or that exceeds policy coverage limits, we could lose the capital invested in the damaged property as well as the anticipated future cash flows from the property. If the damaged property is subject to recourse indebtedness, we could continue to be liable for the indebtedness even if the property is irreparably damaged.
In addition, even if damage to our properties is covered by insurance, a disruption of business disruptions caused by a casualty event may result in loss oflost revenue for our tenants or us. Any business interruptionus for which insurance may not fully compensate them or us for such loss of revenue. If one of our tenants experiences such a loss, it may be unable to satisfy its lease payment obligations to us.
We are, and may continue to be, exposed to contingent rent escalators, which could hinder our profitability and growth.
We derive revenue primarily by leasing our assets under long-term triple-net leases with rental rates that, subject to certain limitations, are generally fixed with annual rent escalations contingent on changes in the Consumer Price Index, subject to maximum fixed percentages. If the Consumer Price Index does not increase, our revenues may not increase. In addition, if economic conditions result in significant increases in the Consumer Price Index, but the escalations under our leases are capped, our growth and profitability also may be limited.
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Risks Related to Laws and Regulations
Healthcare reform legislation impacts cannot accurately be predicted and could adversely affect our results of operations.
We and the healthcare operators leasing our properties depend on the healthcare industry and are susceptible to risks associated with healthcare reform. Legislative proposals are introduced each year that would introduce major changes in the healthcare system, both nationally and at the state level. For example, we believe that efforts may be made to, among other things, transition Federal payment programs further in the direction of value based care, but we cannot predict whether or in what form any of these measures may be enacted, or what effect they would have on our business or the businesses of our tenants if enacted. Efforts may also be made to reduce the age at which individuals become eligible for Medicare, which could have an adverse impact on our tenants because Medicare sometimes reimburses long term care providers at rates lower than those paid by commercial payors. We also believe that additional resources may be dedicated to regulatory enforcement, which could increase our tenants’ costs of doing business and negatively impact their ability to pay their rent obligations to us. Additional stimulus funding for state and local governments may have a positive impact on our tenants because it may alleviate some pressures on state and local governments to reduce overall Medicaid expenditures.
Our tenants are subject to extensive federal, state and local laws and regulations affecting the healthcare industry that include those relating to, among other things, licensure, conduct of operations, ownership of facilities, addition of facilities and equipment, allowable costs, services, prices for services, qualified beneficiaries, quality of care, patient rights and insurance, fraudulent or abusive behavior, and financial and other arrangements that may be entered into by healthcare providers. See “Government Regulation, Licensing and Enforcement” in Item 1 of this Annual Report on Form 10-K for more information. If our tenants or operators fail to comply with the laws, regulations and other requirements applicable to their businesses and the operation of our properties, they could become ineligible to receive reimbursement from governmental and private third-party payor programs, face bans on admissions of new patients or residents, suffer civil or criminal penalties or be required to make significant operational changes. Changes in enforcement policies by federal and state governments have also resulted in a significant increase in inspection rates, citations of regulatory deficiencies and sanctions, including terminations from Medicare and Medicaid programs, bars on Medicare and Medicaid payments for new admissions, civil monetary penalties and criminal penalties. Our tenants and operators could be forced to expend considerable resources responding to an investigation, lawsuit or other enforcement action under applicable laws or regulations. Additionally, if our tenants’ residents do not have insurance, it could adversely impact the tenants’ ability to satisfy their obligation to us. We cannot predict whether any future legislative proposals will be adopted or, if adopted, the impact these proposals would have on our tenants or our business.
Tenants that fail to comply with applicable requirements of governmental reimbursement programs, such as Medicare or Medicaid, may cease to operate or be unable to meet their financial and other contractual obligations to us.
Our tenants are subject to the following risks, among others, relating to governmental healthcare reimbursement programs: statutory and regulatory changes; retroactive rate adjustments; recovery of program overpayments or set-offs; administrative rulings; policy interpretations; payment or other delays by fiscal intermediaries or carriers; government funding restrictions (at a program level or with respect to specific facilities); and interruption or delays in payments due to any ongoing governmental investigations and audits.
We expect healthcare reimbursement will continue to be a significant focus for federal and state authorities in their cost control efforts. We cannot predict the timing or effects of any future legislative reforms on our tenants’ business costs or government and other third-party payor reimbursement. More generally, because of the dynamic nature of the legislative and regulatory environment for health care products and services, and in light of existing federal budgetary concerns, we cannot predict the impact that broad-based, far-reaching legislative or regulatory changes could have on the U.S. economy, our business or that of our operators and tenants. The failure of any of our tenants to comply with these laws, requirements and regulations could materially and adversely affect their ability to meet their financial and contractual obligations to us.
Government investigations and enforcement actions brought against the health care industry have increased dramatically over the past several years and are expected to continue, particularly in the area of Medicare/Medicaid false claims, as well as an increase in the intensity of enforcement actions resulting from these investigations. Some of these enforcement actions represent novel legal theories and expansions in the application of the False Claims Act.
Medicare, Medicaid and other governmental health care payors require reporting of extensive financial information in a specific format or content. These requirements are technical and complex and may not be properly implemented by billing or reporting personnel. For certain required information, False Claims Act violations may occur without any intent to defraud by mere negligence or recklessness in information submission to the government. New billing systems, medical procedures and procedures for which there is not clear guidance may all result in liability. In addition, violations of the Anti-Kickback Law or Stark Law and, for provider tenants who received pandemic relief funds, the failure to comply with terms and conditions related to receipt or repayment of those funds, may form the basis for a federal False Claims Act violation. See “Government Regulation, Licensing and Enforcement,” in Item 1 of this Annual Report on Form 10-K for more information.
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Many states have adopted laws similar to the False Claims Act, some of which apply to claims submitted to private and commercial payors, not just governmental payors. Violations of such laws by an operator of a health care property could result in loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from government healthcare programs, civil liability, and in certain limited instances, criminal penalties, loss of license or closure of the property and/or the incurrence of considerable costs arising from an investigation or regulatory action.
If we or our tenants fail to adhere to applicable privacy and data security laws, or experience a data security incident or breach, this could have a material adverse effect on us underor on our tenants’ ability to meet their obligations to us.
We and our tenants are subject to HIPAA and various other state and federal laws that relate to privacy and data security, including the reporting of data breaches involving personal information as discussed in “Government Regulation, Licensing and Enforcement - Privacy, Security and Data Breach Notification Laws” in Item 1 of this Annual Report on Form 10-K. Failure to comply with these requirements could have a materially adverse effect on us and the ability of our tenants to meet their obligations to us. Furthermore, the adoption of new privacy, security and data breach notification laws at the federal and state level could require us or our tenants to incur significant compliance costs. In addition, the cost and operational consequences of responding to cybersecurity incidents and breaches and implementing remediation measures could be significant.
While we and our tenants maintain various security controls, there is a risk of data security incidents or breaches resulting from unintentional or deliberate acts by third parties or insiders attempting to obtain unauthorized access to information, destroy or manipulate data, or disrupt or sabotage information systems. The trend toward increased remote work and rapid implementation of telehealth within the health care industry in response to the COVID-19 pandemic may have created new or increased cyber risks. Cyber incidents range from individual attempts to gain unauthorized access to our IT systems to sophisticated attacks by hacking groups and nation-state actors. Information technology systems are a vital part of the business of our Company and our tenants, and a security incident or breach could result in a material loss of business, business interruption, loss of patient or other critical data, regulatory enforcement, substantial legal liability and reputational harm. Despite the deployment of commercially reasonable efforts and sophisticated techniques to prevent cyber incidents, information systems remain potentially vulnerable because the techniques used by hackers continue to evolve and are designed not to be detected. In fact, some unauthorized access may not be detected for an extended period of time. As a result, we or our tenants may suffer cybersecurity incidents where we or our tenants have implemented cybersecurity protections. A data security incident or breach occurring at or involving the Company could have a material adverse impact on our Company. Where the data security incident or breach occurs at or involves a tenant, this could jeopardize the tenant’s ability to fulfill its obligations to us.
Tenants that fail to comply with federal, state and local licensure, certification and inspection laws and regulations may cease to operate our healthcare facilities or be unable to meet their financial and other contractual obligations to us.
The healthcare operators to whom we lease properties are subject to extensive federal, state, local and industry-related licensure, certification and inspection laws, regulations and standards. Our tenants’ failure to comply with any of these laws, regulations or standards could result in adverse publicity and reputational harm as well as penalties which may include loss or restriction of license, loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from federal and state healthcare programs, or closure of the facility. Though the regulatory environment in which SNFs operate is more restrictive than for ALFs, ALFs face similar penalties for noncompliance with applicable legal requirements. For example, operations at our properties may require a license, registration, certificate of need, provider agreement or certification. Failure of any tenant to obtain, or the loss or imposition of restrictions on any required license, registration, certificate of need, provider agreement or certification would prevent a facility from operating in the manner intended by such tenant. Additionally, failure of our tenants to generally comply with applicable laws and regulations could adversely affect facilities owned by us, result in adverse publicity and reputational harm, and therefore could materially and adversely affect us. See “Government Regulation, Licensing and Enforcement - Healthcare Licensure and Certificate of Need” in Item 1 of this Annual Report on Form 10-K for additional information.
Environmental compliance costs and liabilities associated with real estate properties owned by us may materially impair the value of those investments.properties owned by us.
Under various federal, state and local laws, ordinances and regulations, as a current or previous owner of real estate, we may be required to investigate and clean up certain hazardous or toxic substances or petroleum released at a property, and may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by the third parties in connection with the contamination. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs it incurs in connection with the contamination. Neither we nor our tenants carry environmental insurance on our properties. Although we generally require our tenants, as operators of our healthcare properties, to indemnify us for environmental liabilities they cause, such liabilities could exceed the financial ability of the tenant to indemnify us or the value of the contaminated property. The presence of contaminationContamination or the failure to remediate contamination may materially adversely affect our ability to sell or lease the real estate or to borrow using the real estate as collateral. As the owner of a site, we may also be held liable to third parties for damages and injuries resulting from environmental contamination emanating from the site. Although we will be generally indemnified byrequire our tenants, as operators of our healthcare properties, to indemnify us
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for contamination caused by them, these indemnities may not adequately cover all environmental costs.liabilities they cause, such liabilities could exceed the financial ability of the tenant to indemnify us or the value of the contaminated property. We may also experience environmental liabilities arising from conditions not known to us.
Risks Related to Our Status as a REIT
If we do notfail to qualify to be taxed as a REIT, or fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which could adversely affect our ability to raise capital or service our indebtedness.
We currently operate, and intend to continue to operate, in a manner that will allow us to continue to qualify to be taxed as a REIT for U.S. federal income tax purposes. We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2014. We received an opinion of our counsel with respect to our qualification as a REIT in connection with the Spin-Off.becoming a public company. Investors should be aware, however, that opinions of advisors are not binding on the IRS or any court. The opinion of our counsel represents only the view of our counsel based on its review and analysis of existing law and on certain representations as to factual matters and covenants made by us, including representations relating to the values of our assets and the sources of our income. The opinion is expressed as of the date issued. Our counsel has no obligation to advise us or the holders of any of our securities of any subsequent change in the matters stated, represented or assumed or of any subsequent change in applicable law. Furthermore, both the validity of the opinion of our counsel and our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis, the results of which will not be monitored by our counsel. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.
If we were to fail to qualify to be taxed as a REIT in any taxable year, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to our stockholders would not be deductible by us in computing our taxable income. Any resulting corporate liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of our common stock. Unless we were entitled to relief under certaincertain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT, which could adversely affect our financial condition and results of operations.
Legislative or other actions affecting REITs could have a negative effect on us.
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury (the “Treasury”). Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect our investors or us. We cannot predict how changes in the tax laws, including any tax reform called for by the newcurrent presidential administration, might affect our investors or us. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify to be taxed as a REIT or the U.S. federal income tax consequences to our investors and us of such qualification.
No prediction can be made regarding whether new legislation or regulation (including new tax measures) will be enacted by legislative bodies or governmental agencies, nor can we predict what consequences would result from this legislation or regulation. Accordingly, no assurance can be given that the currently anticipated tax treatment of an investment will not be modified by legislative, judicial or administrative changes, possibly with retroactive effect.
We could fail to qualify to be taxed as a REIT if income we receive from our tenants is not treated as qualifying income.
Under applicable provisions of the Code, we will not be treated as a REIT unless we satisfy various requirements, including requirements relating to the sources of our gross income. Rents received or accrued by us from our tenants will not be treated as qualifying rent for purposes of these requirements if the leases are not respected as true leases for U.S. federal income tax purposes and are instead treated as service contracts, joint ventures or some other type of arrangement.arrangements. If the leases are not respected as true leases for U.S. federal income tax purposes, we will likely fail to qualify to be taxed as a REIT.
In addition, subject to certain exceptions, rents received or accrued by us from our tenants will not be treated as qualifying rent for purposes of these requirements if we or a beneficial or constructive owner of 10% or more of our stock beneficially or constructively owns 10% or more of the total combined voting power of all classes of stock entitled to vote or 10% or more of the total value of all classes of stock. CareTrust REIT’s charter provides for restrictions on ownership and transfer of CareTrust REIT’s shares of stock, including restrictions on such ownership or transfer that would cause the rents received or accrued by us from our tenants to be treated as non-qualifying rent for purposes of the REIT gross income
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requirements. Nevertheless, there can be no assurance that such restrictions will be effective in ensuring that rents received or accrued by us from our tenants will not be treated as qualifying rent for purposes of REIT qualification requirements.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable by U.S. corporations to U.S. stockholders that are individuals, trusts and estates is currently 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates. However, for taxable years beginning after December 31, 2017 and before January 1, 2026, under the recently enacted Tax Cuts and Jobs Act, noncorporate taxpayers may deduct up to 20% of certain qualified business income, including "qualified REIT dividends" (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends, together with the recently reduced corporate tax rate (currently, 21%), could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our stock. Although these rules do not
adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our stock.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, in order for us to qualify to be taxed as a REIT (assuming that certain other requirements are also satisfied) so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Code.
Our funds from operations are generated primarily by rents paid under leases with our tenants. From time to time, we may generate taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices or distribute amounts that would otherwise be invested in future acquisitions in order to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid being subject to corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity.
Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.
Even if we remain qualified for taxation as a REIT, we may be subject to certain U.S. federal, state, and local taxes on our income and assets, including taxes on any undistributed income and state or local income, property and transfer taxes. For example, we may hold some of our assets or conduct certain of our activities through one or more taxable REIT subsidiaries (each, a “TRS”) or other subsidiary corporations that will be subject to U.S. federal, state, and local corporate-level income taxes as regular C corporations. In addition, we may incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm’s-length basis. Any of these taxes would decrease cash available for distribution to our stockholders.
Complying with REIT requirements may cause us to forgo otherwise attractive acquisition opportunities or liquidate otherwise attractive investments.
To qualify to be taxed as a REIT for U.S. federal income tax purposes, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code). The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a TRS) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a TRS) can consist of the securities of any one issuer, and no more than 25% (20% for taxable years beginning after December 31, 2017) of the value of our total assets can be represented by securities of one or more TRSs. Further, for taxable years beginning after December 31, 2015, no more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” (as defined in the Code). If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate or forgo otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Income from certain hedging transactions that we may enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income
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tests that apply to REITs, provided that certain identification requirements are met. For taxable years beginning after December 31, 2015, income from new transactions entered into to hedge the income or loss from prior hedging transactions, where the indebtedness or property which was the subject of the prior hedging transaction was extinguished or disposed of, will not constitute gross income for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions or fail to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we may be required to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because the TRS may be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in the TRS will generally not provide any tax benefit, except that such losses could theoretically be carried back or forward against past or future taxable income in the TRS.
Risks Related to Our Capital StructureResources and Indebtedness
among others: require us to dedicate a substantial portion of our cash flow from operations to make principal and interest payments on our indebtedness, thereby reducing our cash flow available to fund working capital, dividends, capital expenditures and acquisitions and other general corporate purposes;
require us to maintain certain debt coverage and other financial ratios at specified levels, thereby reducing our financial flexibility;
make it more difficult for us to satisfy our financial obligations, including the Notes and borrowings under the Second Amended Credit Facility;
Facility (as defined below); increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;
limit, along with the financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds on favorable terms or at all to expand our business or ease liquidity constraints;
limit our ability to refinance all or a portion of our indebtedness on or before maturity on the same or more favorable terms or at all;
require us to dispose of one or more of our properties at disadvantageous prices in order to service our indebtedness or to raise funds to pay such indebtedness at maturity; andmaturity.
We may be unable to service our indebtedness.
Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our future financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the international banking and capital
markets. Our business may fail to generate sufficient cash flow from operations or future borrowings may be unavailable to us under the Second Amended Credit Facility or from other sources in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs. If we are unable to meet our debt obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt. We may be unable to refinance any of oursuch debt on commercially reasonable terms or at all. If we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as asset sales, equity issuances and/or negotiations with our lenders to restructure the applicablesuch debt. The Second Amended Credit Agreement and the indenture governing the Notes restrict, and market or business conditions may limit our ability to take, some or all of these actions. Any debt restructuring or refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations. In addition, the Amended Credit Agreement and the indenture governing the Notes permit us to incur additional debt, including secured debt, subject to the satisfaction of certain conditions.
We rely on our subsidiaries for our operating funds.
We conduct our operations through subsidiaries and depend on our subsidiaries for the funds necessary to operate and repay our debt obligations.obligations, including funds transfers to us which are necessary to make the payments due under the Notes. The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by us and all of our existing and future subsidiaries (other than CTR Partnership, L.P. and CareTrust Capital Corp.) that guarantee obligations under the Second Amended Credit Facility. However, under certain circumstances, one or more of our subsidiaries
30
may be released from, or may not be required to provide, a guarantee of the Notes, and in such circumstances, will not be responsible for any obligations with respect to the Notes. Each of our subsidiaries is a distinct legal entity and has no obligation, contingent or otherwise, to transfer funds to us. In addition, the ability of our subsidiaries to transfer funds to us could be restricted by the terms of subsequent financings and the indenture governing the Notes.financings.
Covenants in our debt agreements restrict our activities and could adversely affect our business.
Our debt agreements contain various covenants that limit our ability and theour subsidiaries’ ability of our subsidiaries to engage in various transactions including, as applicable:
These covenants limit our operational flexibility and could prevent us from taking advantage of business opportunities as they arise, growing our business or competing effectively. The Second Amended Credit Agreement requires us 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 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 a change of control and specified events of bankruptcy and insolvency. We are also required to maintain total unencumbered assets of at least 150% of our unsecured indebtedness under the indenture governing the Notes. Our ability to meet these requirements may be affected by events beyond our control and we may not meet these
Certain of our existing debt obligations are variable rate obligations withrequire interest and related payments thatto vary with the movement of certain indices, and in the future we may incur additional indebtedness in connection with the entry into new credit facilities or the financing of any acquisitionacquisitions or development activity. Ifactivities. Increased interest rates have increased and may continue to increase so could our interest costs for any new debt and our variable rate debt obligations under our New Revolving Facility and Term Loan. This increased costLoan, which could make the financing of any acquisition financings more costly as well asor lower our current period earnings. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing. In addition, an increase in interest ratesrate increases could decrease thecredit access third parties have to credit,globally, thereby decreasing the amount theyothers are willing to pay for our assets and consequently limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions. Further, the dividend yield on our common stock, as a percentage of the price of such common stock, will influence the price of such common stock. Thus, an increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield, which could adversely affect the market price of our common stock.
Our Second Amended Credit Agreement uses LIBORSecured Overnight Financing Rate (“SOFR”), as a reference rate for our Term Loan and Revolving Facility, such that the interest rate applicable to such loans may, at our option, be calculated based on LIBOR.SOFR. The publication of SOFR began in April 2018, and, therefore, it has a very limited history. In July 2017,addition, the U. K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intendsfuture performance of SOFR cannot be predicted based on its limited historical performance. Future levels of SOFR may bear little or no relation to phase out LIBORthe historical actual or historical indicative data. Prior observed patterns, if any, in the behavior of market variables and their relation to SOFR, such as correlations, may change in the future. Because only limited historical data has been released by the end of 2021. The U.S. Federal Reserve has begun publishingBank of New York, such analysis inherently involves assumptions, estimates and approximations. The future performance of SOFR is impossible to predict and therefore no future performance of SOFR may be inferred from any of the historical actual or historical indicative data. Hypothetical or historical performance data are not indicative of, and have no bearing on, the potential performance of SOFR or any SOFR-linked notes.
SOFR is a Secured Overnight Funding Rate (“SOFR”)relatively new rate, and the Federal Reserve Bank of New York (or a successor) or CME Group Benchmark Administration Ltd., as administrator of SOFR, may make methodological or other changes that could change the value of SOFR, including changes related to the methods by which SOFR is intendedcalculated, eligibility criteria applicable to replace U.S. dollar LIBOR,the transactions used to calculate SOFR, or the averages or periods used to report SOFR. The administrator of SOFR may withdraw, modify, amend, suspend or discontinue the calculation or dissemination of SOFR in its sole discretion and without notice and has proposedno obligation to consider the interests of holders of SOFR debt in calculating, withdrawing, modifying, amending, suspending or discontinuing SOFR.
As a paced market transition plan to SOFR from LIBOR. Organizations are currently working on industry wide and company specific transition plans as it relates to financial and other derivative contracts exposed to LIBOR. Additionally, plans for alternative reference rates for other currencies have also been announced. We have material borrowings under our Amended Credit Agreement that are indexed to LIBOR. At this time, we cannot predict how markets will respond to these proposed alternative rates or the effect of any changes to LIBOR or the discontinuation of LIBOR. However, if LIBOR is no longer available, if future rates based upon a successor reference rate such as SOFR (or a new method of calculating LIBOR) are higher than LIBOR rates as currently determined or if our lenders have increased costs due to changes in LIBOR,result, we may experience potentialvolatility or increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.
A downgrade of our credit rating downgrade could impair our ability to obtain additional debtdebt financing on favorable terms, if at all, and significantly reduce the trading price of our common stock.
Our credit rating can affect the amount, type and typeterms of capital financings we can access, as well as the terms of any financing we may obtain. Factors that may affectaffecting our credit rating include, among other things,others, our financial performance, our success in raising sufficient equity capital, adverse changes in our debt and
31
fixed charge coverage ratios, our capital structure, and level of indebtedness and pending or future changes in the regulatory framework applicable to our operators and our industry. We may be unable to maintain our current credit ratings, and in the event that our current credit ratings deteriorate, a ratings agency downgrades our credit rating or places our rating under watch or review for possible downgrade, we would likely incur higher borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments and the trading price of our common stock may decline.
Risks Related To Our Common Stock and Organizational Documents
Our charter restricts the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company.
In order for us to qualify to be taxed as a REIT, not more than 50% in value of our outstanding shares of stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year after our first taxable year as a REIT. Additionally, at least 100 persons must beneficially own our stock during at least 335 days of a taxable year (other than our first taxable year as a REIT). Our charter, with certain exceptions, authorizes our board of directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Our charter also provides that, unless exempted by the board of directors, no person may own more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock, or more than 9.8% in value of the outstanding shares of all classes or series of our stock. The constructive ownership rules are complex and may cause shares of stock owned directly or
constructively by a group of related individuals or entities to be constructively owned by one individual or entity. These ownership limits could delay or prevent a transaction or a change in control of us that might involve a premium price for shares of our stock or otherwise be in theour stockholders’ best interests of our stockholders.interests. The acquisition of less than 9.8% of our outstanding stock by an individual or entity could cause that individual or entity to own constructively in excess of 9.8% in value of our outstanding stock, and thus violate our charter’s ownership limit. Our charter also prohibits any person from owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify to be taxed as a REIT. In addition, our charter provides that (i) no person shall beneficially or constructively own shares of stock to the extent such beneficial or constructive ownership of stock would result in us failing to qualify as a “domestically controlled qualified investment entity” within the meaning of Section 897(h) of the Code, and (ii) no person shall beneficially or constructively own shares of stock to the extent such beneficial or constructive ownership would cause us to own, beneficially or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in a tenant of our real property. Any attempt to own or transfer shares of our stock in violation of these restrictions may result in the transfer being automatically void.
Maryland law and provisions in our charter and bylaws may delay or prevent takeover attempts by third parties and therefore inhibit our stockholders from realizing a premium on their stock.stock by delaying or preventing takeover attempts by third parties.
Our charter, and bylaws and Maryland law contain provisions that are intended to deter coercive takeover practicestakeovers and inadequate takeover bids and to encourage prospective acquirors to negotiate with our board of directors rather than to attempt a hostile takeover. As currently in effect, our charter and bylaws, among other things, (1) contain transfer and ownership restrictions on the percentage by number and value of outstanding shares of our stock that may be owned or acquired by any stockholder; (2) provide thatprohibit stockholders are not allowed to actaction by non-unanimous written consent; (3) permit the board of directors, without further action of the stockholders, to amend the charter to increase or decrease the aggregate number of authorized shares or the number of shares of any class or series that we have the authority to issue;may be issued; (4) permit the board of directors to classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares; (5) establish certain advance notice procedures for stockholder proposals, and provide procedures for the nomination of candidates for our board of directors; (6) provide that special meetings of stockholders may only be called by the Company or upon written request of 25% of all the votes entitled to be cast at such meeting; (7) provide that a director may only be removed by stockholders for cause and upon the vote of two-thirds of the outstanding shares of common stock; and (8) provide forrequire supermajority approval requirements for amendingto amend or repealingrepeal certain provisions in our charter.charter provisions. In addition, specific anti-takeover provisions of the Maryland General Corporation Law (“MGCL”) could make it more difficult for a third party to attempt a hostile takeover. These provisions include:takeover, including:
•“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose special appraisal rights and special stockholder voting requirements on these combinations; and
•“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
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We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisionsprevent all takeovers, but they may delay, defer or prevent a change of control or other transaction even if such transaction involves a premium price for our common stock or it is in our stockholders believe that such transaction is otherwise in theirstockholders’ best interests. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
Our bylaws provide that the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland is the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us,
(ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee, (iii) any action asserting a claim arising pursuant to any provision of the MGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine, and any of our record or beneficial stockholders who commences such an action shall cooperate in a request that the action be assigned to the Court’s Business & Technology Case Management Program. This exclusive forum provision is intended to apply to claims arising under the MGCL and would not apply to claims brought pursuant to the Exchange Act of 1934 or Securities Act of 1933, each as amended, or any other claim for which the federal courts have exclusive jurisdiction. The exclusive forum provision in our bylaws will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
This exclusive forum provision may limit a stockholder's ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. In addition, stockholders who do bring a claim in the Circuit Court for Baltimore City, Maryland could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Maryland. The Circuit Court for Baltimore City, Maryland may also reach different judgments or results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. However, the enforceability of similar exclusive forum provisions in other companies' certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find this type of provision and/or the jurisdictional limitation contained therein to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find the exclusive forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions.
We rely on information technology in our operations, and trading volumeany material failure, inadequacy, interruption or security failure of that technology could harm our business.
We rely on information technology networks and systems, including the internet, to process, transmit and store electronic information, and to manage or support our business processes, including financial transactions and records, and maintaining personal information and tenant and lease data. We purchase some of our common stock may fluctuate.
Security breaches, including physical or electronic break-ins, computer viruses, malware, phishing attacks, worms, attacks by hackers or foreign governments, disruptions from unauthorized access and tampering (including through social engineering such as phishing attacks), coordinated denial-of-service attacks, impersonation of authorized users and similar incidents, can create system disruptions, shutdowns or result in a loss of company assets or unauthorized disclosure of confidential information. The risk of security incidents has generally increased as the number, intensity and sophistication of attacks and intrusions from around the world have increased. In some cases, it may be difficult to anticipate or immediately detect such incidents and the market pricedamage they cause. In addition, our technology infrastructure and information systems are vulnerable to damage or interruption from natural disasters, power loss and telecommunications failures. Failure to maintain proper function, security and availability of our common stockinformation systems and the data maintained in those systems could interrupt
33
We have and may be revised over time to adapt to changes in the future incur impairment charges, which could negatively impact our business,results of operations.
At each reporting period, we evaluate our real estate investments and other assets for impairment indicators whenever events or changes in applicable accounting rules. We cannot assure youcircumstances indicate that the carrying amount of the assets may not be recoverable. The existence of impairment indicators is based on factors such as market conditions, operator performance and legal structure. If we determine that an impairment has occurred, we are required to adjust the net carrying value of the asset, which could have a material adverse effect on our internal control over financial reporting will be effectiveresults of operations in the future or that a material weakness will not be discovered with respect to a prior period forin which we had previously believed that internal controls were effective. Matters impacting our internal controls may cause us to be unable to report our financial data on a timely basis, or may cause us to restate previously issued financial data, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reactionwrite-off occurs. For example, in the financial markets duetwelve months ended December 31, 2022, we recorded impairment charges of approximately $79.1 million, contributing to athe net loss of investor confidence in us and$7.5 million for the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in our internal control over financial reporting. This could materially adversely affect us by, for example, leading to a decline in the market price for our common stock and impairing our ability to raise capital.
We cannot assure you of our ability to pay dividends in the future.
We expect to make quarterly dividend payments in cash with the annual dividend amount no less than 90% of our annual REIT taxable income, on an annual basis, determined without regard to the dividends paid deduction and excluding any net capital gains. Our ability to pay dividends may be adversely affected by a number of factors, including the risk factors described in this annual report. Dividends are authorized by our board of directors and declared by us based upon a number of factors, including but not limited to actual results of operations, restrictions under Maryland law or applicable debt covenants, our financial condition, our taxable income, the annual distribution requirements under the REIT provisions of the Code and our operating expenses and other factorsexpenses. There is no assurance that our directors deem relevant. We cannot assure you that we will achieve investmentoperating results that will allow us to make afor specified levellevels of cash dividends or year-to-year increases in cash dividends in the future.
Furthermore, while we are required to pay dividends in order to maintain our REIT status (as described above under “Risks Related to Our Status as a REIT - REIT distribution requirements could adversely affect our ability to execute our business plan”), we may elect not to maintain our REIT status in which case we would no longer be required to pay suchand discontinue paying dividends. Moreover, evenEven if we do elect to maintain our REIT status, after completing various procedural steps, we may elect to comply with the applicable distribution requirements by distributing, under certain circumstances, a portion of the required amount in the form of shares of our common stock in lieu of cash. If we elect not to maintain our REIT status or to satisfy any required distributions in sharesEither of common stock in lieu of cash, such actionthese actions could negatively affect our business and financial condition as well as the market price of our common stock. No assurance can be given that we will pay any dividends on shares of our common stock in the future.
None.
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ITEM 2. Properties
| Lease | |||||||||||||||||||||||
| Maturity | Percent of Total | Percent of | |||||||||||||||||||||
| Year | Investment(1) | Investment | Rent(1) | Total Rent | |||||||||||||||||||
| 2024 | $ | 15,800 | 0.9 | % | $ | 1,537 | 0.8 | % | |||||||||||||||
| 2027 | 46,801 | 2.6 | % | 5,342 | 2.8 | % | |||||||||||||||||
| 2029 | 114,116 | 6.3 | % | 9,051 | 4.8 | % | |||||||||||||||||
| 2030 | 119,868 | 6.6 | % | 11,353 | 6.0 | % | |||||||||||||||||
| 2031 | 527,678 | 29.0 | % | 54,672 | 29.1 | % | |||||||||||||||||
| 2032 | 179,936 | 9.9 | % | 18,027 | 9.6 | % | |||||||||||||||||
| 2033 | 125,216 | 6.9 | % | 19,847 | 10.6 | % | |||||||||||||||||
| 2034 | 438,011 | 24.1 | % | 43,925 | 23.4 | % | |||||||||||||||||
| 2036 | 146,487 | 8.1 | % | 13,862 | 7.4 | % | |||||||||||||||||
| 2038 | 103,001 | 5.6 | % | 10,401 | 5.5 | % | |||||||||||||||||
| Total | $ | 1,816,914 | 100.0 | % | $ | 188,017 | 100.0 | % | |||||||||||||||
(1) Amounts exclude properties classified as held for sale as of December 31, 2022.
| Lease | ||||||||||
| Maturity | Percent of Total | Percent of | ||||||||
| Year | Investment(1) | Investment | Rent(1) | Total Rent | ||||||
| 2026 | $ | 48,988 | 2.9 | % | $ | 5,237 | 3.2 | % | ||
| 2027 | 41,896 | 2.5 | % | 4,894 | 3.0 | % | ||||
| 2028 | 68,193 | 4.0 | % | 7,558 | 4.6 | % | ||||
| 2029 | 148,710 | 8.8 | % | 12,199 | 7.5 | % | ||||
| 2030 | 190,540 | 11.3 | % | 16,000 | 9.8 | % | ||||
| 2031 | 536,671 | 31.7 | % | 50,800 | 31.1 | % | ||||
| 2032 | 208,443 | 12.3 | % | 19,581 | 12.0 | % | ||||
| 2033 | 210,601 | 12.5 | % | 22,767 | 14.0 | % | ||||
| 2034 | 237,078 | 14.0 | % | 24,117 | 14.8 | % | ||||
| Total | $ | 1,691,120 | 100.0 | % | $ | 163,153 | 100.0 | % | ||
The information set forth under “Portfolio Summary” in Item 1 of this Annual Report on Form 10-K is incorporated by reference herein.
The Company and its subsidiaries are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of business, but none of the Company or any of its subsidiaries is, and none of their respective properties are, the subject of any material legal proceedings. Claims and lawsuits may include matters involving general or professional liability asserted against our tenants, which are the responsibility of our tenants and for which we are entitled to be indemnified by our tenants under the insurance and indemnification provisions in the applicable leases.
None.
PART II
ITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Common Equity
Our common stock is listed on the Nasdaq Global Select MarketNew York Stock Exchange under the symbol “CTRE.”
At February 19, 2020,8, 2023, we had approximately 7943 stockholders of record.
To maintain REIT status, we are required each year to distribute to stockholders at least 90% of our annual REIT taxable income after certain adjustments. All distributions will be made by us at the discretion of our board of directors and will depend on our financial position, results of operations, cash flows, capital requirements, debt covenants (which include limits on distributions by us), applicable law, and other factors as our board of directors deems relevant. For example, while the Notes and our Second Amended Credit Agreement permit us to declare and pay any dividend or make any distribution that is necessary to maintain our REIT status, those distributions are subject to certain financial tests under the indenture governing the Notes, and therefore, the amount of cash distributions we can make to our stockholders may be limited.
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Distributions with respect to our common stock can be characterized for federal income tax purposes as taxable ordinary dividends, nondividend distributions or a combination thereof. Following is the characterization of our annual cash dividends on common stock:
| Year Ended December 31, | |||||||||||
| Common Stock | 2022 | 2021 | |||||||||
| Ordinary dividend | $ | 0.4291 | $ | 0.9411 | |||||||
| Non-dividend distributions | 0.6609 | 0.1039 | |||||||||
| Total taxable distribution | 1.0900 | 1.0450 | |||||||||
Distributions allocated from prior tax year(1) | (0.2650) | (0.2500) | |||||||||
Distributions allocated to subsequent tax year(2) | 0.2750 | 0.2650 | |||||||||
| Total distributions declared | $ | 1.1000 | $ | 1.0600 | |||||||
(1) Because our aggregate cash distributions exceeded our annual earnings and profits, the cash distribution declared in the fourth quarter of 2021 and paid in January 2022, of $0.265 per share, was treated as a 2022 distribution for federal income tax purposes.
| Year Ended December 31, | |||||||
| Common Stock | 2019 | 2018 | |||||
| Ordinary dividend | $ | 0.8120 | $ | 0.8025 | |||
| Non-dividend distributions | 0.0880 | 0.0175 | |||||
| $ | 0.9000 | $ | 0.8200 | ||||
On March 20, 2020, our board of directors authorized a share repurchase program to repurchase up to $150.0 million of outstanding shares of our common stock (the “Repurchase Program”). Repurchases under the Repurchase Program, which expires on March 31, 2023, may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by management. Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act. We expect to finance any share repurchases under the Repurchase Program using available cash and may also use short-term borrowings under the Revolving Facility. We did not repurchase any shares of our common stock under the Repurchase Program during the three monthsyears ended December 31, 2019.2022, 2021 and 2020. The Repurchase Program may be modified, discontinued or suspended at any time.
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Stock Price Performance Graph
The graph below compares the cumulative total return of our common stock, the S&P 500 Index, the S&P 500 REIT Index, the RMS (MSCI U.S. REIT Total Return Index) and the SNL U.S. REIT HealthcareRussell 2000 Index (“Russell 2000”). We plan to replace the S&P 500 Index with the Russell 2000 as we have determined that the Russell 2000 is a more comparable index for the period from January 1, 2015 to December 31, 2019.us in terms of market capitalization. Total cumulative return is based on a $100 investment in CareTrust REIT common stock and in each of the indices at the market close on December 31, 201429, 2017 and assumes quarterly reinvestment of dividends before consideration of income taxes. Stockholder returns over the indicated periods should not be considered indicative of future stock prices or stockholder returns.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG S&P 500, S&P 500 REIT INDEX, RMS, SNL US REIT HEALTHCARERUSSELL 2000 AND CARETRUST REIT, INC.
RATE OF RETURN TREND COMPARISON
(DECEMBER 31, 201429, 2017 = $100)
Stock Price Performance Graph Total Return
The stock performance graph shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933 or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act of 1933 or the Exchange ActAct.
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| December 31, | ||||||||||||||||||||||||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||||||||||||||||||||
| CareTrust REIT, Inc. | $ | 100.00 | $ | 115.79 | $ | 134.62 | $ | 153.01 | $ | 165.07 | $ | 142.46 | ||||||||||||||||||||||||||
| S&P 500 | $ | 100.00 | $ | 95.62 | $ | 125.72 | $ | 148.85 | $ | 191.58 | $ | 156.89 | ||||||||||||||||||||||||||
| RMS | $ | 100.00 | $ | 95.43 | $ | 120.09 | $ | 110.99 | $ | 158.79 | $ | 119.87 | ||||||||||||||||||||||||||
| Russell 2000 | $ | 100.00 | $ | 88.99 | $ | 111.70 | $ | 134.00 | $ | 153.85 | $ | 122.41 | ||||||||||||||||||||||||||
| S&P 500 Real Estate Index | $ | 100.00 | $ | 97.78 | $ | 126.15 | $ | 123.41 | $ | 180.42 | $ | 133.28 | ||||||||||||||||||||||||||
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ITEM 6.[Reserved]
ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K. Our historical operating results may not be comparable to our future operating results. The comparability of the selected financial data presented below is significantly affected by our acquisitions and new investments in each of the years presented. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
As of or For the Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||
| (dollars in thousands, except per share amounts) | |||||||||||||||
| Income statement data: | |||||||||||||||
| Total revenues | $ | 163,401 | $ | 156,941 | $ | 132,982 | $ | 104,679 | $ | 74,951 | |||||
| Income before provision for income taxes | 46,359 | 57,923 | 25,874 | 29,353 | 10,034 | ||||||||||
| Net income | 46,359 | 57,923 | 25,874 | 29,353 | 10,034 | ||||||||||
| Net income per share, basic | 0.49 | 0.73 | 0.35 | 0.52 | 0.26 | ||||||||||
| Net income per share, diluted | 0.49 | 0.72 | 0.35 | 0.52 | 0.26 | ||||||||||
| Balance sheet data: | |||||||||||||||
| Total assets | $ | 1,518,861 | $ | 1,291,762 | $ | 1,184,986 | $ | 925,358 | $ | 673,166 | |||||
| Senior unsecured notes payable, net | 295,911 | 295,153 | 294,395 | 255,294 | 254,229 | ||||||||||
| Senior unsecured term loan, net | 198,713 | 99,612 | 99,517 | 99,422 | — | ||||||||||
| Unsecured revolving credit facility | 60,000 | 95,000 | 165,000 | 95,000 | 45,000 | ||||||||||
| Secured mortgage indebtedness, net | — | — | — | — | 94,676 | ||||||||||
| Total equity | 927,591 | 768,247 | 594,617 | 452,430 | 262,288 | ||||||||||
| Other financial data: | |||||||||||||||
| Dividends declared per common share | $ | 0.90 | $ | 0.82 | $ | 0.74 | $ | 0.68 | $ | 0.64 | |||||
| FFO(1) | 113,029 | 101,536 | 62,275 | 61,483 | 34,109 | ||||||||||
| FAD(1) | 117,751 | 104,989 | 66,406 | 65,118 | 37,831 | ||||||||||
| For the Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||
| (dollars in thousands) | |||||||||||||||
| Net income | $ | 46,359 | $ | 57,923 | $ | 25,874 | $ | 29,353 | $ | 10,034 | |||||
| Real estate related depreciation and amortization | 51,755 | 45,664 | 39,049 | 31,865 | 24,075 | ||||||||||
| (Gain) loss on sale of real estate | (1,777 | ) | (2,051 | ) | — | 265 | — | ||||||||
| Impairment of real estate investments | 16,692 | — | 890 | — | — | ||||||||||
| Gain on disposition of other real estate investment | — | — | (3,538 | ) | — | — | |||||||||
| FFO | 113,029 | 101,536 | 62,275 | 61,483 | 34,109 | ||||||||||
| Amortization of deferred financing costs | 2,003 | 1,938 | 2,059 | 2,239 | 2,200 | ||||||||||
| Amortization of stock-based compensation | 4,104 | 3,848 | 2,416 | 1,546 | 1,522 | ||||||||||
| Straight-line rental income | (1,385 | ) | (2,333 | ) | (344 | ) | (150 | ) | — | ||||||
| FAD | $ | 117,751 | $ | 104,989 | $ | 66,406 | $ | 65,118 | $ | 37,831 | |||||
The discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those which are discussed in the section titled “Risk Factors.” Also see “Statement Regarding Forward-Looking Statements” preceding Part I.
The following discussion and analysis should be read in conjunction with the “Selected Financial Data” above and our accompanying consolidated financial statements and the notes thereto.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is organized as follows:
•Overview
•Recent Developments
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Estimates
•Impact of Inflation
Overview
CareTrust REIT is a self-administered, publicly-traded REIT engaged in the ownership, acquisition, financing, development and leasing of skilled nursing, seniors housing and other healthcare-related properties. As of December 31, 2022, CareTrust REIT’s real estate portfolio comprised of 216 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”), consisting of 22,831 operational beds and units located in 28 states with the highest concentration of properties by rental income located in California, Texas, Louisiana, Idaho and Arizona. As of December 31, 2022, we also had other real estate investments consisting of three real estate secured loans receivable and two mezzanine loans receivable with a carrying value of $156.4 million.
Recent TransactionsDevelopments
COVID-19 Update
Tenants of our properties operating pursuant to triple-net master leases have been adversely impacted, and we expect that they will continue to be adversely impacted, by the COVID-19 pandemic. Our tenants are experiencing increased operating costs as a result of actions they are taking to prevent or mitigate the outbreak or spread of COVID-19 at their facilities. Our tenants are also experiencing labor shortages resulting in limited admissions, reduced occupancy and higher agency expense. While our tenants have experienced some recent increases in occupancy, occupancy rates are still below pre-pandemic levels. The current limited availability or unavailability of grants and other funds being made available to our seniors housing facilities for healthcare related expenses or lost revenues attributable to COVID-19, as well as the tapering of grants and other funds for our SNFs, has also impacted some of our tenants’ ability to continue to meet some of their financial obligations, as they continue to experience lower occupancy levels and higher operating costs. In some cases, we may have to restructure tenants’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place.
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At a portfolio wide level, occupancy levels at our seniors housing facilities remained relatively stable from the onset of the COVID-19 pandemic until the beginning of the fourth quarter of 2020, at which time we began to see a decline. This decline in occupancy continued through the fourth quarter of 2021; however, seniors housing facilities occupancy has begun to increase in the beginning of the first quarter of 2022 and continued throughout 2022. Occupancy levels at our SNFs, which declined at the onset of the COVID-19 pandemic and continued to decline through January 2021, have been on a steady incline through the fourth quarter of 2022. Beginning in early 2020, the federal government temporarily suspended the three-day hospital stay requirement for a patient’s Medicare benefits to refresh. Providers can now “skill in place,” eliminating the risk of transferring the patient to the hospital. Because of this temporary rule change, overall skilled mix remained slightly elevated in the three months ended December 31, 2022 compared to the pre-pandemic skilled mix during the three months ended March 31, 2020. An increase in skilled mix can, but may not necessarily, offset some or all of the adverse financial impact to the operator of the SNF from a decline in occupancy. However, the skilled mix in our SNFs during the three months ended December 31, 2022 was lower than the peak level seen in December 2020, and we anticipate that skilled mix in our SNFs will continue to decline as cases of COVID-19 decline and temporary suspensions are retired.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) included a temporary suspension of a 2% Medicare sequestration cut through the end of March 2022. Beginning April 1, 2022, a 1% sequestration cut went into effect through June 30, 2022 with the full 2% cut resuming thereafter. On January 30, 2023, the U.S. Department of Health and Human Services (“HHS”) announced that the COVID-19 Public Health Emergency (“PHE”) will end on May 11, 2023. The PHE has allowed HHS to provide temporary regulatory waivers, including the waiver of the three-day hospital stay requirement for a patient’s Medicare benefits to refresh. The temporary 6.2% increase in Federal Medical Assistance Percentages (“FMAP”) was approved retroactive to January 1, 2020, but is expected to be phased down by December 31, 2023 under the Consolidated Appropriations Act of 2023 and the ending of the PHE. With the expiration of the PHE and the potential lifting of the three-day hospital stay requirement, SNFs may experience decreases in occupancy levels or revenues, which may adversely impact the business and financial condition of the operators of our SNFs.
As a result of the foregoing impacts of the COVID-19 pandemic and actions taken in response, our tenants’ ability to continue to meet some of their financial obligations to us has been negatively impacted. See “Impairment of Real Estate Assets, Assets Held for Sale and Asset Sales” below. During the three and twelve months ended December 31, 2022, we collected 95.5% and 95.2% of contractual rents due from our operators including cash deposits used to offset rent shortfalls, respectively. During both the three and twelve months ended December 31, 2022, we collected 94.0% of contractual rents due from our operators excluding cash deposits. In January 2023, we collected 94.5% of contractual rents due from our operators.
During the year ended December 31, 2022, we determined that it was not probable that we would collect substantially all of the contractual obligations from five existing and former operators and, accordingly, we reversed $0.7 million of operating expense reimbursements, $0.2 million of contractual rent and $0.5 million of straight-line rent. In addition, we determined that the collectibility of contractual rents from four operators was not probable and we moved these four operators to a cash basis method of accounting during the year ended December 31, 2022.
Impact of Macroeconomic Conditions
The substantial inflationary pressures that our economy continues to face has resulted in many headwinds for us and our tenants, most notably in the form of rising interest rates, volatility in the capital markets, a softening of consumer sentiment and signs of a potential broader economic slowdown. These current macroeconomic conditions, particularly inflation (including rising wages and supply costs), rising interest rates and related changes to consumer spending, including, but not limited to, causing individuals to delay or defer moves to seniors housing, has adversely impacted and could continue to adversely impact our tenants’ ability to meet some of their financial obligations to us. Rising interest rates also increase our costs of capital to finance acquisitions and increase our borrowing costs, and future changes in market interest rates could materially impact the estimated discounted cash flows that are used to determine the fair value of our other real estate related investments. In addition, current macroeconomic conditions and the resulting market volatility may adversely impact our ability to sell properties on acceptable terms, if at all, which could result in additional impairment charges.
For more information regarding the potential impact of COVID-19 and macroeconomic conditions on our business, see “Risk Factors” in Item 1A of this report.
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SNF Reimbursement Rates
On July 29, 2022, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule that will increase the aggregate net payment by 2.7% for fiscal year 2023. CMS estimates that the aggregate impact of the payment policies in the final rule will result in an increase of approximately $904 million in Medicare Part A payments to SNFs in fiscal year 2023 compared to fiscal year 2022. The payment rates became effective on October 1, 2022.
Impairment of Real Estate Assets, Assets Held for Sale, and Asset Sales
In connection with our ongoing review and monitoring of our investment portfolio and the performance of our tenants, during the first quarter of 2022, we determined to pursue the sale of 27 properties and the repurposing of three properties, representing an aggregate of approximately 10% of contractual cash rent as of March 31, 2022. As of March 31, 2022, we determined that these 27 properties met the criteria to be classified as assets held for sale. During the year ended December 31, 2022, we recognized an aggregate impairment charge of $79.1 million, of which $45.0 million related to 12 facilities that have been sold, $18.0 million related to 10 facilities that were classified as held for sale in the first quarter of 2022 and reclassified to held for use in the third and fourth quarters of 2022, $14.4 million related to five facilities that were held for sale as of December 31, 2022, and $1.7 million related to one facility that was held for use during the year. For properties classified as held for sale, the impairment charges were recognized to write down the properties to the lower of their carrying value or their aggregate fair value, less estimated costs to sell. For properties classified as held for use, the impairment charges were recognized to write down the properties to their fair value.
Following the asset sales and held for sale reclassifications discussed below, five properties continued to meet the criteria to be classified as held for sale as of December 31, 2022. As of December 31, 2022, the real estate assets comprising the remaining five properties classified as held for sale had an aggregate carrying value of $12.3 million.
Asset Sales and Held for Sale Reclassifications
During the first quarter of 2022, we determined that one ALF that was classified as held for sale at December 31, 2021 no longer met the held for sale criteria. We reclassified this ALF’s carrying value of $4.8 million out of assets held for sale and recorded catch-up depreciation of approximately $0.1 million during the year ended December 31, 2022.
During the first quarter of 2022, we closed on the sale of one SNF consisting of 83 beds located in Washington with a carrying value of $0.8 million, for net sales proceeds of $1.0 million. During the year ended December 31, 2022, we recorded a gain of $0.2 million in connection with the sale.
During the third quarter of 2022, we determined that one ALF, with a carrying value of $4.9 million, that was classified as held for sale at June 30, 2022 no longer met the held for sale criteria. We reclassified this ALF out of assets held for sale at its fair value at the date of the decision not to sell of approximately $4.9 million.
During the third quarter of 2022, we closed on the sale of six SNFs and one multi-service campus, operated by
affiliates of Trio Healthcare Holdings, LLC (“Trio”), consisting of 708 beds located in Ohio for net proceeds of $32.8 million. In connection with the sale, we provided affiliates of the purchaser of the properties with a $7.0 million term loan that bears interest at 8.5% and has a maturity date of September 30, 2025. We also provided a $5.0 million bridge loan to four individuals that bore interest at 8.5% and was subsequently paid off during the fourth quarter of 2022. Prior to their sale, the seven properties had been classified as held for sale, with a carrying value of $46.9 million. During the year ended December 31, 2022, we recorded a loss of $2.1 million in connection with the sale.
During the fourth quarter of 2022, we closed on the sale of five ALFs, operated by affiliates of Noble VA Holdings, LLC (“Noble”), consisting of 301 beds located in Virginia for net proceeds of $11.0 million. Prior to their sale, the five properties had been classified as held for sale, with a carrying value of $12.7 million. During the year ended December 31, 2022, we recorded a loss of $1.7 million in connection with the sale.
During the fourth quarter of 2022, we determined that nine ALFs, with a carrying value of $50.8 million, that were classified as held for sale at September 30, 2022, no longer met the held for sale criteria. We reclassified the nine ALFs out of assets held for sale at their fair value at the date of the decision not to sell of approximately $47.8 million.
During the first quarter of 2023, we closed on the sale of one ALF, with a carrying value of $3.3 million, which approximated the net sales proceeds received. The facility was classified as held for sale at December 31, 2022.
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Impairment of Assets Held For Use
During the second quarter of 2022, we recognized an impairment charge of $1.7 million related to one SNF. We wrote down its carrying value of $2.8 million to its estimated fair value of $1.1 million.
Portfolio Activity
During the year ended 2022, two leases we entered into with Landmark Recovery of Maryland, LLC (“Landmark Maryland”) and Landmark Recovery of Florida, LLC (“Landmark Florida”) commenced. In connection with the leases, we are repurposing two existing ALFs (previously leased to affiliates of Noble Senior Services) as behavioral health treatment centers that will be operated by Landmark Maryland and Landmark Florida, respectively. Rent under the leases will commence 12 to 18 months following commencement of the lease term or, if earlier, upon Landmark Maryland and Landmark Florida obtaining all licensure, permits, and other required regulatory authorizations with respect to operating the facility. The leases will expire on the 20th anniversary of the rent commencement date and both contain one 10-year renewal option and CPI-based rent escalators. See Note 3, Real Estate Investments, Net in the Notes to consolidated financial statements for additional information.
Recent Investments
From January 1, 2022 through February 9, 2023, we acquired one SNF and one multi-service campus for approximately $21.9 million, which includes capitalized acquisition costs. These acquisitions are expected to generate initial annual cash revenues of approximately $2.1 million and an initial blended yield of approximately 9.4%. See Note 3, Real Estate Investments, Net in the Notes to consolidated financial statements for additional information.
In September 2022, we extended a $24.9 million term loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner. The secured term loan was structured with an “A” and a “B” tranche (with the payments on the “B” tranche being subordinate to the “A” tranche pursuant to the terms of a written agreement between the lenders). Our $24.9 million secured term loan constituted the entirety of the “B” tranche with its payments subordinated accordingly. The secured term loan is primarily secured by four skilled nursing facilities operated by an operator in the Southeast. The “B” tranche secured term loan is set to mature on September 8, 2025, with two one-year extension options and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The “B” tranche secured term loan provides for an earnout advance of $4.7 million if certain conditions are met. The “B” tranche secured term loan bears interest at a rate based on term secured overnight financing rate (“SOFR”), calculated as a fraction, with the numerator being the difference between (i) the monthly payment of interest of term SOFR plus a 4.50% spread and (ii) the amount of such monthly payment of interest of term SOFR plus a 2.85% spread, and with the denominator being the average daily balance of the outstanding principal amount during the applicable month, with such fraction expressed as a percentage and annualized, with a term SOFR floor of 1.00% and less a subservicing fee of 100% over 9.00%. The “B” tranche secured term loan requires monthly interest payments.
In August 2022, we extended a $22.3 million term loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner. The secured term loan was structured with an “A” and a “B” tranche (with the payments on the “B” tranche being subordinate to the “A” tranche pursuant to the terms of a written agreement between the lenders). Our $22.3 million secured term loan constituted the entirety of the “B” tranche with its payments subordinated accordingly. The secured term loan is primarily secured by five skilled nursing facilities, four of which will be operated by an existing operator and one of which will be operated by a large, regional skilled nursing operator. The “B” tranche secured term loan is set to mature on August 1, 2025, with two one-year extension options and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 2% to 3% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The “B” tranche secured term loan bears interest at a rate based on term SOFR, calculated as a fraction, with the numerator being the difference between (i) the monthly payment of interest of term SOFR plus a 4.25% spread and (ii) the amount of such monthly payment of interest of term SOFR plus a 2.75% spread, and with the denominator being the average daily balance of the outstanding principal amount during the applicable month, with such fraction expressed as a percentage and annualized, with a term SOFR floor of 1.00% and less a subservicing fee of 50% over 8.25%. The “B” tranche secured term loan requires monthly interest payments.
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In June 2022, we extended a $75.0 million term loan to a skilled nursing real estate owner as part of a larger, multi-tranche, senior secured term loan facility. The senior secured term loan was structured with an “A” tranche, a “B” tranche, and a “C” tranche (with the “C” tranche being the most subordinate). Our $75.0 million term loan constituted the entirety of the “C” tranche with its payments subordinated accordingly. The senior secured term loan facility is secured by an 18-facility skilled nursing portfolio in the Mid-Atlantic region, to be operated by a large, regional skilled nursing operator. In connection with the senior secured term loan facility and the borrower’s acquisition of the skilled nursing portfolio, we also extended to the borrower group a $25.0 million mezzanine loan. The “C” tranche term loan bears interest at 8.5%, less a servicing fee equal to the positive difference, if any, between the lesser of the contractual interest payment and actual payment of interest made by the borrower and a hypothetical interest payment at a rate of 8.25%, resulting in an effective interest rate of 8.375%. The ”C” tranche term loan is set to mature on June 30, 2027 and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the end of the month of prepayment; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The mezzanine loan bears interest at 11% and is secured by a pledge of membership interests in an up-tier affiliate of the borrower group. The mezzanine loan is set to mature on June 30, 2032, and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date, commencing on June 30, 2029, for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the date of prepayment. The “C” tranche term loan and mezzanine loan both require monthly interest payments.
At-The-Market Offering of Common Stock
On March 10, 2020, we entered into a new equity distribution agreement to issue and sell, from time to time, up to $500.0 million in aggregate offering price of our common stock through an “at-the-market” equity offering program (the “ATM Program”).
The following table summarizes the ATM Program activity for the year ended December 31, 2022 (in thousands, except per share amounts).
| For the Year Ended | ||||||||
| December 31, 2022 | ||||||||
| Number of shares | 2,405 | |||||||
| Average sales price per share | $ | 20.00 | ||||||
Gross proceeds(1) | $ | 48,100 | ||||||
(1) Total gross proceeds is before $0.6 million of commissions paid to the sales agents during the year ended December 31, 2022 under the ATM Program.
As of December 31, 2022, we had $428.4 million available for future issuances under the ATM Program.
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Recent TransactionsInvestments
9.4%. SOn September 1, 2019, we sold three of the seven Ohio skilled nursing properties operated by Trillium under the Original Trillium Lease for a purchase price of $28.0 million. During the three months ended September 30, 2019 and prior to the disposition, we recorded an impairment expense of approximately $7.8 million. In connection with the sale, we provided affiliates of CommuniCare Family of Companies (“CommuniCare”), the purchaser of the three Ohio properties, with a mortgage loan secured by the three Ohio properties for approximately $26.5 million. Seeee Note 4,3, Other Real Estate Investments, Net in the Notes to consolidated financial statements for additional information.
In addition, duringAugust 2022, we extended a $22.3 million term loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner. The secured term loan was structured with an “A” and a “B” tranche (with the third quarterpayments on the “B” tranche being subordinate to the “A” tranche pursuant to the terms of 2019, we meta written agreement between the criteria to classify sixlenders). Our $22.3 million secured term loan constituted the entirety of the “B” tranche with its payments subordinated accordingly. The secured term loan is primarily secured by five skilled nursing facilities, four of which will be operated by affiliatesan existing operator and one of Metron Integrated Health Systems (“Metron”)which will be operated by a large, regional skilled nursing operator. The “B” tranche secured term loan is set to mature on August 1, 2025, with two one-year extension options and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 2% to 3% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The “B” tranche secured term loan bears interest at a rate based on term SOFR, calculated as held for sale, which resulted in an impairment expensea fraction, with the numerator being the difference between (i) the monthly payment of approximately $8.8 million to reduceinterest of term SOFR plus a 4.25% spread and (ii) the carrying value to fair value less costs to sellamount of such monthly payment of interest of term SOFR plus a 2.75% spread, and with the propertiesdenominator being the average daily balance of the outstanding principal amount during the third quarter ended September 30, 2019. Asapplicable month, with such fraction expressed as a percentage and annualized, with a term SOFR floor of December 31, 2019,1.00% and less a subservicing fee of 50% over 8.25%. The “B” tranche secured term loan requires monthly interest payments.
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In June 2022, we extended a $75.0 million term loan to a skilled nursing real estate owner as part of a larger, multi-tranche, senior secured term loan facility. The senior secured term loan was structured with an “A” tranche, a “B” tranche, and a “C” tranche (with the properties continued“C” tranche being the most subordinate). Our $75.0 million term loan constituted the entirety of the “C” tranche with its payments subordinated accordingly. The senior secured term loan facility is secured by an 18-facility skilled nursing portfolio in the Mid-Atlantic region, to be held for sale and the carrying value of $34.6 million is primarily comprised of real estate assets. In February 2020, the sixoperated by a large, regional skilled nursing facilities were sold. See Note 14, Subsequent Events, for further detail.
At-The-Market Offering of Common Stock
On March 4, 2019,10, 2020, we entered into a new equity distribution agreement to issue and sell, from time to time, up to $300.0$500.0 million in aggregate offering price of our common stock through an “at-the-market” equity offering program (the “New ATM Program”). In connection with the entry into the equity distribution agreement and the commencement of the New ATM Program, our “at-the-market” equity offering program pursuant to our prior equity distribution agreement, dated as of May 17, 2017, was terminated (the “Prior ATM“ATM Program”).
| For the Three Months Ended | |||||||||||||||||||
| March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2019 | Total | |||||||||||||||
| Number of shares | 2,459 | — | — | — | 2,459 | ||||||||||||||
| Average sales price per share | $ | 19.48 | $ | — | $ | — | $ | — | $ | 19.48 | |||||||||
Gross proceeds(1) | $ | 47,893 | $ | — | $ | — | $ | — | $ | 47,893 | |||||||||
| For the | ||||||||
| December 31, | ||||||||
| Number of shares | 2,405 | |||||||
| Average sales price per share | $ | 20.00 | ||||||
Gross proceeds(1) | $ | 48,100 | ||||||
(1) Total gross proceeds is before $0.6 million of commissions paid to the sales agents during the year ended December 31, 2022 under the ATM Program.
As of December 31, 2019,2022, we had $300.0$428.4 million available for future issuances under the New ATM Program. See
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Recent Investments
From January 1, 20192022 through February 20, 2020,9, 2023, we acquired eighteen skilled nursing facilities, fourone SNF and one multi-service campuses and two assisted living facilitiescampus for approximately $352.8approximately $21.9 million, which includes capitalized acquisition costs. These acquisitions are expected to generate initial annual cash revenues of approximately $31.4$2.1 million and an initial blended yield of approximately 8.9%9.4%. SeeSee Note 3, Real Estate Investments, NetandNote 14, Subsequent Events, in the Notes to consolidated financial statements for additional information.
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In June 2022, we extended a $75.0 million term loan to a skilled nursing real estate owner as part of a larger, multi-tranche, senior secured term loan facility. The senior secured term loan was structured with an “A” tranche, a “B” tranche, and a “C” tranche (with the “C” tranche being the most subordinate). Our $75.0 million term loan constituted the entirety of the “C” tranche with its payments subordinated accordingly. The senior secured term loan facility is secured by an 18-facility skilled nursing portfolio in the Mid-Atlantic region, to be operated by a large, regional skilled nursing operator. In connection with the senior secured term loan facility and the borrower’s acquisition of the skilled nursing portfolio, we also extended to the borrower group a $25.0 million mezzanine loan. The “C” tranche term loan bears interest at 8.5%, less a servicing fee equal to the positive difference, if any, between the lesser of the contractual interest payment and actual payment of interest made by the borrower and a hypothetical interest payment at a rate of 8.25%, resulting in an effective interest rate of 8.375%. The ”C” tranche term loan is set to mature on June 30, 2027 and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the end of the month of prepayment; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The mezzanine loan bears interest at 11% and is secured by a pledge of membership interests in an up-tier affiliate of the borrower group. The mezzanine loan is set to mature on June 30, 2032, and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date, commencing on June 30, 2029, for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the date of prepayment. The “C” tranche term loan and mezzanine loan both require monthly interest payments.
At-The-Market Offering of Common Stock
On April 15, 2019,March 10, 2020, we completed an underwritten publicentered into a new equity distribution agreement to issue and sell, from time to time, up to $500.0 million in aggregate offering of 6,641,250 sharesprice of our common stock par value $0.01through an “at-the-market” equity offering program (the “ATM Program”).
The following table summarizes the ATM Program activity for the year ended December 31, 2022 (in thousands, except per share at an initialamounts).
| For the Year Ended | ||||||||
| December 31, 2022 | ||||||||
| Number of shares | 2,405 | |||||||
| Average sales price per share | $ | 20.00 | ||||||
Gross proceeds(1) | $ | 48,100 | ||||||
(1) Total gross proceeds is before $0.6 million of commissions paid to the publicsales agents during the year ended December 31, 2022 under the ATM Program.
As of $23.35, including 866,250 sharesDecember 31, 2022, we had $428.4 million available for future issuances under the ATM Program.
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Results of Operations
Operating Results
Our primary business consists of acquiring, developing, financing and owning real property to be leased to third party tenants in the healthcare sector.
Year Ended December 31, 20192022 Compared to Year Ended December 31, 20182021
| Year Ended December 31, | Increase (Decrease) | Percentage Difference | |||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Rental income | $ | 187,506 | $ | 190,195 | $ | (2,689) | (1) | % | |||||||||||||||
| Interest and other income | 8,626 | 2,156 | 6,470 | 300 | % | ||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Depreciation and amortization | 50,316 | 55,340 | (5,024) | (9) | % | ||||||||||||||||||
| Interest expense | 30,008 | 23,677 | 6,331 | 27 | % | ||||||||||||||||||
| Property taxes | 4,333 | 3,574 | 759 | 21 | % | ||||||||||||||||||
| Impairment of real estate investments | 79,062 | — | 79,062 | * | |||||||||||||||||||
| Provision for loan losses, net | 3,844 | — | 3,844 | * | |||||||||||||||||||
| Property operating expenses | 5,039 | — | 5,039 | * | |||||||||||||||||||
| General and administrative | 20,165 | 26,874 | (6,709) | (25) | % | ||||||||||||||||||
| Other loss: | |||||||||||||||||||||||
| Loss on extinguishment of debt | — | (10,827) | 10,827 | (100) | % | ||||||||||||||||||
| Loss on sale of real estate, net | (3,769) | (77) | (3,692) | * | |||||||||||||||||||
| Unrealized loss on other real estate related investments | (7,102) | — | (7,102) | * | |||||||||||||||||||
| Year Ended December 31, | Increase (Decrease) | Percentage Difference | ||||||||||||
| 2019 | 2018 | |||||||||||||
| (dollars in thousands) | ||||||||||||||
| Revenues: | ||||||||||||||
| Rental income | $ | 155,667 | $ | 140,073 | $ | 15,594 | 11 | % | ||||||
| Tenant reimbursements | — | 11,924 | (11,924 | ) | (100 | )% | ||||||||
| Independent living facilities | 3,389 | 3,379 | 10 | — | % | |||||||||
| Interest and other income | 4,345 | 1,565 | 2,780 | 178 | % | |||||||||
| Expenses: | ||||||||||||||
| Depreciation and amortization | 51,822 | 45,766 | 6,056 | 13 | % | |||||||||
| Interest expense | 28,125 | 27,860 | 265 | 1 | % | |||||||||
| Property taxes | 3,048 | 11,924 | (8,876 | ) | (74 | )% | ||||||||
| Independent living facilities | 2,898 | 2,964 | (66 | ) | (2 | )% | ||||||||
| Impairment of real estate investments | 16,692 | — | 16,692 | 100 | % | |||||||||
| Provision for loan losses | 1,076 | — | 1,076 | 100 | % | |||||||||
| General and administrative | 15,158 | 12,555 | 2,603 | 21 | % | |||||||||
Rental income. Rental income was $155.7decreased by $2.7 million as detailed below:
| Year Ended | ||||||||||||||||||||
| (in thousands) | December 31, 2022 | December 31, 2021 | Increase/(Decrease) | |||||||||||||||||
| Contractual cash rent | $ | 186,131 | $ | 186,501 | $ | (370) | ||||||||||||||
| Tenant reimbursements | 2,775 | 3,599 | (824) | |||||||||||||||||
Total contractual rent[1] | 188,906 | 190,100 | (1,194) | |||||||||||||||||
| Straight-line rent | 17 | 32 | (15) | |||||||||||||||||
Adjustment for collectibility[2] | (1,417) | — | (1,417) | |||||||||||||||||
| Lease termination revenue | — | 63 | (63) | |||||||||||||||||
| Total change in rental income | $ | 187,506 | $ | 190,195 | $ | (2,689) | ||||||||||||||
[1] Includes initial contractual cash rent and tenant reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the year ended December 31, 2019 comparedCompany. For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received. Total contractual cash rent decreased by $1.2 million due to $140.1a $10.6 million for the year ended December 31, 2018. The $15.6 million, or 11%, increasedecrease in rental income is primarily duerelated to $25.7certain tenants on a cash basis method of accounting and a $0.8 million decrease in tenant reimbursements, partially offset by an increase of $5.9 million in contractual cash rent from real estate investments made after January 1, 2018, $2.82021 and $4.3 million from increases in rental rates for our existing tenants and $2.9 million of tenant reimbursement revenue recognized and classified as rental income due to the adoption of the new lease accounting standards updates (the “new lease ASUs”) on January 1, 2019, partially offset by an $11.8 million adjustment for collectibility of rental income, a $1.6 million decrease in rental income due to the sale of three ALFs in March 2018 and three SNFs in September 2019, a $1.5 million decrease in straight-line rent and a $1.0 million decrease in cash rents.tenants.
Interest and other income. InterestThe $6.5 million, or 300%, increase in interest and other income increased $2.8 million for the year ended December 31, 2019 to $4.3 million compared to $1.6 million for the year ended December 31, 2018. The increase wasis primarily due to $1.3an increase of $6.7 million of interest income, including $0.6 million for unrecognized preferred return related to prior periods, due to the repayment of preferred equity investments and $1.5 million of interest income related to the mortgageorigination of loans receivable that we providedin June, August and September 2022 partially offset by a
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decrease of $0.2 million related to Covenant Care in February 2019 and to CommuniCare in September 2019.repayments of other loans. See Note 4, Other Real Estate Investments, Net.above under “Recent Developments” for additional information on the origination of loans receivable.
Depreciation and amortization. Depreciation and amortization expense increased $6.1decreased $5.0 million, or 13%9%, for the year ended December 31, 20192022 to $51.8$50.3 million compared to $45.8$55.3 million for the year ended December 31, 2018.2021. The $6.1$5.0 million decrease in depreciation and amortization was primarily due to a $5.0 million decrease from assets sold and classified as held for sale and a decrease in depreciation of $2.8 million due to assets becoming fully depreciated after January 1, 2021, partially offset by an increase in depreciation and amortization of $2.8 million related to new real estate investments and capital improvements made after January 1, 2021.
Interest expense. Interest expense increased by $6.3 million as detailed below:
| Change in interest expense for the year ended December 31, 2022 compared to the year ended December 31, 2021 | ||||||||
| (in thousands) | ||||||||
| Increases to interest expense due to: | ||||||||
| Issuance of the 2028 senior unsecured notes - June 17, 2021 | $ | 7,110 | ||||||
| Increase in interest rates for the senior unsecured term loan | 3,370 | |||||||
| Increase in outstanding borrowing amount for the unsecured revolving facility, net | 2,095 | |||||||
| Increase in interest rates for the unsecured revolving credit facility | 1,591 | |||||||
| Other changes in interest expense | 43 | |||||||
| Total increases to interest expense | 14,209 | |||||||
| Decreases to interest expense due to: | ||||||||
| Redemption of the prior senior notes - July 1, 2021 | (7,878) | |||||||
| Total decreases to interest expense | (7,878) | |||||||
| Total change in interest expense | $ | 6,331 | ||||||
Property taxes. Property taxes increased $0.8 million, or 21%, for the year ended December 31, 2022 compared to December 31, 2021. The increase was primarily due to a $0.6 million increase was primarilyin property taxes due to new real estate investments made after January 1, 2018,2021, a $0.2 million increase in property taxes related to two non-operational properties at December 31, 2022 and a $0.1 million increase in property taxes due to the transfer of certain properties to new operators in January 2021 that do not make direct tax payments, partially offset by assets sold or designated as assets held for sale.
Impairment of real estate investments.On September 1, 2019, we sold three of the seven Ohio skilled nursing properties operated by Trillium under the Original Trillium Lease for a purchase price of $28.0 million. Prior to the disposition, we recorded an impairment of approximately $7.8 million in the three months ended September 30, 2019. Additionally, in the three months ended September 30, 2019, we met the criteria to classify six skilled nursing facilities operated by Metron as held for sale, which resulted in an impairment expense of approximately $8.8 million to reduce the carrying value to fair value less costs to sell the facilities.
Provision for loan agreement to Priority Life Care, LLC (“Priority”) were not collectible andlosses, net. During the year ended December 31, 2022, we recorded a $1.1$4.6 million expected credit loss related to two other loans receivable that were placed on non-accrual status, partially offset by a $0.8 million recovery related to one other loan receivable that was previously written off. No provision for loan losses.losses was recognized during the year ended December 31, 2021.
Property operating expenses. During the year ended December 31, 2022, we recognized $5.0 million of property operating expenses related to assets we plan to sell or repurpose, or have sold. No similar expenses were incurred during the year ended December 31, 2021.
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General and administrative expense. General and administrative expense increased $2.6decreased by $6.7 million or 21% for the year ended December 31, 2019 to $15.2 million compared to $12.6as detailed below:
| Year Ended | ||||||||||||||||||||
| (in thousands) | December 31, 2022 | December 31, 2021 | Increase/(Decrease) | |||||||||||||||||
| Cash compensation | $ | 6,107 | $ | 5,364 | $ | 743 | ||||||||||||||
Share-based compensation[1] | 5,758 | 10,832 | (5,074) | |||||||||||||||||
| Incentive compensation | 3,550 | 4,900 | (1,350) | |||||||||||||||||
| Professional services | 1,897 | 1,601 | 296 | |||||||||||||||||
| Other administrative expense | 923 | 915 | 8 | |||||||||||||||||
| Taxes and insurance | 897 | 843 | 54 | |||||||||||||||||
| Non-routine transaction costs | 6 | 1,424 | (1,418) | |||||||||||||||||
| Other expenses | 1,027 | 995 | 32 | |||||||||||||||||
| Total change in general and administrative expense | $ | 20,165 | $ | 26,874 | $ | (6,709) | ||||||||||||||
[1] Share-based compensation decreased $5.1 million for the year ended December 31, 2018.2022 compared to December 31, 2021. The increasedecrease is primarily due to accelerated vesting of awards for one executive in the fourth quarter of 2021 in connection with his retirement.
Loss on extinguishment of debt. During the year ended December 31, 2021, we recorded a $10.8 million loss on extinguishment of debt, including a prepayment penalty of $7.9 million and a $2.9 million write-off of deferred financing costs associated with the redemption of the prior senior notes. No loss on extinguishment of debt was recognized during the year ended December 31, 2022.
Loss on sale of real estate, net. During the year ended December 31, 2022, we recorded a $3.8 million loss on sale of real estate related to higher cash wagesthe sale of $1.3six SNFs, five ALFs and one multi-service campus and a $0.2 million increased amortizationloss on sale of stock-based compensationreal estate related to the sale of $0.3a land parcel, partially offset by a $0.2 million increased professional servicesgain on sale of $0.5real estate related to the sale of one SNF. During the year ended December 31, 2021, we recorded a $0.2 million and $0.4loss on sale of real estate related to the sale of one SNF, partially offset by a $0.1 million gain on sale of other corporate expenses.real estate related to the sale of a land parcel adjacent to one of our SNFs.
Year Ended December 31, 20182021 Compared to Year Ended December 31, 20172020
For discussion related to the results of operations and changes in financial condition for fiscal 20182021 compared to fiscal 2017,2020, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 20182021 Annual Report on Form 10-K, which was filed with the SEC on February 13, 2019.16, 2022.
To qualify as a REIT for federal income tax purposes, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, to our stockholders on an annual basis. Accordingly, we intend to make, but are not contractually bound to make, regular quarterly dividends to common stockholders from cash flow from operating activities. All such dividends are at the discretion of our board of directors.
Our short-term liquidity requirements consist primarily of operating and interest expenses directly associated with our properties, including:
•As of December 31, 2019, we had cashinterest expense and cash equivalents of $20.3 million.
•general and administrative expenses;
•dividend plansplans;
•operating lease obligations; and
•capital expenditures for at least the next twelve months.improvements to our properties.
Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions and other investments (including mortgage and mezzanine loan originations) capital expenditures, and scheduled debt maturities. We intend to invest in and/or develop additional healthcare and seniors housing properties as suitable opportunities arise and so long as adequate sources of financing are available. We expect that future investments in and/or development of properties, including any
46
improvements or renovations of current or newly-acquired properties, will depend on and will be financed by, in whole or in part, our existing cash, borrowings available to us under the Second Amended Credit Facility (as defined below), future borrowings or the
proceeds from sales of shares of our common stock pursuant to our New ATM Program or additional issuances of common stock or other securities. In addition, we may seek financing from U.S. government agencies, including through Fannie Mae and the U.S. Department of Housing and Urban Development, in appropriate circumstances in connection with acquisitions and refinancing of existing mortgage loans.
We believe that our expected operating cash flow from rent collections, interest payments on our other real estate related investments, and borrowings under our Second Amended Credit Facility, together with our cash balance of $13.2 million, available borrowing capacity of $475.0 million under the Revolving Facility and availability under the ATM Program, each at December 31, 2022, will be sufficient to meet ongoing debt service requirements, dividend plans, operating lease obligations, capital expenditures, working capital requirements and other needs for at least the next 12 months. We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements. While we are currently pursuing the sale, re-tenanting or repurposing of certain of our assets in connection with our ongoing review and monitoring of our investment portfolio as described under “Recent Developments” above, we currently do not expect to sell any of our properties to meet liquidity needs, although we may do so in the future. Our quarterly cash dividend, any share repurchases under our Repurchase Program (as defined below) and any failure of our operators to pay rent or of our borrowers to make interest or principal payments may impact our available capital resources.
On March 20, 2020, our board of directors authorized a share repurchase program to repurchase up to $150.0 million of outstanding shares of our common stock (the “Repurchase Program”). Repurchases under the Repurchase Program, which expires on March 31, 2023, may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by management. Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act. We expect to finance any share repurchases under the Repurchase Program using available cash and may also use short-term borrowings under the Revolving Facility. We did not repurchase any shares of common stock under the Repurchase Program during the year ended December 31, 2022. The Repurchase Program may be modified, discontinued or suspended at any time.
We have filed an automatic shelf registration statement with the U.S. Securities and Exchange Commission that expires in May 2020,March 2023, which allowswill allow us or certain of our subsidiaries, as applicable, to offer and sell shares of common stock, preferred stock, warrants, rights, units and debt securities through underwriters, dealers or agents or directly to purchasers, in one or more offerings on a continuous or delayed basis, in amounts, at prices and on terms we determine at the time of the offering. We expect to renew the automatic shelf registration statement on or prior to its expiration.
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.
We currently are in compliance with all debt covenants on our outstanding indebtedness.
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Cash Flows
The following table presents selected data from our consolidated statements of cash flows for the years presented:
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| (dollars in thousands) | |||||||||||||||||
| Net cash provided by operating activities | $ | 144,415 | $ | 156,871 | |||||||||||||
| Net cash used in investing activities | (127,400) | (192,633) | |||||||||||||||
| Net cash (used in) provided by financing activities | (23,732) | 36,738 | |||||||||||||||
| Net (decrease) increase in cash and cash equivalents | (6,717) | 976 | |||||||||||||||
| Cash and cash equivalents at beginning of period | 19,895 | 18,919 | |||||||||||||||
| Cash and cash equivalents at end of period | $ | 13,178 | $ | 19,895 | |||||||||||||
| Year Ended December 31, | |||||||
| 2019 | 2018 | ||||||
| (dollars in thousands) | |||||||
| Net cash provided by operating activities | $ | 126,295 | $ | 99,357 | |||
| Net cash used in investing activities | (316,007 | ) | (115,069 | ) | |||
| Net cash provided by financing activities | 173,247 | 45,595 | |||||
| Net (decrease) increase in cash and cash equivalents | (16,465 | ) | 29,883 | ||||
| Cash and cash equivalents at beginning of period | 36,792 | 6,909 | |||||
| Cash and cash equivalents at end of period | $ | 20,327 | $ | 36,792 | |||
Year Ended December 31, 20192022 Compared to Year Ended December 31, 20182021
Net cash provided by operating activities for the year ended December 31, 20192022 was $126.3$144.4 million compared to $99.4$156.9 million for the year ended December 31, 2018, an increase2021, a decrease of $26.9$12.5 million. Operating cash inflows are derived primarily from the rental payments received under our lease agreements, including as a result of new investments, and interest payments on our other real estate related investments. Operating cash outflows consist primarily of interest expense on our borrowings and general and administrative expenses. The increase wasnet decrease of $12.5 million in cash provided by operating activities for the year ended December 31, 2022 is primarily due to a decrease in rental income received, an increase in rental income duecash paid for interest expense and an increase in cash paid for operating expenses related to acquisitions, increases in rental rates for existing tenants subsequentassets we plan to December 31, 2018 and timing of payments to our vendors in settling accounts payable,sell, have sold, or repurpose, partially offset by a decrease in collectibility of base cash rental income.interest income received on our other real estate related investments.
Cash used in investing activities for the year ended December 31, 20192022 was primarily comprised of $339.7$171.6 million in acquisitions of real estate and investments in real estate mortgagerelated investments and other loans receivable, and $6.3$7.3 million of improvement inpurchases of, and improvements to, equipment, furniture and fixtures and real estate, and purchases of furniture, fixtures and equipment partially offset by $26.5$6.3 million of payments received from our preferred equity investment and mortgage and other loans receivable and $3.5$45.1 million in net proceeds from real estate sales. Cash used in investing activities for the year ended December 31, 20182021 was primarily comprised of $122.3$194.0 million related toin acquisitions of real estate and investments in real estate related investments and other loans receivable and $9.0$6.0 million of improvement inpurchases of, and improvements to, equipment, furniture and fixtures and real estate, and purchases of furniture, fixtures and equipment, partially offset by $13.0 million of net proceeds from real estate sales and $3.2$0.4 million of payments received from our mortgage and other loans receivable.receivable and $7.0 million in net proceeds from real estate sales.
Our cash flows used in financing activities for the year ended December 31, 2022 were primarily comprised of $106.1 million in dividends paid, $5.4 million in payments of deferred financing costs and a $4.5 million net settlement adjustment on restricted stock, partially offset by $47.2 million of net proceeds from the issuance of common stock under the ATM Program and $45.0 million in net borrowings under our Second Amended Credit Facility (as defined below). Our cash flows provided by financing activities for the year ended December 31, 20192021 were primarily comprised of $196.0$393.8 million inof net proceeds from common stock sales under our Prior ATM Program and April 2019 equity offering and $65.0the issuance of the Notes, $30.0 million in net borrowings under our Amended Credit Facility and Prior Credit Facility, partially offset by $80.6Agreement (as defined below) and $22.9 million in dividends paid, $4.5 million in payments of deferred financing costs and $2.5 million net settlement adjustment on restricted stock. Our cash flows provided by financing activities for the year ended December 31, 2018 were primarily comprised of $179.9 million in net proceeds from the issuance of common stock sales under our Priorthe ATM Program, partially offset by $63.0$307.9 million of payments to redeem our prior senior notes, $100.8 million in dividends paid, $70.0 million in net pay downs under our Prior Credit Facility and a $1.3 million net settlement adjustment on restricted stock.
Year Ended December 31, 20182021 Compared to Year Ended December 31, 20172020
For discussion related to the cash flows for fiscal 20182021 compared to fiscal 2017,2020, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal 20182021 Annual Report on Form 10-K, which was filed with the SEC on February 13, 2019.16, 2022.
3.875% Senior Unsecured Notes due 2028
On May 10, 2017, June 17, 2021, our 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 public private
48
offering of $300.0$400.0 million aggregate principal amount of 5.25%3.875% Senior Notes due 20252028 (the “Notes”). The Notes were issued at par, resulting in gross proceeds of $300.0 million and net proceeds of approximately $294.0 million after deducting underwriting fees and other offering expenses. The Notes mature on June 1, 2025 and bear30, 2028. The Notes accrue interest at a rate of 5.25%3.875% per year. Interest on the Notes isannum payable semiannually in arrears on June 130 and December 130 of each year, beginningcommencing on December 1, 2017.
30, 2021. The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by CareTrust REITus and certainall of CareTrust REIT’s wholly owned existing and, subject to certain exceptions, future materialour subsidiaries (other than the Issuers); provided, however, that such guarantees are subject to automatic release under certain customary circumstances, including if the subsidiary guarantor is sold or sells all or substantially all of its assets, the subsidiary guarantor is designated “unrestricted” for covenant purposes under the indenture, the subsidiary guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied. See Note 12, Summarized Condensed Consolidating Information.
As of December 31, 2019,2022, we were in compliance with all applicable financial covenants under the indenture.indenture governing the Notes. See Note 7, Debt, to our consolidated financial statements included in this report for further information about the Notes.
Unsecured Revolving Credit Facility and Term Loan
On August 5, 2015, the Company, CareTrust GP, LLC, the Operating Partnership, as the borrower, andDecember 16, 2022, we, together with certain of its wholly ownedour subsidiaries, entered into a credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender, and the lenders party thereto (the “Prior Credit Agreement”). As later amended on February 1, 2016, the Prior Credit Agreement provided the following: (i) a $400.0 million unsecured asset based revolving credit facility (the “Prior Revolving Facility”), (ii) a $100.0 million non-amortizing unsecured term loan (the “Prior Term Loan” and, together with the Prior Revolving Facility, the “Prior Credit Facility”), and (iii) a $250.0 million uncommitted incremental facility. The Prior Revolving Facility was scheduled to mature on August 5, 2019, subject to two, six-month extension options. The Prior Term Loan was scheduled to mature on February 1, 2023, and could be prepaid at any time subject to a 2% premium in the first year after issuance and a 1% premium in the second year after issuance.
“Prior Credit Agreement,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) anthe 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 “Amended“Second Amended Credit Facility”) in an aggregate principal amount of $200.0 million. Borrowing availability under the Revolving Facility is subject to no default or event of default under the Amended Credit Agreement having occurred at the time of borrowing. The proceeds of the Term Loan were used, in part, to repay in full all outstandingFuture borrowings under the Prior Term Loan and Prior Revolving Facility under the Prior Credit Agreement. Future borrowings under theSecond Amended Credit Facility will be used for working capital purposes, for capital expenditures, to fund acquisitions and for general corporate purposes.
As of December 31, 2022, we had $200.0 million outstanding under the Term Loan and $125.0 million outstanding under the Revolving Facility. The Revolving Facility has a maturity date of February 9, 2027, and includes, at our sole discretion, two, six-month extension options. The Term Loan has a maturity date of February 8, 2026.
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 LIBORAdjusted 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 itsour consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtainswe obtain certain specified investment grade ratings on itsour 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 LIBORAdjusted 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 itsour consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtainswe obtain certain specified investment grade ratings on itsour 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 itsour consolidated subsidiaries (unless the Company obtainswe obtain certain specified investment grade ratings on itsour senior long-term unsecured debt and the Operating Partnership elects to decrease the applicable margin as described above, in which case the Operating Partnership will pay a facility fee on the revolving commitments ranging from 0.125% to 0.30% per annum based off the credit ratings of the Company’sour senior long-term unsecured debt).
As of December 31, 2019,2022, we had $200.0 million outstanding under the Term Loan and $60.0 million outstanding under the Revolving Facility.
| Payments Due by Period | |||||||||||||||||||
| Total | Less than 1 Year | 1 Year to Less than 3 Years | 3 Years to Less than 5 Years | More than 5 years | |||||||||||||||
| Senior unsecured notes payable (1) | $ | 386,625 | $ | 15,750 | $ | 31,500 | $ | 31,500 | $ | 307,875 | |||||||||
| Senior unsecured term loan (2) | 240,524 | 6,648 | 13,260 | 13,278 | 207,338 | ||||||||||||||
| Unsecured revolving credit facility (3) | 68,322 | 2,684 | 5,352 | 60,286 | — | ||||||||||||||
| Operating lease | 3,421 | 71 | 104 | 104 | 3,142 | ||||||||||||||
| Total | $ | 698,892 | $ | 25,153 | $ | 50,216 | $ | 105,168 | $ | 518,355 | |||||||||
Capital Expenditures
Dividend Plans
We are required to pay dividends in order to maintain our REIT status and we expect to make quarterly dividend payments in cash with the annual dividend amount no less than 90% of our annual REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. See Note 8, Equity, to our consolidated financial
49
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 2022, 2021 and 2020.
Critical Accounting PoliciesEstimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that the assumptions and estimates used in preparation of the underlying consolidated financial statements are reasonable. Actual results, however, could differ from those estimates and assumptions.
Certain accounting policies are considered to be critical accounting policies. Critical accounting policies are those policies that require management to make significant estimates and/or assumptions about matters that are
uncertain at the time the estimates and/or assumptions are made or where we are required to make significant judgments and assumptions with respect to the practical application of accounting principles in our business operations. Critical accounting policies are by definition those policies that are material to our financial statements and for which the impact of changes in estimates, assumptions, and judgments could have a material impact to our financial statements.
The following critical accounting policies discussion reflects what we believe are the most significant estimates,
assumptions, and judgments used in the preparation of our consolidated financial statements. This discussion of our
critical accounting policies is intended to supplement the description of our accounting policies in the footnotes to our consolidated financial statements and to provide additional insight into the information used by management when evaluating significant estimates, assumptions, and judgments. For furthera discussion of our significant accounting policies, see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.
Real Estate Acquisition Valuation. In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, our acquisitions of real estate investments generally do not meet the definition of a business, and are treated as asset acquisitions. The assets acquired and liabilities assumed are measured at their acquisition date relative fair values. Acquisition costs are capitalized as incurred. We allocate the acquisition costs to the tangible assets, identifiable intangible assets/liabilities and assumed liabilities on a relative fair value basis. Purchase price allocations contain uncertainties because they require management to make significant estimates and assumptions and to apply judgment to allocate the purchase price of real estate acquired among its components. We assess fair value based on available market information, such as capitalization and discount rates, comparable sale transactions and relevant per square foot or unit cost information. A real estate asset’s fair value may be determined utilizing cash flow projections that incorporate such market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, as well as market and economic conditions. The fair value of land is derived from comparable sales of land within the same submarket and/or region. The fair value of buildings and improvements and integral equipment, furniture and fixtures considers the value of the property as if it was vacant as well as replacement costs, depreciation factors, and other relevant market information. The use of different assumptions in these fair value inputs could significantly affect the reported amounts of the allocation of the acquisition on a relative fair value basis and the related depreciation expense recorded for such assets.
Impairment of Long-Lived Assets. At each reporting period, we evaluate our real estate investments to be held and usedfor use for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The judgment regarding the existence of impairment indicators, used to determine if an impairment assessment is necessary, is based on factors such as, but not limited to, market conditions, operator performance and legal structure. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying facilities. The most significant inputs to the undiscounted cash flows include, but are not limited to, historical and projected facility level financial results, a lease coverage ratio, the intended hold period by the Company,us, and a terminal capitalization rate. The analysis is also significantly impacted by determining the lowest level of cash flows, which generally would be at the master lease level of cash flows. Provisions for impairment losses related to long-lived assets are recognized when expected future undiscounted cash flows are determined to be less than the carrying values of the assets. The impairment is measured as the excess of carrying value over fair value. All impairments are taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset.
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We classify our real estate investments as held for sale when the applicable criteria have been met, which entailsincludes a formal plan to sell the properties that is expected to be completed within one year, among other criteria. Upon designation as held for sale, we write down the excess of the carrying value over the estimated fair value less costs to sell, resulting in an impairment of the real estate investments, if necessary, and cease depreciation. The fair value of the assets held for sale is based on estimated sales prices, which are considered to be Level 3 measurements within the fair value hierarchy. Estimated sales prices are 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.
Our ability to accurately estimate future cash flows and estimate and allocate fair values impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on financial results.
Revenue Recognition. We generate revenues primarily by leasing healthcare-related properties to healthcare operators in triple-netrecognize lease arrangements, under which the tenant is solely responsible for the costs related to the property and recognize revenue on a straight-line basis over the lease term if deemed probable of collection. On January 1, 2019, we elected the single component practical expedient, which allows a lessor, by class of underlying asset, not to allocate the total consideration to the lease and non-lease components based on their relative stand-alone selling prices where certain criteria are met. This single component practical expedient requires us to account for the lease component and non-lease component(s) associated with that lease as a single component if (i) the timing and pattern of transfer of the lease component and the non-lease component(s) associated with it are the same and (ii) the lease component would be classified as an operating lease if it were accounted for separately. If we determine that the lease component is the predominant component, we account for the single component as an operating lease in accordance with the new lease ASUs. Conversely, we are required to account for the combined component under the revenue recognition standard if we determine that the non-lease component is the predominant component. As a resultASC 842, Leases. See Note 2, Summary of this assessment, rental revenues and tenant recoveries from the lease of real estate assets that qualify for this expedient are accounted for as a single component under the new lease ASUs, with tenant recoveries primarily as variable consideration. Tenant recoveries that do not qualify for the single component practical expedient and are considered non-lease components are accounted for under the revenue recognition standard. The components of our operating leases qualify for the single component presentation.Significant Accounting Policies,
collection, revenue is recorded as the lesser of (i) the amount which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable balances charged as a direct write-off against rental income in the period of the change in the collectibility determination. ForManagement’s judgement can impact the timing of write-offs and recovery adjustments. We did not materially change the assumptions used in the analysis during the year ended December 31, 2019, we recorded $11.8 million2022.
Fair Value of Other Real Estate Related Investments. We have elected the fair value option for our other real estate related investments for which such election is permitted, as provided for under ASC 825, Financial Instruments (“ASC 825”). For financial instruments that are traded in an "active market," the best measure of fair value is the quoted market price. In cases where market-observable data is not available, the data used for the measurement must reflect assumptions that market participants would use in pricing the asset or liability (including adjustments that market participants demand for the risk associated with the unobservable data or the model used to rental incomedetermine fair value). We have concluded to use a present value technique, a discounted cash flow model, to determine fair value.
The determination of estimated fair value of our other real estate related to recognized rental incomeinvestments requires the use of both macroeconomic and microeconomic assumptions and/or inputs, which are generally based on current market and economic conditions, such as changes in the current quarterrisk-free or benchmark rate and prior periods. See Note 3, Real Estate Investments, Net, changes attributable to instrument-specific credit risk (e.g., changes in credit spread associated with the Notesinstrument). Changes in market and/or economic conditions could have a significant adverse effect on the estimated fair value of our financial instruments. Changes to assumptions, including assumed benchmark rates and credit spreads, may significantly impact the Consolidated Financial Statements for further detail.estimated fair value of our investments.
51
Impact of Inflation
Our rental income in future years will be impacted by changes in inflation. Almost all of our triple-net lease agreements, including the Ensign Master Leases,leases, provide for an annual rent escalator based on the percentage change in the Consumer Price Index (but not less than zero), subject to maximum fixed percentages.
Our primary market risk exposure is interest rate risk with respect to our variable rate indebtedness.
Our Second Amended Credit Agreement providesprovides 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) an unsecured term loan credit facility (the “Term Loan”) in an aggregate principal amount of $200.0 million from a syndicate of banks and other financial institutions.
The interest rates applicable to loans under the Revolving Facility are, at ourthe Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.10% to 0.55% per annum or LIBORAdjusted 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 itsour consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if we obtain certain specified investment grade ratings on our senior long-term unsecured debt). The interest rates applicable to loans under the Term Loan are, at ourthe Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.50% to 1.20% per annum or LIBORAdjusted 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 itsour consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if we obtain certain specified investment grade ratings on our senior long-term unsecured debt). As of December 31, 2019,2022, we had a $200.0 million Term Loan outstanding and there was $60.0$125.0 million outstanding outstanding under the Revolving Facility.
Based on our outstanding debt balance as of December 31, 2022 described above and the interest rates applicable to our outstanding debt at December 31, 2022, assuming a 100 basis point increase in the interest rates related to our variable rate debt, interest expense would have increased approximately $3.3 million for the year ended December 31, 2022.
An increase in interest rates could make the financing of any acquisition by us more costly as well as increase the costs of our variable rate debt obligations. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. In addition, there is currently uncertainty around whether LIBOR will continue to exist after 2021. If LIBOR ceases to exist,Increased inflation may also have a pronounced negative impact on the interest expense we will need to enter into an amendment to the Amended Credit Agreement and we cannot predict what alternative index would be negotiatedpay in connection with our lenders. Ifoutstanding indebtedness, as these costs could increase at a rate higher than our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows. Based on our outstanding debt balance as of December 31, 2019 described above and the interest rates applicable to our outstanding debt at December 31, 2019, assuming a 100 basis point increase in the interest rates related to our variable rate debt, interest expense would have increased approximately $2.6 million for the year ended December 31, 2019.rents.
We may, in the future, manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements. However, the REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. See “Risk“Risk Factors - Risks Related to Our Status as a REIT - Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.” As of December 31, 2019,2022, we had no swap agreements to hedge our interest rate risks. We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and variable rates for our indebtedness.
ITEM 8. Financial Statements and Supplementary Data
See the Index to Consolidated Financial Statements on page F-1 of this report.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
ITEM 9A.Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure
52
controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of December 31, 2019,2022, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2019.2022.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2019.2022.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2019,2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of the Independent Registered Public Accounting Firm
The effectiveness of our internal control over financial reporting as of December 31, 20192022 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholdersstockholders and the Board of Directors of CareTrust REIT, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of CareTrust REIT, Inc. and subsidiaries (the “Company”) as of December 31, 2019,2022, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2022, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019,2022, of the Company and our report dated February 20, 2020,9, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether theeffective internal control over financial statements are free ofreporting was maintained in all material misstatement, whether due to error or fraud.respects. Our audit included performing procedures to assessobtaining an understanding of internal control over financial reporting, assessing the risksrisk that a material weakness exists, testing and evaluating the design and operating effectiveness of material misstatement ofinternal control based on the financial statements, whether due to error or fraud,assessed risk, and performing such other procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresas we considered necessary in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a matter arising fromprocess designed to provide reasonable assurance regarding the current-period auditreliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements that was communicated or required to be communicated to the audit committeein accordance with generally accepted accounting principles, and that (1) relates to accountsreceipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or disclosurestimely detection of unauthorized acquisition, use, or disposition of the company’s assets that arecould have a material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinioneffect on the financial statements, taken as a whole, and westatements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
February 20, 20209, 2023
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ITEM 9B.Other Information
Not applicable.
ITEM 9C.Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not applicable.
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PART III
ITEM 10.Directors, Executive Officers and Corporate Governance
The information required under Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders.
Code of Conduct and Ethics
We have servedadopted a code of business conduct and ethics that applies to all employees, including employees of our subsidiaries, as well as each member of our Board of Directors. The code of business conduct and ethics is available at our website at www.caretrustreit.com under the Company's auditor since 2019.Investors-Corporate Governance section. We intend to satisfy any disclosure requirement under applicable rules of the Securities and Exchange Commission or the New York Stock Exchange regarding an amendment to, or waiver from, a provision of this code of business conduct and ethics by posting such information on our website, at the address specified above.
ITEM 11.Executive Compensation
The information required under Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders.
ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required under Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required under Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders.
ITEM 14.Principal Accountant Fees and Services
The information required under Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022 in connection with our 2023 Annual Meeting of Stockholders.
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PART IV
ITEM 15.Exhibit and Financial Statement Schedules
| (a)(1) | Financial Statements | ||||
| See Index to Consolidated Financial Statements on page F-1 of this report. | |||||
| (a)(2) | Financial Statement Schedules | ||||
| Schedule III: Real Estate Assets and Accumulated Depreciation | |||||
| Schedule IV: Mortgage Loans on Real Estate | |||||
| Note: All other schedules have been omitted because the required information is presented in the financial statements and the related notes or because the schedules are not applicable. | |||||
| (a)(3) | Exhibits | ||||
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| *101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||
| *101.SCH | XBRL Taxonomy Extension Schema Document | ||||
| *101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| *101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||
| *101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||
| *101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| *104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | ||||
* Filed herewith.
** Furnished herewith.
+ Management contract or compensatory plan or arrangement.
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ITEM 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CARETRUST REIT, INC. | |||||
| By: | /S/ DAVID M. SEDGWICK | ||||
| David M. Sedgwick | |||||
| President and Chief Executive Officer | |||||
| Dated: February 9, 2023 | |||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name | Title | Date | ||||||||||||
| /s/ DAVID M. SEDGWICK | President and Chief Executive Officer (Principal Executive Officer) | February 9, 2023 | ||||||||||||
| David M. Sedgwick | ||||||||||||||
| /s/ WILLIAM M. WAGNER | Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) | February 9, 2023 | ||||||||||||
| William M. Wagner | ||||||||||||||
| /s/ DIANA LAING | Director | February 9, 2023 | ||||||||||||
| Diana Laing | ||||||||||||||
| /s/ ANNE OLSON | Director | February 9, 2023 | ||||||||||||
| Anne Olson | ||||||||||||||
| /s/ SPENCER PLUMB | Director | February 9, 2023 | ||||||||||||
| Spencer Plumb | ||||||||||||||
| /s/ CAREINA WILLIAMS | Director | February 9, 2023 | ||||||||||||
| Careina Williams | ||||||||||||||
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | |||||
| Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) with respect to CareTrust REIT, Inc. | |||||
| Consolidated Balance Sheets as of December 31, 2022 and 2021 | |||||
| Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 | |||||
| Consolidated Statements of Equity for the years ended December 31, 2022, 2021 and 2020 | |||||
| Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020 | |||||
| Notes to Consolidated Financial Statements | |||||
| Schedule III: Real Estate Assets and Accumulated Depreciation | |||||
| Schedule IV: Mortgage Loans on Real Estate | |||||
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholdersstockholders and the Board of Directors of CareTrust REIT, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetsheets of CareTrust REIT, Inc. and subsidiaries (the Company),"Company") as of December 31, 2018,2022 and 2021, the related consolidated income statements, statements of operations, equity, and cash flows, for each of the twothree years in the period ended December 31, 2018,2022, and the related notes and the financial statement schedules listed in the Index at Item 15(a)(2)15 (collectively referred to as the “consolidated financial statements”"financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company atas of December 31, 2018,2022 and 2021, and the consolidated results of its operations and its cash flows for each of the twothree years in the period ended December 31, 2018,2022, in conformity with U.S.accounting principles generally accepted accounting principles.in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment of Real Estate Investments, Assets Held for Sale, Net and Asset Sales — Refer to Notes 2 and 4 to the financial statements
Critical Audit Matter Description
The Company classifies its real estate investments as held for sale when the applicable criteria have been met, which includes a formal plan to sell the properties that is expected to be completed within one year, among other criteria. Upon designation as held for sale, the Company writes down the excess of the carrying value over the estimated fair value less costs to sell, resulting in an impairment of the real estate investments, if necessary.
If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a real estate investment previously classified as held for sale or otherwise no longer meets the held for sale criteria, the respective assets are reclassified as real estate investments held for use. A real estate investment that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the real estate investment was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the real estate investment been continuously classified as held for use, or (b) the fair value at the date of the decision not to sell or change in circumstances that led to the real estate investment no longer meeting the criteria of held for sale.
F-2
The fair value of the assets held for sale is based on a market approach using estimated sales prices (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. The fair value of assets reclassified as real estate investments held for use is based on an income approach using current market conditions and considers matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, and, where applicable, terms of recent lease agreements or the results of negotiations with prospective tenants. There are inherent uncertainties in making these assumptions.
We identified the impairment of real estate investments as a critical audit matter because of the significant estimates and assumptions management makes to determine the fair value of real estate investments held for sale and real estate investments reclassified from held for sale to held for use. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s determination of fair value.
As of December 31, 2022, the Company had real estate investments held for sale of $12.3 million, after taking an impairment loss of $14.4 million. During the year ended December 31, 2022, the Company reclassified real estate investments from held for sale to held for use of $57.4 million, after taking an impairment loss of $18.0 million.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant inputs to the fair value of real estate investments held for sale and real estate investments reclassified from held for sale to held for use included the following, among others:
•We tested the effectiveness of controls over management’s evaluation of balance sheet classification and determination of fair value for real estate investments held for sale and real estate investments reclassified to real estate investments held for use.
•We evaluated the reasonableness of the (1) valuation methodology; and (2) the concluded real estate investment fair value by independently obtaining sales comparison data, capitalization rates, and market rents and developing a range of independent fair value estimates and comparing our estimates to those used by management.
•We used the assistance of our fair value specialists in obtaining relevant market data, where necessary.
•Read and considered terms of executed arrangements and evidence regarding terms for arrangements in the process of negotiation at or near the valuation date.
•We held discussions with management to understand individual real estate investment specific factors that impacted the Company’s fair value determination.
/s/ ERNSTDELOITTE & YOUNGTOUCHE LLP
Costa Mesa, California
February 9, 2023
We have served as the Company’sCompany's auditor from 2014 tosince 2019.
F-3
CARETRUST REIT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| December 31, | |||||||
| 2019 | 2018 | ||||||
| Assets: | |||||||
| Real estate investments, net | $ | 1,414,200 | $ | 1,216,237 | |||
| Other real estate investments, net | 33,300 | 18,045 | |||||
| Assets held for sale, net | 34,590 | — | |||||
| Cash and cash equivalents | 20,327 | 36,792 | |||||
| Accounts and other receivables, net | 2,571 | 11,387 | |||||
| Prepaid expenses and other assets | 10,850 | 8,668 | |||||
| Deferred financing costs, net | 3,023 | 633 | |||||
| Total assets | $ | 1,518,861 | $ | 1,291,762 | |||
| Liabilities and Equity: | |||||||
| Senior unsecured notes payable, net | $ | 295,911 | $ | 295,153 | |||
| Senior unsecured term loan, net | 198,713 | 99,612 | |||||
| Unsecured revolving credit facility | 60,000 | 95,000 | |||||
| Accounts payable and accrued liabilities | 14,962 | 15,967 | |||||
| Dividends payable | 21,684 | 17,783 | |||||
| Total liabilities | 591,270 | 523,515 | |||||
| Commitments and contingencies (Note 10) | |||||||
| Equity: | |||||||
| Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2019 and December 31, 2018 | — | — | |||||
| Common stock, $0.01 par value; 500,000,000 shares authorized, 95,103,270 and 85,867,044 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively | 951 | 859 | |||||
| Additional paid-in capital | 1,162,990 | 965,578 | |||||
| Cumulative distributions in excess of earnings | (236,350 | ) | (198,190 | ) | |||
| Total equity | 927,591 | 768,247 | |||||
| Total liabilities and equity | $ | 1,518,861 | $ | 1,291,762 | |||
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Assets: | |||||||||||
| Real estate investments, net | $ | 1,421,410 | $ | 1,589,971 | |||||||
| Other real estate related investments, at fair value (including accrued interest of $1,320 as of December 31, 2022 and $155 as of December 31, 2021) | 156,368 | 15,155 | |||||||||
| Assets held for sale, net | 12,291 | 4,835 | |||||||||
| Cash and cash equivalents | 13,178 | 19,895 | |||||||||
| Accounts and other receivables | 416 | 2,418 | |||||||||
| Prepaid expenses and other assets, net | 11,690 | 7,512 | |||||||||
| Deferred financing costs, net | 5,428 | 1,062 | |||||||||
| Total assets | $ | 1,620,781 | $ | 1,640,848 | |||||||
| Liabilities and Equity: | |||||||||||
| Senior unsecured notes payable, net | $ | 395,150 | $ | 394,262 | |||||||
| Senior unsecured term loan, net | 199,348 | 199,136 | |||||||||
| Unsecured revolving credit facility | 125,000 | 80,000 | |||||||||
| Accounts payable, accrued liabilities and deferred rent liabilities | 24,360 | 25,408 | |||||||||
| Dividends payable | 27,550 | 26,285 | |||||||||
| Total liabilities | 771,408 | 725,091 | |||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Equity: | |||||||||||
| Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 2021 | — | — | |||||||||
| Common stock, $0.01 par value; 500,000,000 shares authorized, 99,010,112 and 96,296,673 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 990 | 963 | |||||||||
| Additional paid-in capital | 1,245,337 | 1,196,839 | |||||||||
| Cumulative distributions in excess of earnings | (396,954) | (282,045) | |||||||||
| Total equity | 849,373 | 915,757 | |||||||||
| Total liabilities and equity | $ | 1,620,781 | $ | 1,640,848 | |||||||
See accompanying notes to consolidated financial statements.
F-4
CARETRUST REIT, INC.
CONSOLIDATED INCOME STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| Year Ended December 31, | |||||||||||
| 2019 | 2018 | 2017 | |||||||||
| Revenues: | |||||||||||
| Rental income | $ | 155,667 | $ | 140,073 | $ | 117,633 | |||||
| Tenant reimbursements | — | 11,924 | 10,254 | ||||||||
| Independent living facilities | 3,389 | 3,379 | 3,228 | ||||||||
| Interest and other income | 4,345 | 1,565 | 1,867 | ||||||||
| Total revenues | 163,401 | 156,941 | 132,982 | ||||||||
| Expenses: | |||||||||||
| Depreciation and amortization | 51,822 | 45,766 | 39,159 | ||||||||
| Interest expense | 28,125 | 27,860 | 24,196 | ||||||||
| Loss on the extinguishment of debt | — | — | 11,883 | ||||||||
| Property taxes | 3,048 | 11,924 | 10,254 | ||||||||
| Independent living facilities | 2,898 | 2,964 | 2,733 | ||||||||
| Impairment of real estate investments | 16,692 | — | 890 | ||||||||
| Provision for loan losses | 1,076 | — | — | ||||||||
| Reserve for advances and deferred rent | — | — | 10,414 | ||||||||
| General and administrative | 15,158 | 12,555 | 11,117 | ||||||||
| Total expenses | 118,819 | 101,069 | 110,646 | ||||||||
| Other income: | |||||||||||
| Gain on sale of real estate | 1,777 | 2,051 | — | ||||||||
| Gain on disposition of other real estate investment | — | — | 3,538 | ||||||||
| Net income | $ | 46,359 | $ | 57,923 | $ | 25,874 | |||||
| Earnings per common share: | |||||||||||
| Basic | $ | 0.49 | $ | 0.73 | $ | 0.35 | |||||
| Diluted | $ | 0.49 | $ | 0.72 | $ | 0.35 | |||||
| Weighted-average number of common shares: | |||||||||||
| Basic | 93,088 | 79,386 | 72,647 | ||||||||
| Diluted | 93,098 | 79,392 | 72,647 | ||||||||
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Revenues: | |||||||||||||||||
| Rental income | $ | 187,506 | $ | 190,195 | $ | 173,612 | |||||||||||
| Independent living facilities | — | — | 2,077 | ||||||||||||||
| Interest and other income | 8,626 | 2,156 | 2,643 | ||||||||||||||
| Total revenues | 196,132 | 192,351 | 178,332 | ||||||||||||||
| Expenses: | |||||||||||||||||
| Depreciation and amortization | 50,316 | 55,340 | 52,760 | ||||||||||||||
| Interest expense | 30,008 | 23,677 | 23,661 | ||||||||||||||
| Property taxes | 4,333 | 3,574 | 2,836 | ||||||||||||||
| Independent living facilities | — | — | 1,869 | ||||||||||||||
| Impairment of real estate investments | 79,062 | — | — | ||||||||||||||
| Provision for loan losses, net | 3,844 | — | — | ||||||||||||||
| Property operating expenses | 5,039 | — | — | ||||||||||||||
| General and administrative | 20,165 | 26,874 | 16,302 | ||||||||||||||
| Total expenses | 192,767 | 109,465 | 97,428 | ||||||||||||||
| Other loss: | |||||||||||||||||
| Loss on extinguishment of debt | — | (10,827) | — | ||||||||||||||
| Loss on sale of real estate, net | (3,769) | (77) | (37) | ||||||||||||||
| Unrealized loss on other real estate related investments | (7,102) | — | — | ||||||||||||||
| Total other loss | (10,871) | (10,904) | (37) | ||||||||||||||
| Net (loss) income | $ | (7,506) | $ | 71,982 | $ | 80,867 | |||||||||||
| (Loss) earnings per common share: | |||||||||||||||||
| Basic | $ | (0.08) | $ | 0.74 | $ | 0.85 | |||||||||||
| Diluted | $ | (0.08) | $ | 0.74 | $ | 0.85 | |||||||||||
| Weighted-average number of common shares: | |||||||||||||||||
| Basic | 96,703 | 96,017 | 95,200 | ||||||||||||||
| Diluted | 96,703 | 96,092 | 95,207 | ||||||||||||||
See accompanying notes to consolidated financial statements.
F-5
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except share and per share amounts)
| Common Stock | Additional Paid-in Capital | Cumulative Distributions in Excess of Earnings | Total Equity | |||||||||||||||
| Shares | Amount | |||||||||||||||||
| Balance as of December 31, 2016 | 64,816,350 | $ | 648 | $ | 611,475 | $ | (159,693 | ) | $ | 452,430 | ||||||||
| Issuance of common stock, net | 10,573,089 | 106 | 170,213 | — | 170,319 | |||||||||||||
| Vesting of restricted common stock, net of shares withheld for employee taxes | 88,763 | 1 | (867 | ) | — | (866 | ) | |||||||||||
| Amortization of stock-based compensation | — | — | 2,416 | — | 2,416 | |||||||||||||
| Common dividends ($0.74 per share) | — | — | — | (55,556 | ) | (55,556 | ) | |||||||||||
| Net income | — | — | — | 25,874 | 25,874 | |||||||||||||
| Balance as of December 31, 2017 | 75,478,202 | 755 | 783,237 | (189,375 | ) | 594,617 | ||||||||||||
| Issuance of common stock, net | 10,264,981 | 103 | 179,783 | — | 179,886 | |||||||||||||
| Vesting of restricted common stock, net of shares withheld for employee taxes | 123,861 | 1 | (1,290 | ) | — | (1,289 | ) | |||||||||||
| Amortization of stock-based compensation | — | — | 3,848 | — | 3,848 | |||||||||||||
| Common dividends ($0.82 per share) | — | — | — | (66,738 | ) | (66,738 | ) | |||||||||||
| Net income | — | — | — | 57,923 | 57,923 | |||||||||||||
| Balance as of December 31, 2018 | 85,867,044 | 859 | 965,578 | (198,190 | ) | 768,247 | ||||||||||||
| Issuance of common stock, net | 9,100,250 | 91 | 195,833 | — | 195,924 | |||||||||||||
| Vesting of restricted common stock, net of shares withheld for employee taxes | 135,976 | 1 | (2,525 | ) | — | (2,524 | ) | |||||||||||
| Amortization of stock-based compensation | — | — | 4,104 | — | 4,104 | |||||||||||||
| Common dividends ($0.90 per share) | — | — | — | (84,519 | ) | (84,519 | ) | |||||||||||
| Net income | — | — | — | 46,359 | 46,359 | |||||||||||||
| Balance as of December 31, 2019 | 95,103,270 | $ | 951 | $ | 1,162,990 | $ | (236,350 | ) | $ | 927,591 | ||||||||
| Common Stock | Additional Paid-in Capital | Cumulative Distributions in Excess of Earnings | Total Equity | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | 95,103,270 | $ | 951 | $ | 1,162,990 | $ | (236,350) | $ | 927,591 | ||||||||||||||||||||||||||||||||
| Issuance of common stock, net | — | — | (404) | — | (404) | ||||||||||||||||||||||||||||||||||||
| Vesting of restricted common stock, net of shares withheld for employee taxes | 112,527 | 1 | (1,996) | — | (1,995) | ||||||||||||||||||||||||||||||||||||
| Amortization of stock-based compensation | — | — | 3,812 | — | 3,812 | ||||||||||||||||||||||||||||||||||||
| Common dividends ($1.00 per share) | — | — | — | (95,729) | (95,729) | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 80,867 | 80,867 | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | 95,215,797 | 952 | 1,164,402 | (251,212) | 914,142 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 990,000 | 10 | 22,936 | — | 22,946 | ||||||||||||||||||||||||||||||||||||
| Vesting of restricted common stock, net of shares withheld for employee taxes | 90,876 | 1 | (1,331) | — | (1,330) | ||||||||||||||||||||||||||||||||||||
| Amortization of stock-based compensation | — | — | 10,832 | — | 10,832 | ||||||||||||||||||||||||||||||||||||
| Common dividends ($1.06 per share) | — | — | — | (102,815) | (102,815) | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 71,982 | 71,982 | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | 96,296,673 | 963 | 1,196,839 | (282,045) | 915,757 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 2,405,000 | 24 | 47,212 | — | 47,236 | ||||||||||||||||||||||||||||||||||||
| Vesting of restricted common stock, net of shares withheld for employee taxes | 308,439 | 3 | (4,472) | — | (4,469) | ||||||||||||||||||||||||||||||||||||
| Amortization of stock-based compensation | — | — | 5,758 | — | 5,758 | ||||||||||||||||||||||||||||||||||||
| Common dividends ($1.10 per share) | — | — | — | (107,403) | (107,403) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | (7,506) | (7,506) | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | 99,010,112 | $ | 990 | $ | 1,245,337 | $ | (396,954) | $ | 849,373 | ||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-6
CARETRUST REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2022 | 2021 | 2020 | |||||||||||||||||||||||
| Cash flows from operating activities: | Cash flows from operating activities: | |||||||||||||||||||||||||||
| Net income | $ | 46,359 | $ | 57,923 | $ | 25,874 | ||||||||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||||||
| Net (loss) income | Net (loss) income | $ | (7,506) | $ | 71,982 | $ | 80,867 | |||||||||||||||||||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||||||||||||||||||
| Depreciation and amortization (including below-market ground leases) | 51,866 | 45,783 | 39,176 | Depreciation and amortization (including below-market ground leases) | 50,378 | 55,394 | 52,819 | |||||||||||||||||||||
| Amortization of deferred financing costs | 2,003 | 1,938 | 2,100 | Amortization of deferred financing costs | 2,095 | 2,052 | 1,950 | |||||||||||||||||||||
| Loss on the extinguishment of debt | — | — | 11,883 | |||||||||||||||||||||||||
| Loss on extinguishment of debt | Loss on extinguishment of debt | — | 10,827 | — | ||||||||||||||||||||||||
| Unrealized loss on other real estate related investments | Unrealized loss on other real estate related investments | 7,102 | — | — | ||||||||||||||||||||||||
| Amortization of stock-based compensation | 4,104 | 3,848 | 2,416 | Amortization of stock-based compensation | 5,758 | 10,832 | 3,790 | |||||||||||||||||||||
| Straight-line rental income | (1,385 | ) | (2,333 | ) | (344 | ) | Straight-line rental income | (17) | (32) | (77) | ||||||||||||||||||
| Adjustment for collectibility of rental income | 11,774 | — | — | Adjustment for collectibility of rental income | 1,417 | — | — | |||||||||||||||||||||
| Noncash interest income | (797 | ) | (238 | ) | (686 | ) | Noncash interest income | (1,165) | (155) | — | ||||||||||||||||||
| Gain on sale of real estate | (1,777 | ) | (2,051 | ) | — | |||||||||||||||||||||||
| Loss on sale of real estate, net | Loss on sale of real estate, net | 3,769 | 77 | 37 | ||||||||||||||||||||||||
| Interest income distribution from other real estate investment | 463 | — | 1,500 | Interest income distribution from other real estate investment | — | — | 1,346 | |||||||||||||||||||||
| Reserve for advances and deferred rent | — | — | 10,414 | |||||||||||||||||||||||||
| Impairment of real estate investments | 16,692 | — | 890 | Impairment of real estate investments | 79,062 | — | — | |||||||||||||||||||||
| Provision for loan losses | 1,076 | — | — | |||||||||||||||||||||||||
| Provision for loan losses, net | Provision for loan losses, net | 3,844 | — | — | ||||||||||||||||||||||||
| Change in operating assets and liabilities: | Change in operating assets and liabilities: | |||||||||||||||||||||||||||
| Accounts and other receivables, net | (6,283 | ) | (3,800 | ) | (9,428 | ) | ||||||||||||||||||||||
| Prepaid expenses and other assets | (495 | ) | (270 | ) | (273 | ) | ||||||||||||||||||||||
| Accounts payable and accrued liabilities | 2,695 | (1,443 | ) | 5,278 | ||||||||||||||||||||||||
| Accounts and other receivables | Accounts and other receivables | 604 | (562) | 825 | ||||||||||||||||||||||||
| Prepaid expenses and other assets, net | Prepaid expenses and other assets, net | 123 | 399 | 387 | ||||||||||||||||||||||||
| Accounts payable, accrued liabilities and deferred rent liabilities | Accounts payable, accrued liabilities and deferred rent liabilities | (1,049) | 6,057 | 3,791 | ||||||||||||||||||||||||
| Net cash provided by operating activities | 126,295 | 99,357 | 88,800 | Net cash provided by operating activities | 144,415 | 156,871 | 145,735 | |||||||||||||||||||||
| Cash flows from investing activities: | Cash flows from investing activities: | |||||||||||||||||||||||||||
| Acquisitions of real estate, net of deposits applied | (321,458 | ) | (111,640 | ) | (296,517 | ) | Acquisitions of real estate, net of deposits applied | (21,915) | (192,718) | (89,650) | ||||||||||||||||||
| Improvements to real estate | (3,352 | ) | (7,230 | ) | (748 | ) | ||||||||||||||||||||||
| Purchases of equipment, furniture and fixtures | (2,937 | ) | (1,782 | ) | (403 | ) | ||||||||||||||||||||||
| Investment in real estate mortgage and other loans receivable | (18,246 | ) | (5,648 | ) | (12,416 | ) | ||||||||||||||||||||||
| Principal payments received on real estate mortgage and other loans receivable | 24,283 | 3,227 | 25 | |||||||||||||||||||||||||
| Purchases of equipment, furniture and fixtures and improvements to real estate | Purchases of equipment, furniture and fixtures and improvements to real estate | (7,292) | (6,013) | (8,297) | ||||||||||||||||||||||||
| Investment in real estate related investments and other loans receivable | Investment in real estate related investments and other loans receivable | (149,650) | (1,253) | (30,498) | ||||||||||||||||||||||||
| Principal payments received on other loans receivable | Principal payments received on other loans receivable | 6,308 | 393 | 80,928 | ||||||||||||||||||||||||
| Repayment of other real estate investment | 2,204 | — | 7,500 | Repayment of other real estate investment | — | — | 2,327 | |||||||||||||||||||||
| Escrow deposits for acquisitions of real estate | — | (5,000 | ) | — | ||||||||||||||||||||||||
| Escrow deposits for potential acquisitions of real estate | Escrow deposits for potential acquisitions of real estate | — | — | (3,000) | ||||||||||||||||||||||||
| Net proceeds from sales of real estate | 3,499 | 13,004 | — | Net proceeds from sales of real estate | 45,149 | 6,958 | 6,608 | |||||||||||||||||||||
| Net cash used in investing activities | (316,007 | ) | (115,069 | ) | (302,559 | ) | Net cash used in investing activities | (127,400) | (192,633) | (41,582) | ||||||||||||||||||
| Cash flows from financing activities: | Cash flows from financing activities: | |||||||||||||||||||||||||||
| Proceeds from the issuance of common stock, net | 195,924 | 179,882 | 170,323 | |||||||||||||||||||||||||
| Proceeds from (costs paid for) the issuance of common stock, net | Proceeds from (costs paid for) the issuance of common stock, net | 47,236 | 22,946 | (404) | ||||||||||||||||||||||||
| Proceeds from the issuance of senior unsecured notes payable | — | — | 300,000 | Proceeds from the issuance of senior unsecured notes payable | — | 400,000 | — | |||||||||||||||||||||
| Proceeds from the issuance of senior unsecured term loan | 200,000 | — | — | |||||||||||||||||||||||||
| Borrowings under unsecured revolving credit facility | 243,000 | 65,000 | 238,000 | Borrowings under unsecured revolving credit facility | 160,000 | 220,000 | 65,000 | |||||||||||||||||||||
| Payments on senior unsecured notes payable | — | — | (267,639 | ) | Payments on senior unsecured notes payable | — | (300,000) | — | ||||||||||||||||||||
| Payments on senior unsecured term loan | (100,000 | ) | — | — | ||||||||||||||||||||||||
| Payments on unsecured revolving credit facility | (278,000 | ) | (135,000 | ) | (168,000 | ) | Payments on unsecured revolving credit facility | (115,000) | (190,000) | (75,000) | ||||||||||||||||||
| Payments of deferred financing costs | (4,534 | ) | — | (6,063 | ) | |||||||||||||||||||||||
| Payments on debt extinguishment and deferred financing costs | Payments on debt extinguishment and deferred financing costs | (5,361) | (14,095) | — | ||||||||||||||||||||||||
| Net-settle adjustment on restricted stock | (2,524 | ) | (1,288 | ) | (866 | ) | Net-settle adjustment on restricted stock | (4,469) | (1,331) | (1,996) | ||||||||||||||||||
| Dividends paid on common stock | (80,619 | ) | (62,999 | ) | (52,587 | ) | Dividends paid on common stock | (106,138) | (100,782) | (93,161) | ||||||||||||||||||
| Net cash provided by financing activities | 173,247 | 45,595 | 213,168 | |||||||||||||||||||||||||
| Net cash (used in) provided by financing activities | Net cash (used in) provided by financing activities | (23,732) | 36,738 | (105,561) | ||||||||||||||||||||||||
| Net (decrease) increase in cash and cash equivalents | (16,465 | ) | 29,883 | (591 | ) | Net (decrease) increase in cash and cash equivalents | (6,717) | 976 | (1,408) | |||||||||||||||||||
| Cash and cash equivalents, beginning of period | 36,792 | 6,909 | 7,500 | |||||||||||||||||||||||||
| Cash and cash equivalents, end of period | $ | 20,327 | $ | 36,792 | $ | 6,909 | ||||||||||||||||||||||
| Cash and cash equivalents as of the beginning of period | Cash and cash equivalents as of the beginning of period | 19,895 | 18,919 | 20,327 | ||||||||||||||||||||||||
| Cash and cash equivalents as of the end of period | Cash and cash equivalents as of the end of period | $ | 13,178 | $ | 19,895 | $ | 18,919 | |||||||||||||||||||||
| Supplemental disclosures of cash flow information: | Supplemental disclosures of cash flow information: | |||||||||||||||||||||||||||
| Interest paid | $ | 26,005 | $ | 25,941 | $ | 29,619 | Interest paid | $ | 25,912 | $ | 22,838 | $ | 21,691 | |||||||||||||||
| Supplemental schedule of noncash investing and financing activities: | Supplemental schedule of noncash investing and financing activities: | |||||||||||||||||||||||||||
| Increase in dividends payable | $ | 3,900 | $ | 3,739 | $ | 2,970 | Increase in dividends payable | $ | 1,265 | $ | 2,033 | $ | 2,568 | |||||||||||||||
| Right-of-use asset obtained in exchange for new operating lease obligation | $ | 1,010 | $ | — | $ | — | Right-of-use asset obtained in exchange for new operating lease obligation | $ | — | $ | — | $ | 599 | |||||||||||||||
| Application of escrow deposit to acquisition real estate | $ | — | $ | — | $ | 700 | ||||||||||||||||||||||
| Transfer of pre-acquisition costs to acquired assets | $ | 242 | $ | — | $ | — | Transfer of pre-acquisition costs to acquired assets | $ | 7 | $ | 358 | $ | 168 | |||||||||||||||
| Sale of real estate settled with notes receivable | $ | 27,500 | $ | — | $ | — | Sale of real estate settled with notes receivable | $ | 12,000 | $ | — | $ | 32,400 | |||||||||||||||
See accompanying notes to consolidated financial statements.
F-7
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 December 31, 2019,2022, the Company owned and leased to independent operators, including The Ensign Group, Inc. (“Ensign”), 216 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 21,96322,831 operational beds and units located in 28 states with the highest concentration of properties by rental income located in California, Texas, Louisiana, ArizonaIdaho and Idaho. The Company also owned and operated 1 independent living facility which had a total of 168 units and is located in Texas.Arizona. As of December 31, 2019,2022, the Company also had other real estate related investments consisting of 1 preferred equity investment of $3.8 millionthree real estate secured loans receivable and 2 mortgagetwo mezzanine loans receivable with a carrying value of $29.5$156.4 million.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation—The accompanying consolidated financial statements of the Company reflect, for all periods presented, the historical financial position, results of operations and cash flows of the Company and its wholly-owned subsidiaries prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany transactions and account balances within the Company have been eliminated.
Lessor Accounting—On January 1, 2019, theThe Company elected the single component practical expedient, which allows a lessor, by class of underlying asset, not to allocate the total consideration to therecognizes lease and non-lease components based on their relative stand-alone selling prices. This single component practical expedient requires the Company to account for the lease component and non-lease component(s) associated with that lease as a single component if (i) the timing and pattern of transfer of the lease component and the non-lease component(s) associated with it are the same and (ii) the lease component would be classified as an operating lease if it were accounted for separately. If the Company determines that the lease component is the predominant component, the Company accounts for the single component as an operating leaserevenue in accordance with Accounting Standards Codification (“ASC”) 842, Leases. The Company’s lease agreements typically contain annual escalators based on the new lease ASUs. Conversely,percentage change in the Company is required to account for the combined component under the revenue recognition standard if the Company determines that the non-lease component is the predominant component. As a result of this assessment, rental revenues and tenant recoveries from the lease of real estate assets that qualify for this expedientConsumer Price Index which are accounted for as variable lease payments in the period in which the change occurs. For lease agreements that contain fixed rent escalators, the Company generally recognizes lease revenue on a single componentstraight-line basis of accounting. The Company generates revenues primarily by leasing healthcare-related properties to healthcare operators in triple-net lease arrangements, under which the new lease ASUs, with tenant recoveries primarily as variable consideration. Tenant recoveries that do not qualifyis solely responsible for the single component practical expedientcosts related to the property. Tenant reimbursements related to property taxes and insurance paid by the lessee directly to a third party on behalf of a lessor are considered non-lease components are accounted for underrequired to be excluded from variable payments and from recognition in the revenue recognition standard. The componentslessor’s statements of the Company’s operating leases qualify for the single component presentation.
Estimates and Assumptions—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that the assumptions and estimates used in preparation of the underlying consolidated financial statements are reasonable. Actual results, however, could differ from those estimates and assumptions.
F-8
Real Estate Acquisition Valuation— In accordance with ASC 805, Business Combinations, the Company’s acquisitions of real estate investments generally do not meet the definition of a business, and are treated as asset acquisitions. The assets acquired and liabilities assumed are measured at their acquisition date relative fair values. Acquisition costs are capitalized as incurred. The Company allocates the acquisition costs to the tangible assets, identifiable intangible assets/liabilities and assumed liabilities on a relative fair value basis. The Company assesses fair value based on available market information, such as capitalization and discount rates, comparable sale transactions and relevant per square foot or unit cost information. A real estate asset’s fair value may be determined utilizing cash flow projections that incorporate such market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, as well as market and economic conditions. The fair value of tangible assets of an acquired property is based on the value of the property as if it is vacant.
Impairment of Long-Lived Assets—At each reporting period, the Company evaluates its real estate investments to be held and usedfor use for potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The judgment regarding the existence of impairment indicators, used to determine if an impairment assessment is necessary, is based on factors such as, but not limited to, market conditions, operator performance and legal structure. If indicators of impairment are present, the Company evaluates the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying facilities. The most significant inputs to the undiscounted cash flows include, but are not limited to, historical and projected facility level financial results, a lease coverage ratio, the intended hold period by the Company, and a terminal capitalization rate. The analysis is also significantly impacted by determining the lowest level of cash flows, which generally would be at the master lease level of cash flows. Provisions for impairment losses related to long-lived assets are recognized when expected future undiscounted cash flows are determined to be less than the carrying values of the assets. The impairment is measured as the excess of carrying value over fair value. All impairments are taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset.
The Company classifies its real estate investments as held for sale when the applicable criteria have been met, which entailsincludes a formal plan to sell the properties that is expected to be completed within one year, among other criteria. Upon designation as held for sale, the Company writes down the excess of the carrying value over the estimated fair value less costs to sell, resulting in an impairment of the real estate investments, if necessary, and ceases depreciation.
In the event of impairment, the fair value of the real estate investment is based on current market conditions and considers matters such as the forecasted operating cash flows, lease coverage ratios, capitalization rates, comparable sales data, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers.
If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a real estate investment previously classified as held for sale or otherwise no longer meets the held for sale criteria, the respective assets are reclassified as real estate investments held for use. A real estate investment that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the real estate investment was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the real estate investment been continuously classified as held for use, or (b) the fair value at the date of the decision not to sell or change in circumstances that led to the real estate investment no longer meeting the criteria of held for sale.
The Company’s ability to accurately estimate future cash flows and estimate and allocate fair values impacts the timing and recognition of impairments. While the Company believes its assumptions are reasonable, changes in these assumptions may have a material impact on financial results.
Other Real Estate Related Investments—Included in other real estate related investments on the Company’s consolidated balance sheets at December 31, 2022, are three real estate secured loans receivable and two mezzanine loans receivable. Included in other real estate related investments on the Company’s consolidated balance sheets at December 31, 2021, is one mezzanine loan receivable. The Company elected the fair value option for all other real estate related investments. Instruments for which the fair value option has been elected are measured at fair value on a recurring basis with changes in fair value recognized in other income (loss) on the consolidated statements of operations. Fair value was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market
F-9
Prepaid expenses and other assets—Prepaid expenses and other assets consist of prepaid expenses, deposits, pre-acquisition costs and other loans receivable. Included in other loans receivable is a bridge loan to Priority Life Care, LLC (“Priority”) under which the Company agreed to fund up to $1.4 million until the earlier of (i) October 31, 2019, (ii) the date that a new credit facility is established such that the borrower may submit draw requests to the applicable lender, or (iii) the date on which Priority’s lease is terminated with respect to any facility. Borrowings under the bridge loan accrue interest at an annual base rate of 8.0%. During the year ended December 31, 2019,2022, the Company determined that the remaining contractual obligations under the bridge loan agreement to Prioritytwo other loans receivable were not collectible and recorded a $1.1$4.6 million expected credit loss, net of a loan loss recovery of $0.8 million related to a loan previously written-off. Expected credit losses and recoveries are recorded in provision for loan losses, net in the consolidated statements of operations.
The Company’s other loans receivable are reflected at amortized cost, net of an allowance for credit loss, on the accompanying consolidated income statements.balance sheets. The amortized cost of a loan receivable is the outstanding unpaid principal balance, net of unamortized discounts, costs and fees directly associated with the origination of the loan.
Income Taxes—The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). The Company believes it has been organized and has operated, and the Company intends to continue to operate, in a manner to qualify for taxation as a REIT under the Code. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute to its stockholders at least 90% of the Company’s annual REIT taxable income (computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes as qualifying dividends all of its REIT taxable income to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.
Real Estate Depreciation and Amortization—Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
| Building | 25-40 years | |||||||
| Building improvements | 10-25 years | |||||||
| Tenant improvements | Shorter of lease term or expected useful life | |||||||
| Integral equipment, furniture and fixtures | 5 years | |||||||
| Identified intangible assets | Shorter of lease term or expected useful life | |||||||
Cash and Cash Equivalents—Cash and cash equivalents consist of bank term deposits and money market funds with original maturities of three months or less at time of purchase and therefore approximate fair value. The fair value of these investments is determined based on “Level 1” inputs, which consist of unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. The Company places its cash and short-term investmentscash equivalents with high credit quality financial institutions.
The Company’s cash and cash equivalents balance periodically exceeds federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.
Deferred Financing Costs—External costs incurred from placement of the Company’s debt are capitalized and amortized on a straight-line basis over the terms of the related borrowings, which approximates the effective interest method. For senior unsecured notes payable and the senior unsecured term loan, deferred financing costs are netted against the outstanding debt amounts on the consolidated balance sheet.sheets. For the unsecured revolving credit facility, deferred financing costs are included in assets on the Company’s consolidated balance sheet.sheets. Amortization of deferred financing costs is
F-10
classified as interest expense in the consolidated income statements.statements of operations. Accumulated amortization of deferred financing costs was $7.1$2.5 million and $5.1$8.0 million at December 31, 20192022 and December 31, 2018,2021, respectively.
When financings are terminated, unamortized deferred financing costs, as well as charges incurred for the termination, are expensed at the time the termination is made. Gains and losses from the extinguishment of debt are presented within other income from continuing operations(loss) in the Company’s consolidated income statements.statements of operations. During the year ended December 31, 2021, the Company recorded a loss on extinguishment of debt of $10.8 million. See Note 7, Debt, for further detail.
Stock-Based Compensation—The Company accounts for share-based payment awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). ASC 718 requires all entities to apply a fair value-based measurement method in accounting for share-based payment transactions with directors, officers and employees. The Company measures and recognizes compensation expense for all share-based payment awards made to directors, officers and employees based on the grant date fair value, amortized over the requisite service period of the award.award. Compensation expense for awards with performance-based vesting conditions is recognized based upon the probability that the performance target will be met. Compensation expense for awards with market-based vesting conditions is recognized based upon the estimated number of awards to be earned and is recognized provided that the requisite service is rendered, regardless of when, if ever, the market condition is satisfied. Forfeitures of stock-based awards are recognized as they occur. Net (loss) income reflects stock-based compensation expense of $4.1$5.8 million, $3.8$10.8 million and $2.4$3.8 million for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively.
Concentration of Credit Risk—The Company is subject to concentrations of credit risk consisting primarily of operating leases on its owned properties. See Note 11,12, Concentration of Risk, for a discussion of major operator concentration.
Segment Disclosures —The Company is subject to disclosures about segments of an enterprise and related information in accordance with ASC Topic 280, Segment Reporting. The Company has 1one reportable segment consisting of investments in healthcare-related real estate assets.
Earnings (Loss) Per Share—The Company calculates earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities.
Beds, Units, Occupancy and Other Measures—Beds, units, occupancy and other non-financial measures used to describe real estate investments included in these Notes to the consolidated financial statements are presented on an unaudited basis and are not subject to audit by the independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board.
Recent Accounting Pronouncements— In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional relief to applying reference rate reform to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). For U.S. Dollar LIBOR, the overnight, one-month, three-month, six-month and one-year LIBOR rates will be discontinued in June 2023, while other U.S. Dollar LIBOR rates were discontinued at the end of 2021. The amendments in this update were effective immediately and could have been applied through December 31, 2022. On December 21, 2022, the FASB issued ASU 2022-06 to defer the sunset date of ASC 848 to December 31, 2024. During the year ended December 31, 2022, the Company adopted ASU 2020-04. Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
F-11
3. REAL ESTATE INVESTMENTS, NET
The following table summarizes the Company’s investment in owned properties held for use at December 31, 20192022 and December 31, 20182021 (dollars in thousands):
| December 31, 2022 | December 31, 2021 | ||||||||||
| Land | $ | 238,738 | $ | 251,787 | |||||||
| Buildings and improvements | 1,483,133 | 1,622,019 | |||||||||
| Integral equipment, furniture and fixtures | 97,199 | 104,722 | |||||||||
| Identified intangible assets | 2,832 | 1,257 | |||||||||
| Real estate investments | 1,821,902 | 1,979,785 | |||||||||
| Accumulated depreciation and amortization | (400,492) | (389,814) | |||||||||
| Real estate investments, net | $ | 1,421,410 | $ | 1,589,971 | |||||||
| December 31, 2019 | December 31, 2018 | ||||||
| Land | $ | 204,154 | $ | 166,948 | |||
| Buildings and improvements | 1,400,927 | 1,201,209 | |||||
| Integral equipment, furniture and fixtures | 93,005 | 87,623 | |||||
| Identified intangible assets | 1,650 | 2,382 | |||||
| Real estate investments | 1,699,736 | 1,458,162 | |||||
| Accumulated depreciation and amortization | (285,536 | ) | (241,925 | ) | |||
| Real estate investments, net | $ | 1,414,200 | $ | 1,216,237 | |||
As of December 31, 2019, 852022, 94 of the Company’s 217216 facilities were leased to subsidiaries of The Ensign Group, Inc. (“Ensign”) on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease” and, collectively, the “Ensign Master Leases”) which commenced on June 1, 2014.2014 and were subsequently modified on October 1, 2019, June 1, 2021, August 1, 2021, March 1, 2022 and April 1, 2022. The obligations under the Ensign Master Leases are guaranteed by Ensign. A default by any subsidiary of Ensign with regard to any facility leased pursuant to an Ensign Master Lease will result in a default under all of the Ensign Master Leases. As of December 31, 2019,2022, annualized revenuescontractual rental income from the Ensign Master Leases were $53.4was $62.3 million and areis escalated annually, in June, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than 0)zero) or 2.5%, and (2) the prior year’s rent. In addition to rent, the subsidiaries of Ensign that are tenants under the Ensign Master Leases are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). On October 1, 2019,During the year ended December 31, 2020, the Company acquired four additional facilities leased to subsidiaries of Ensign completed its previously announced separationon a triple-net basis under two separate master lease agreements, each of its home healthwhich contains a purchase option. As of December 31, 2022, annualized contractual rental income from the four additional Ensign facilities was $3.9 million and hospice operationsis escalated annually, in December, by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero) or 2.5%, and substantially all(2) the prior year’s rent. In addition to rent, the subsidiaries of its senior living operations into a separate independent publicly traded company throughEnsign that are tenants under the distribution of shares of common stock offour additional facilities are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). The Pennant Group, Inc. (“Pennant” and, such separation,obligations under the “Pennant Spin”).lease agreements for the four additional facilities are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases. See Lease Amendments below under “Lease Amendments” for additional information.further detail on Ensign lease amendments.
As of December 31, 2019,2022, 15 of the CompanyCompany’s facilities were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”). The PMG Master Lease commenced on December 1, 2016, and provides an initial term of fifteen years, with 2two five-year renewal options. As of December 31, 2019,2022, annualized revenuescontractual rental income from the PMG Master Lease were $27.4was $30.2 million and areis escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than 0)zero) or 3.0%, and (2) the prior year’s rent. In addition to rent, the subsidiaries of PMG that are tenants under the PMG Master Lease are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).
As of December 31, 2019, 1162022, 103 of the Company’s 217216 facilities were leased to various other operators under triple-net leases. All of these leases contain annual escalators based on the percentage change in the CPI (but not less than zero), some of which are subject to a cap, or fixed rent escalators.
During the second and third quarters of 2022, the Company entered into triple-net lease agreements for two of the Company’s 216 facilities which are being repurposed to behavioral health facilities with rent commencing 12 to 18 months following lease commencement. Two of the Company’s 216 facilities are non-operational and are leased under a short term lease with an expected remaining term of less than one year as of December 31, 2022. As of December 31, 2019, the Company has 1 independent living facility that the Company owns2022, five facilities were held for sale. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale, Net and operates.Asset Sales for additional information.
F-12
As of December 31, 2019,2022, the Company’s total future contractual minimum rental revenuesincome for all of its tenants, excluding operating expense reimbursements, werewas as follows (dollars in thousands):
| Year | Amount | ||||
| 2023 | $ | 190,704 | |||
| 2024 | 190,463 | ||||
| 2025 | 190,621 | ||||
| 2026 | 190,727 | ||||
| 2027 | 187,719 | ||||
| Thereafter | 984,665 | ||||
| $ | 1,934,899 | ||||
| Year | Amount | ||
| 2020 | $ | 168,394 | |
| 2021 | 169,175 | ||
| 2022 | 169,272 | ||
| 2023 | 168,968 | ||
| 2024 | 169,069 | ||
| Thereafter | 1,144,102 | ||
| $ | 1,988,980 | ||
| Asset Type | Properties | Lease Expiration | Next Option Open Date(1) | Option Type(2) | Current Cash Rent(3) | ||||||||||||||||||
| SNF | 11 | November 2030 | 1/1/2023 | (4) | B | 5,092 | |||||||||||||||||
| SNF | 1 | March 2029 | 4/1/2022 | (5) | A / B(6) | 805 | |||||||||||||||||
| SNF / Campus | 2 | October 2032 | 1/1/2023 | (4) | A | 1,097 | |||||||||||||||||
| SNF | 4 | November 2034 | 12/1/2024 | (5) | A | 3,891 | |||||||||||||||||
| Year | Amount | ||
| 2019 | $ | 146,010 | |
| 2020 | 146,560 | ||
| 2021 | 147,132 | ||
| 2022 | 147,719 | ||
| 2023 | 148,169 | ||
| Thereafter | 1,055,012 | ||
| $ | 1,790,602 | ||
A - Fixed base price.
B - Fixed capitalization rate on lease revenue.
(3) Based on annualized cash revenue for contracts in place at December 31, 2022.
(4) Option window is open for six months.
(5) Option window is open until the expiration of the lease term.
(6) Purchase option reflects two option types.
Rental Income
The following table summarizes components of the Company’s rental income (dollars in thousands):
| For the Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Rental Income | |||||||||||||||||
Contractual rent due(1) | $ | 188,906 | $ | 190,100 | $ | 171,309 | |||||||||||
| Straight-line rent | 17 | 32 | 77 | ||||||||||||||
Adjustment for collectibility(2) | (1,417) | — | — | ||||||||||||||
Recoveries(3) | — | — | 1,047 | ||||||||||||||
Lease termination revenue(4) | — | 63 | 1,179 | ||||||||||||||
| Total | $ | 187,506 | $ | 190,195 | $ | 173,612 | |||||||||||
(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.
(2)During the year ended December 31, 2022, and in accordance with ASC 842, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from five existing and former operators. As such, the Company reversed $0.7 million of operating expense reimbursements, $0.2 million of contractual rent and $0.5 million of straight-line rent during the year ended December 31, 2022. If lease payments are subsequently deemed probable of collection, the Company will reestablish the receivable which will result in an increase in rental income for such recoveries.
(3)During the year ended December 31, 2020, the Company recovered $1.0 million in rental income related to affiliates of Metron Integrated Health Systems (“Metron”) that was previously written off.
F-13
| For the Year Ended December 31, 2019 | |||
| Rental Income | |||
Contractual rent due(1) | $ | 166,056 | |
| Straight-line rent | 1,385 | ||
Adjustment for collectibility of rental income(2) | (11,774 | ) | |
| Total | $ | 155,667 | |
(4)In connection with the agreement to terminate its lease agreements with Metron and to sell the facilities to a third-party, the Company received certain lease termination payments from Metron. During the years ended December 31, 2021 and 2020, the Company recognized approximately $0.1 million and $1.2 million in lease termination revenue, respectively.
Recent Real Estate Acquisitions
The following table summarizes the Company’s acquisitions for the yearyears ended December 31, 20192022, 2021 and 2020 (dollar amounts in thousands):
| Type of Property | Purchase Price(1) | Initial Annual Cash Rent | Number of Properties | Number of Beds/Units(2) | |||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||
| Skilled nursing | $ | 8,918 | $ | 815 | 1 | 135 | |||||||||||||||||
| Multi-service campuses | 13,003 | 1,235 | 1 | 130 | |||||||||||||||||||
| Total | $ | 21,921 | $ | 2,050 | 2 | 265 | |||||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||
| Skilled nursing | $ | 57,973 | $ | 4,499 | (3) | 4 | 509 | ||||||||||||||||
| Multi-service campuses | 125,708 | 8,604 | (4) | 4 | 640 | ||||||||||||||||||
| Assisted living | 12,395 | — | (5) | 2 | 98 | ||||||||||||||||||
| Total | $ | 196,076 | $ | 13,103 | 10 | 1,247 | |||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||
| Skilled nursing | $ | 75,545 | $ | 6,453 | 6 | 715 | |||||||||||||||||
| Multi-service campuses | 6,876 | 555 | 1 | 184 | |||||||||||||||||||
| Assisted living | 7,396 | 590 | 1 | 62 | |||||||||||||||||||
| Total | $ | 89,817 | $ | 7,598 | 8 | 961 | |||||||||||||||||
(1) Purchase price includes capitalized acquisition costs.
| Type of Property | Purchase Price(1) | Initial Annual Cash Rent(2) | Number of Properties | Number of Beds/Units(3) | |||||||||
| Skilled nursing | $ | 254,760 | $ | 22,909 | 17 | 2,099 | |||||||
| Multi-service campuses | 59,344 | 5,203 | 4 | 762 | |||||||||
| Assisted living | 12,596 | 1,031 | 1 | 96 | |||||||||
| Total | $ | 326,700 | $ | 29,143 | 22 | 2,957 | |||||||
(3) Initial annual cash rent represents initial cash rent for the first twelve months excluding any impact of straight-line rent.
(4) Initial annual cash rent represents the first twelve months of rent upon commencement of |
(5) Initial annual cash rent is zero until transfer of operations upon receipt of licensing approval.
| Type of Property | Purchase Price(1) | Initial Annual Cash Rent | Number of Properties | Number of Beds/Units(2) | ||||||||||
| Skilled nursing | $ | 85,814 | $ | 7,715 | 10 | 926 | ||||||||
| Multi-service campuses | 27,520 | (3) | 2,240 | 2 | 177 | |||||||||
| Assisted living | — | — | — | — | ||||||||||
| Total | $ | 113,334 | $ | 9,955 | $ | 12 | 1,103 | |||||||
Lease Amendments
Pennant Partial Lease Termination and Amended Ensign Master Leases. On April 1, 2022, operations at two ALFs in California and Washington operated by affiliates of The Pennant Group, Inc. (“Pennant”) were transferred to affiliates of The Ensign Group, Inc. (“Ensign”). In connection with the transfers, the Company amended the Pennant master lease to reflect the removal of the two ALFs and amended two existing Ensign Master Leases to lease 85 facilities to subsidiariesinclude the two ALFs. The applicable Ensign Master Leases, as amended, had a remaining term at the date of Ensign, which have a totalamendment of 8,908 operational beds,approximately five years and entered into a new triple-net master lease16 years, respectively, both with subsidiaries of Pennant (the “Pennant Master Lease”) to lease 11 facilities, which have a total of 1,151 operational beds. The contractual initial annual cash rent under the Pennant Master Lease is approximately $7.8 million. The Pennant Master Lease carries an initial term of 15 years, with 2three five-year renewal options and CPI-based rent escalators. The contractualAnnual cash rent under each of the two applicable Ensign Master Leases, as amended, increased by approximately $0.4 million and annual cash rent under the amended Ensign Master Leases was reduced by approximately $7.8 million. Ensign continues to guarantee obligations under the Ensign Master Leases and the Pennant Master Lease. If Pennant achieves a specified portfolio coverage and continuously maintains it for a specified period, Ensign’s obligations under the guaranty with respect to the Pennant Master Lease would be released.
Amended Eduro Master Lease.On February 1, 2022, the Company acquired one SNF. In conjunction with the acquisition, the Company amended its existing triple-net master lease with Providence.affiliates of Eduro Healthcare, LLC (“Eduro”) to include the one SNF and extended the initial lease term. The Eduro master lease, as amended, lease hashad a remaining term at the date of amendment of approximately 12 years, with two five-year renewal options and CPI-based rent escalators. Annual cash rent under the Eduro master lease, as amended, increased by approximately $0.8 million.
Amended WLC Master Lease. On March 1, 2022, the Company acquired one multi-service campus. In conjunction with the acquisition, the Company amended its existing triple-net master lease with affiliates of WLC Management Firm, LLC (“WLC”) to include the one multi-service campus. The WLC master lease, as amended, had a remaining term at the date of amendment of approximately 12 years, with two five-year renewal options and CPI-based rent escalators. Annual cash rent under the WLC master lease, as amended, increased by approximately $1.2 million.
Amended Noble Master Leases and New Noble NJ Master Lease.During the three months ended September 30, 2021, the Company did not collect a portion of rent from affiliates of Noble Senior Services and Noble VA Holdings, LLC (collectively, “Noble”). On September 23, 2021, the Company amended its two existing triple-net master leases with Noble. The lease amendment granted a deferral for a total of $1.8 million of unpaid base rent, which represented approximately 4% of the Company’s total contractual base rent for the three months ended September 30, 2021. In connection with its agreement to the rent deferral, the Company also entered into a purchase agreement with Noble to acquire two assisted living facilities owned by Noble. The lease amendment required the deferred rent, as well as all contractual rent for the fourth quarter of 2021, to be paid in full upon the closing of the purchase of the two facilities. The Company closed on the acquisition of the two facilities in December 2021 and the deferred rent, as well as all contractual rent for the fourth quarter of 2021, was paid in full. The two facilities are currently leased back to Noble under a short-term lease agreement while the Company pursues other tenants for the long-term.
Amended Ensign Master Lease. On August 1, 2021, the Company acquired two skilled nursing facilities. The facilities were leased to affiliates of Ensign. In conjunction with the acquisition of the two facilities, the Company amended and extended the initial term of an existing Ensign Master Lease to include the two skilled nursing facilities. The Ensign Master Lease, as amended, had a remaining term at the date of amendment of approximately 1317 years, with 2three five-year renewal options and CPI-based rent escalators. Annual cash rent under the amended lease increased by approximately $2.1 million.$2.2 million, with GAAP rent increasing by $2.5 million due to a $5.0 million prepayment of rent made at closing, which is being amortized on a straight-line basis over the remaining lease term.
F-15
Premier Partial Lease Termination and Amended Noble VA Master Lease. On March 10, 2021 and July 1, 2021, two assisted living facilities in Wisconsin operated by affiliates of Premier Senior Living, LLC (“Premier”) were transferred to affiliates of Noble VA Holdings, LLC (“Noble VA”). In connection with the transfer, the Company partially terminated the Premier master lease and amended the existing triple-net master lease with Trio isNoble VA to include the two assisted living facilities. The Noble VA master lease, as amended, had a remaining term at the date of amendment of approximately $4.713 years, with two five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the amended Noble VA master lease increased by approximately $1.3 million on March 10, 2021 and providesapproximately $1.0 million on July 1, 2021 and annual cash rent under the partially terminated Premier master lease decreased by approximately the same amount. See above under “Amended Noble Master Leases and New Noble NJ Master Lease” for payment of percentage rent if Trio achieves certain increases in portfolio revenue.additional information regarding the Company’s leases with Noble.
4. IMPAIRMENT OF REAL ESTATE INVESTMENTS, ASSETS HELD FOR SALE, NET AND ASSET SALES
In connection with the Company’s ongoing review and Hillstone is approximately $10.0 million, subject to CPI-based or fixed escalators.
Following the asset sales and held for sale reclassifications discussed below, five properties continued to meet the criteria to be classified as held for sale as of December 31, 2022. As of December 31, 2022, the real estate comprising the remaining five properties classified as held for sale had an aggregate carrying value of $12.3 million.
The fair value of the terms thereof,assets held for sale was based on estimated sales prices, which are considered to terminate Pristine’s master leasebe 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 all future obligations of the tenant thereunder; however, under the terms of the master lease(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 security interest in Pristine’s accounts receivable has survived any such termination. Such security interest was subject to the prior lien and security interest of Pristine’s working capital lender, Capital One, National Association (“CONA”), with whom the Company has an existing intercreditor agreement that defines the relative rights and responsibilities of CONA and with its respect to the loan and lease collateral represented by Pristine’s accounts receivable andimpairment calculations, the Company’s respective security interests therein.fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $20,000 to $85,000, with a weighted average price per unit of $55,000.
During the first quarter of 2022, the Company closed on the sale of one SNF, operated by Trillium under the Original Trillium Leaseaffiliates of Cascadia Healthcare, LLC (“Cascadia”), consisting of 83 beds located in Washington with a carrying value of $0.8 million, for a purchase pricenet sales proceeds of $28.0$1.0 million. During the three monthsyear ended September 30, 2019 and prior to the disposition,December 31, 2022, the Company recorded an impairment expensea gain of $0.2 million in connection with the sale. There was no rent reduction under the Cascadia master lease in connection with the sale.
F-16
During the third quarter of 2022, the Company determined that one ALF, with a carrying value of $4.9 million, that was classified as held for sale at June 30, 2022 no longer met the held for sale criteria. The Company reclassified this ALF out of assets held for sale at its fair value at the date of the decision not to sell of approximately $7.8$4.9 million, or a weighted average price per unit of $125,000.
During the third quarter of 2022, the Company closed on the sale of six SNFs and one multi-service campus, operated by affiliates of Trio Healthcare Holdings, LLC (“Trio”), consisting of 708 beds located in Ohio for net proceeds of $32.8 million. In connection with the sale, the Company provided affiliates of CommuniCare Family of Companies (“CommuniCare”), the purchaser of the 3 Ohio properties with a mortgage$7.0 million term loan secured by the 3 Ohio properties for approximately $26.5 million. See Note 4, Other Real Estate Investments, Net for additional information.
During the fourth quarter of 2022, the Company closed on the sale of five ALFs, operated by affiliates of Metron Integrated Health SystemsNoble VA Holdings, LLC (“Metron”Noble”), consisting of 301 beds located in Virginia for net proceeds of $11.0 million. Prior to their sale, the five properties had been classified as held for sale which resulted in an impairment expense of approximately $8.8 million to reduce theat September 30, 2022, with a carrying value to fair value less costs to sellof $12.7 million. During the properties. As ofyear ended December 31, 2019,2022, the properties continued to beCompany recorded a loss of $1.7 million in connection with the sale.
During the fourth quarter of 2022, the Company determined that nine ALFs, with a carrying value of $50.8 million, that were classified as held for sale andat September 30, 2022, no longer met the carryingheld for sale criteria. The Company reclassified the nine ALFs out of assets held for sale at their fair value at the date of the decision not to sell of approximately $47.8 million.
The fair value of $34.6 million is primarily comprised ofassets reclassified as real estate assets. In February 2020, the 6 skilled nursing facilities were sold. See Note 14, Subsequent Events, investments held for further detail.
Impairment of Assets Held For Use
During the year ended December 31, 2019,second quarter of 2022, the Company sold 1recognized an impairment charge of $1.7 million related to one SNF. The Company wrote down its owned and operated independent living facilities consisting of 38 units located in Texas with an aggregate carrying value of $1.7$2.8 million for net proceeds of $3.3 million. In connection with the sale, the Company recognized a gain of $1.6 million.
F-17
As of —In July 2016,December 31, 2022 and 2021, the Company completed a $2.2 million preferred equity investment with an affiliate of Cascadia Development, LLC. The preferred equity investment yielded a return equal to prime plus 9.5% but in no event less than 12.0% calculated on a quarterly basis on the outstanding carryingCompany’s other real estate related investments, at fair value, consisted of the investment. following (dollar amounts in thousands):
| As of December 31, 2022 | ||||||||||||||||||||||||||||||||
| Investment | Facility Count and Type | Principal Balance as of December 31, 2022 | Book Value as of December 31, 2022 | Book Value as of December 31, 2021 | Weighted Average Contractual Interest Rate | Maturity Date | ||||||||||||||||||||||||||
| Senior mortgage secured loan receivable | 18 SNF/Campus | $ | 75,000 | $ | 72,543 | $ | — | 8.4 | % | (1) | 6/30/2027 | |||||||||||||||||||||
| Mortgage secured loan receivable | 5 SNF | 22,250 | 21,345 | — | 10.2 | % | (2) | 8/1/2025 | ||||||||||||||||||||||||
| Mortgage secured loan receivable | 4 SNF | 24,900 | 23,796 | — | 9.0 | % | (2) | 9/8/2025 | ||||||||||||||||||||||||
| Mezzanine loan receivable | 9 SNF | 15,000 | 14,672 | 15,155 | 12.0 | % | 11/30/2025 | |||||||||||||||||||||||||
| Mezzanine loan receivable | 18 SNF/Campus | 25,000 | 24,012 | — | 11.0 | % | 6/30/2032 | |||||||||||||||||||||||||
| Total | $ | 162,150 | $ | 156,368 | $ | 15,155 | ||||||||||||||||||||||||||
(1) Rate is net of subservicing fee.
(2) Term secured overnight financing rate (“SOFR”) used as of December 31, 2022 was 4.33%. Rates are net of subservicing fees.
The investment was used to develop a 99-bed skilled nursing facility in Nampa, Idaho. In connection with its investment, CareTrust REIT obtained an option to purchasefollowing table summarizes the development at a fixed-formula price upon stabilization, with an initial lease yield of at least 9.0%. The project was completed in the fourth quarter of 2017 and began lease-up during the first quarter of 2018. In June 2019, the Company purchased the skilled nursing facilityCompany’s other real estate related investments activity for approximately $16.2 million, inclusive of transaction costs. The Company paid $12.9 million after receiving back its initial investment of $2.2 million and cumulative contractual preferred return through June 18, 2019, the acquisition date, of $1.1 million, of which $0.6 million was recognized as interest income during the year ended December 31, 2019.2022 and 2021 (dollars in thousands):
| For the Year Ended December 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Origination of other real estate related investments | $ | 147,150 | $ | — | ||||||||||
| Accrued interest, net | 1,165 | 155 | ||||||||||||
| Unrealized loss on other real estate related investments | (7,102) | — | ||||||||||||
| Net increase in other real estate related investments, at fair value | $ | 141,213 | $ | 155 | ||||||||||
In September 2016,2022, the Company completedextended a $2.3$24.9 million preferred equity investment with an affiliateterm loan as part of Cascadia Development, LLC. The preferred equity investment yields a return equallarger, multi-tranche real estate secured term loan facility to prime plus 9.5% but in no event less than 12.0% calculated on a quarterly basis on the outstanding carrying value of the investment. The investment is being used to develop a 99-bed skilled nursing facility in Boise, Idaho. In connection with its investment, CareTrust REIT obtained an option to purchase the development at a fixed-formula price upon stabilization, with an initial lease yield of at least 9.0%. The project was completed in the first quarter of 2018 and began lease-up during the second quarter of 2018. In January 2020, the Company purchased the skilled nursing facility for approximately $18.7 million, inclusive of estimated transaction costs. The Company paid $15.0 million after receiving back its initial investment of $2.3 million and cumulative contractual preferred return through January 17, 2020, the acquisition date, of $1.4 million, of which $0.7 million was recognized as interest income during the year ended December 31, 2019. See Note 14, Subsequent Events, for further detail.
F-18
In June 2022, the Company has concludedextended a $75.0 million term loan to a skilled nursing real estate owner as part of a larger, multi-tranche, senior secured term loan facility. The senior secured term loan was structured with an “A” tranche, a “B” tranche, and a “C” tranche (with the “C” tranche being the most subordinate). The Company’s $75.0 million term loan constituted the entirety of the “C” tranche with its payments subordinated accordingly. The senior secured term loan facility is secured by an 18-facility skilled nursing portfolio in the Mid-Atlantic region, operated by a large, regional skilled nursing operator. In connection with the senior secured term loan facility and the borrower’s acquisition of the skilled nursing portfolio, the Company also extended to the borrower group a $25.0 million mezzanine loan. The “C” tranche of the senior secured term loan bears interest at 8.5%, less a servicing fee equal to the positive difference, if any, between the lesser of the contractual interest payment and actual payment of interest made by the borrower and a hypothetical interest payment at a rate of 8.25%, resulting in an effective interest rate of 8.375%. The “C” tranche senior secured term loan is set to mature on June 30, 2027 and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the end of the month of prepayment; provided, however, that no exit fee is payable in connection with portions of the acquiring entities whomloan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The mezzanine loan bears interest at 11% and is secured by a pledge of membership interests in an up-tier affiliate of the borrower group. The mezzanine loan is set to mature on June 30, 2032, and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date, commencing on June 30, 2029, for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the date of prepayment. The “C” tranche senior secured term loan and mezzanine loan both require monthly interest payments. The Company elected the fair value option for both the “C” tranche term loan and the mezzanine loan.
The fair value option is elected on an instrument by instrument basis and must be applied to an entire instrument and is irrevocable once elected. The Company’s primary purpose in electing the fair value option for these instruments was to align with management’s view of the underlying economics of the loans and the manner in which they are jointmanaged.
As of December 31, 2022 and severally liable2021, the Company’s other loans receivable, included in prepaid expenses and other assets, net on the Company’s consolidated balance sheets, consisted of the following (dollars in thousands):
| As of December 31, 2022 | ||||||||||||||||||||||||||||||||
| Investment | Principal Balance as of December 31, 2022 | Book Value as of December 31, 2022 | Book Value as of December 31, 2021 | Weighted Average Contractual Interest Rate | Maturity Date | |||||||||||||||||||||||||||
| Other loans receivable | $ | 9,596 | $ | 9,600 | $ | 3,161 | 8.5 | % | 9/1/2023 - 9/30/2025 | |||||||||||||||||||||||
| Expected credit loss | — | (2,094) | — | |||||||||||||||||||||||||||||
| Total | $ | 9,596 | $ | 7,506 | $ | 3,161 | ||||||||||||||||||||||||||
F-19
The following table summarizes the Company’s other loans receivable activity for the year endedDecember 31, 2022 and 2021 (dollars in thousands):
| For the Year Ended December 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Origination of loans receivable | $ | 14,500 | $ | 1,253 | ||||||||||
| Principal payments | (6,307) | (393) | ||||||||||||
| Accrued interest, net | (4) | (6) | ||||||||||||
| Provision for loan losses, net | (3,844) | — | ||||||||||||
| Net increase in other loans receivable | $ | 4,345 | $ | 854 | ||||||||||
Expected credit losses and recoveries are recorded in provision for loan constitute variable interest entities. The loan includes standard lender protective rights and does not allowlosses, net in the consolidated statements of operations. During the year ended December 31, 2022, the Company recorded a $4.6 million expected credit loss related to controltwo other loans receivable that were placed on non-accrual status, net of a loan loss recovery of $0.8 million related to a loan previously written-off. During the entities.year ended December 31, 2022, the Company fully reserved and wrote-off $2.5 million, related to one other loan receivable, in connection with the sale of six SNFs and one multi-service campus. As of December 31, 2021, the Company had no expected credit loss and did not consider any loan receivable investments to be impaired.
| For Year Ended December 31, | ||||||||||||||||||||
| Investment | 2022 | 2021 | 2020 | |||||||||||||||||
| Mortgage secured loans receivable | $ | 4,853 | $ | — | $ | 2,044 | ||||||||||||||
| Mezzanine loans receivable | 3,489 | 1,825 | 305 | |||||||||||||||||
Preferred equity investments(1) | — | — | 24 | |||||||||||||||||
| Other | 284 | 331 | 270 | |||||||||||||||||
| Total | $ | 8,626 | $ | 2,156 | $ | 2,643 | ||||||||||||||
(1) As of December 31, 2022 and 2021, the Company recognized $3.0had no preferred equity investments.
6. FAIR VALUE MEASUREMENTS
The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. GAAP guidance defines three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. The Company does not expect that changes in classifications between levels will be frequent.
F-20
Items Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021, 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 December 31, 2022 | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Mortgage secured loans receivable | $ | — | $ | — | $ | 117,684 | $ | 117,684 | |||||||||||||||
| Mezzanine loans receivable | — | — | 38,684 | 38,684 | |||||||||||||||||||
| Total | $ | — | $ | — | $ | 156,368 | $ | 156,368 | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Balance as of December 31, 2021 | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Mezzanine loan receivable | $ | — | $ | — | $ | 15,155 | $ | 15,155 | |||||||||||||||
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, 2021 | $ | — | $ | 15,155 | |||||||
| Loan originations | 122,150 | 25,000 | |||||||||
| Accrued interest, net | 928 | 237 | |||||||||
| Unrealized loss on other real estate related investments | (5,394) | (1,708) | |||||||||
| Balance as of December 31, 2022 | $ | 117,684 | $ | 38,684 | |||||||
Real estate secured and mezzanine loans receivable: The fair value of the secured and mezzanine loans receivables were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. As such, the Company classifies each instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms. During the year ended December 31, 2022, the Company recorded an unrealized loss of $7.1 million $1.2 millionon the Company’s secured and $0.2 million, respectively,mezzanine loans receivable due to rising interest rates. 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 interest incomethe secured and mezzanine loans receivable. As of December 31, 2022 and 2021, the Company did not have any loans that were 90 days or more past due.
The following table shows the quantitative information about unobservable inputs related to the mortgage loans.Level 3 fair value measurements comprising the investments in secured and mezzanine loans receivables as of December 31, 2022:
| Type | Book Value as of December 31, 2022 | Valuation Technique | Unobservable Inputs | Range | |||||||||||||||||||
| Mortgage secured loans receivable | $ | 117,684 | Discounted cash flow | Discount Rate | 9% - 13% | ||||||||||||||||||
| Mezzanine loans receivable | 38,684 | Discounted cash flow | Discount Rate | 12% - 14% | |||||||||||||||||||
For the year ended December 31, 2022, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.
F-21
Company recorded an impairment charge of $79.1 million. For the years ended December 31, 2021 and 2020, there were no real estate assets deemed to be impaired. See Note 4, Impairments of Real Estate Investments, Assets Held for Sale, Net and Asset Sales, for additional information.
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 values, carrying amountsamount and fair valuesvalue of the Company’s financial instrumentsNotes (as defined in Note 7, Debt, below) as of December 31, 20192022 and 20182021 using Level 2 inputs for the senior unsecured notes payable, and Level 3 inputs, for all other financial instruments, is as follows (dollars in thousands):
| December 31, 2019 | December 31, 2018 | ||||||||||||||||||||||
| Face Value | Carrying Amount | Fair Value | Face Value | Carrying Amount | Fair Value | ||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Preferred equity investments | $ | 2,327 | $ | 3,800 | $ | 3,674 | $ | 4,531 | $ | 5,746 | $ | 6,246 | |||||||||||
| Mortgage loans receivable | 29,500 | 29,500 | 29,500 | 12,375 | 12,299 | 12,375 | |||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Senior unsecured notes payable | $ | 300,000 | $ | 295,911 | $ | 312,750 | $ | 300,000 | $ | 295,153 | $ | 289,500 | |||||||||||
| December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| Face Value | Carrying Amount | Fair Value | Face Value | Carrying Amount | Fair Value | ||||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||
| Senior unsecured notes payable | $ | 400,000 | $ | 395,150 | $ | 345,036 | $ | 400,000 | $ | 394,262 | $ | 410,500 | |||||||||||||||||||||||
Cash and cash equivalents, accounts and other receivables, other loans receivable, and accounts payable, and accrued liabilities: These balancesThe carrying values for these instruments approximate their fair values due to the short-term nature of these instruments.
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 for similar debt arrangements.
The following table summarizes the balance of the Company’s indebtedness as of December 31, 20192022 and 20182021 (in thousands):
| December 31, 2019 | December 31, 2018 | ||||||||||||||||||
| Principal | Deferred | Carrying | Principal | Deferred | Carrying | ||||||||||||||
| Amount | Loan Fees | Value | Amount | Loan Fees | Value | ||||||||||||||
| Senior unsecured notes payable | $ | 300,000 | $ | (4,089 | ) | $ | 295,911 | $ | 300,000 | $ | (4,847 | ) | $ | 295,153 | |||||
| Senior unsecured term loan | 200,000 | (1,287 | ) | 198,713 | 100,000 | (388 | ) | 99,612 | |||||||||||
| Unsecured revolving credit facility | 60,000 | — | 60,000 | 95,000 | — | 95,000 | |||||||||||||
| $ | 560,000 | $ | (5,376 | ) | $ | 554,624 | $ | 495,000 | $ | (5,235 | ) | $ | 489,765 | ||||||
| December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Principal | Deferred | Carrying | Principal | Deferred | Carrying | ||||||||||||||||||
| Amount | Loan Fees | Amount | Amount | Loan Fees | Amount | ||||||||||||||||||
| Senior unsecured notes payable | $ | 400,000 | $ | (4,850) | $ | 395,150 | $ | 400,000 | $ | (5,738) | $ | 394,262 | |||||||||||
| Senior unsecured term loan | 200,000 | (652) | 199,348 | 200,000 | (864) | 199,136 | |||||||||||||||||
| Unsecured revolving credit facility | 125,000 | — | 125,000 | 80,000 | — | 80,000 | |||||||||||||||||
| $ | 725,000 | $ | (5,502) | $ | 719,498 | $ | 680,000 | $ | (6,602) | $ | 673,398 | ||||||||||||
Senior Unsecured Notes Payable
2028 Senior Notes.On May 10, 2017,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 an underwritten publica private offering of $300.0$400.0 million aggregate principal amount of 5.25%3.875% Senior Notes due 20252028 (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 $300.0$400.0 million and net proceeds of approximately $294.0$393.8 million after deducting underwriting fees and other offering expenses. The Company used the net proceeds from the offering of the Notes to redeem all $260.0 million aggregate principal amount outstanding of its 5.875% Senior Notes due 2021, including payment of the redemption price at 102.938% and all accrued and unpaid interest thereon. The Company used the remaining portion of the net proceeds of the Notes offering to pay borrowings outstanding under its senior unsecured revolving credit facility. The Notes mature on June 1, 2025 and bear30, 2028. The Notes accrue interest at a rate of 5.25%3.875% per year. Interest on the Notes isannum payable semiannually in arrears on June 130 and December 130 of each year, beginningcommencing on December 1, 2017.30, 2021.
The Issuers may redeem some or all of the Notes at any time before June 1, 2020prior to March 30, 2028 at a redemption price ofequal 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 described inpremium. At any time on or after March 30, 2028, the indenture governingIssuers may redeem some or all of the Notes and,at a redemption price equal to 100% of the principal amount of the Notes redeemed plus accrued interest on the Notes, if any, to, but not including, the redemption date. In addition, at any time on or afterprior to June 1, 2020, at the redemption prices set forth in the indenture. At any time on or before June 1, 2020,30, 2024, up to 40% of the
F-22
aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings if at least 60% of the originally issued aggregate principal amount of the Notes remains outstanding. In such case, thea redemption price will be equal to 105.25%of 103.875% of the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date. If certain changes of control of the Company occur, the Issuers will be required to make an offer to holders of the Notes will have the right to require the Issuers to repurchase their Notes at a price of 101% of thetheir 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 certainall of the Company’s wholly ownedCareTrust’s existing and subject to certain exceptions, future material 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, including if the subsidiary guarantor is sold or sells all or substantially all of its assets, the subsidiary guarantor is designated “unrestricted” for covenant purposes under the indenture, the subsidiary guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied. See Note 12, Summarized Condensed Consolidating Information.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 December 31, 2019,2022, the Company was in compliance with all applicable financial covenants under the indenture.indenture governing the Notes.
2025 Senior Notes. On May 10, 2017, the Issuers completed an underwritten public offering of $300.0 million aggregate principal amount of 5.25% Senior Notes due 2025 (the “2025 Notes”). The 2025 Notes were issued at par, resulting in gross proceeds of $300.0 million and net proceeds of approximately $294.0 million after deducting underwriting fees and other offering expenses. The 2025 Notes were scheduled to mature on June 1, 2025 and bore interest at a rate of 5.25% per year. Interest on the 2025 Notes was payable on June 1 and December 1 of each year. On July 1, 2021 (the “Redemption Date”), the Issuers redeemed all $300.0 million aggregate principal amount of the 2025 Notes at a redemption price equal to 102.625% of the principal amount of the 2025 Notes, plus accrued and unpaid interest thereon up to, but not including, the Redemption Date. During the year ended December 31 2021, the Company recorded a loss on extinguishment of debt of $10.8 million in the consolidated statements of operations, including a prepayment penalty of $7.9 million and a $2.9 million write-off of deferred financing costs associated with the redemption of the 2025 Notes.
Unsecured Revolving Credit Facility and Term Loan
On August 5, 2015, the Company, CareTrust GP, LLC, the Operating Partnership, as the borrower, and certain of its wholly owned subsidiaries entered into a credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender, and the lenders party thereto (the “Prior Credit Agreement”). As later amended on February 1, 2016, the Prior Credit Agreement provided the following: (i) a $400.0 million unsecured asset based revolving credit facility (the “Prior Revolving Facility”), (ii) a $100.0 million non-amortizing unsecured term loan (the “Prior Term Loan” and, together with the Prior Revolving Facility, the “Prior Credit Facility”), and (iii) a $250.0 million uncommitted incremental facility. The Prior Revolving Facility was scheduled to mature on August 5, 2019, subject to 2, six-month extension options. The Prior Term Loan was scheduled to mature on February 1, 2023 and could be prepaid at any time subject to a 2% premium in the first year after issuance and a 1% premium in the second year after issuance.
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 LIBORAdjusted 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 LIBORAdjusted 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
F-23
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 December 31, 2019,2022, the Operating Partnership had $200.0 million of borrowings outstanding under the Term Loan and $60.0$125.0 million outstanding under the Revolving Facility.
The Revolving Facility has a maturity date of February 8, 2023,9, 2027, and includes, at the sole discretion of the Operating Partnership, 2,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 December 31, 2019,2022, the Company was in compliance with all applicable financial covenants under the Second Amended Credit Agreement.
Schedule of Debt Maturities
As of December 31, 2019,2022, the Company’s debt maturities were (dollars in thousands):
| Year | Amount | ||||
| 2023 | $ | — | |||
| 2024 | — | ||||
| 2025 | — | ||||
| 2026 | 200,000 | ||||
| 2027 | 125,000 | ||||
| Thereafter | 400,000 | ||||
| $ | 725,000 | ||||
| Year | Amount | ||
| 2020 | $ | — | |
| 2021 | — | ||
| 2022 | — | ||
| 2023 | 60,000 | ||
| 2024 | — | ||
| Thereafter | 500,000 | ||
| $ | 560,000 | ||
Common Stock
At-The-Market Offering—On March 4, 2019,10, 2020, the Company entered into a new equity distribution agreement to issue and sell, from time to time, up to $300.0$500.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “New ATM“ATM Program”). In connection with the entry into the equity distribution agreement and the commencement of the New ATM Program, the Company’s “at-the-market” equity offering program pursuant to the Company’s prior equity distribution agreement, dated as of May 17, 2017, was terminated (the “Prior ATM Program”)., which expires in March 2023.
| For the Years Ended December 31, | |||||||
| 2019 | 2018 | ||||||
| Number of shares | 2,459 | 10,265 | |||||
| Average sales price per share | $ | 19.48 | $ | 17.76 | |||
Gross proceeds(1) | $ | 47,893 | $ | 182,321 | |||
| For the Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| Number of shares | 2,405 | 990 | |||||||||||||||
| Average sales price per share | $ | 20.00 | $ | 23.74 | |||||||||||||
Gross proceeds(1) | $ | 48,100 | $ | 23,505 | |||||||||||||
(1) Total gross proceeds is before $0.6 million and $0.3 million of commissions paid to the sales agents during the year ended December 31, 2022 and 2021, respectively, under the ATM Program.
As of December 31, 2022, the Company had $428.4 million available for future issuances under the ATM Program.
Share Repurchase Program — On March 20, 2020, the Company’s Board of Directors authorized a share repurchase program up to $150.0 million of outstanding shares of the Company’s common stock (the “Repurchase Program”). Repurchases under the Repurchase Program, which expires on March 31, 2023, may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by management. Repurchases under the Repurchase Program may also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act. The Company expects to finance any share repurchases under the Repurchase Program using available cash and may also use short-term borrowings under the Revolving Facility. The Company did not repurchase any shares of common stock under the Repurchase Program during the years ended December 31, 2022, 2021 and 2020. The Repurchase Program may be modified, discontinued or suspended at any time.
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 2019, 20182022, 2021 and 20172020 (dollars in thousands, except per share amounts):
| For the Three Months Ended | ||||||||||||||||||||||||||
| 2022 | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||||||||
| Dividends declared per share | $ | 0.275 | $ | 0.275 | $ | 0.275 | $ | 0.275 | ||||||||||||||||||
| Dividends payment date | April 15, 2022 | July 15, 2022 | October 14, 2022 | January 13, 2023 | ||||||||||||||||||||||
Dividends payable as of record date[1] | $ | 26,691 | $ | 26,683 | $ | 26,683 | $ | 27,386 | ||||||||||||||||||
| Dividends record date | March 31, 2022 | June 30, 2022 | September 30, 2022 | December 30, 2022 | ||||||||||||||||||||||
| 2021 | ||||||||||||||||||||||||||
| Dividends declared per share | $ | 0.265 | $ | 0.265 | $ | 0.265 | $ | 0.265 | ||||||||||||||||||
| Dividends payment date | April 15, 2021 | July 15, 2021 | October 15, 2021 | January 14, 2022 | ||||||||||||||||||||||
Dividends payable as of record date[1] | $ | 25,633 | $ | 25,714 | $ | 25,714 | $ | 25,755 | ||||||||||||||||||
| Dividends record date | March 31, 2021 | June 30, 2021 | September 30, 2021 | December 31, 2021 | ||||||||||||||||||||||
| 2020 | ||||||||||||||||||||||||||
| Dividends declared per share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 | ||||||||||||||||||
| Dividends payment date | April 15, 2020 | July 15, 2020 | October 15, 2020 | January 15, 2021 | ||||||||||||||||||||||
Dividends payable as of record date[1] | $ | 23,931 | $ | 23,931 | $ | 23,934 | $ | 23,933 | ||||||||||||||||||
| Dividends record date | March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | ||||||||||||||||||||||
(1) Dividends payable includes dividends on performance stock awards that will be paid if and when the shares subject to such awards vest.
| For the Three Months Ended | ||||||||||||||||
| 2019 | March 31, | June 30, | September 30, | December 31, | ||||||||||||
| Dividends declared | $ | 0.225 | $ | 0.225 | $ | 0.225 | $ | 0.225 | ||||||||
| Dividends payment date | April 15, 2019 | July 15, 2019 | October 15, 2019 | January 15, 2020 | ||||||||||||
| Dividends payable as of record date | $ | 20,011 | $ | 21,508 | $ | 21,500 | $ | 21,500 | ||||||||
| Dividends record date | March 29, 2019 | June 28, 2019 | September 30, 2019 | December 31, 2019 | ||||||||||||
| 2018 | ||||||||||||||||
| Dividends declared | $ | 0.205 | $ | 0.205 | $ | 0.205 | $ | 0.205 | ||||||||
| Dividends payment date | April 13, 2018 | July 13, 2018 | October 15, 2018 | January 15, 2019 | ||||||||||||
| Dividends payable as of record date | $ | 15,608 | $ | 16,224 | $ | 17,196 | $ | 17,710 | ||||||||
| Dividends record date | March 30, 2018 | June 29, 2018 | September 28, 2018 | December 31, 2018 | ||||||||||||
| 2017 | ||||||||||||||||
| Dividends declared | $ | 0.185 | $ | 0.185 | $ | 0.185 | $ | 0.185 | ||||||||
| Dividends payment date | April 14, 2017 | July 14, 2017 | October 13, 2017 | January 16, 2018 | ||||||||||||
| Dividends payable as of record date | $ | 13,421 | $ | 14,047 | $ | 14,045 | $ | 14,043 | ||||||||
| Dividends record date | March 31, 2017 | June 30, 2017 | September 29, 2017 | December 29, 2017 | ||||||||||||
F-25
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.
| Shares | Weighted Average Share Price | |||||
| Unvested balance at December 31, 2017 | 422,911 | $ | 14.19 | |||
| Granted | 287,982 | 15.25 | ||||
| Vested | (191,287 | ) | 14.39 | |||
| Forfeited | (334 | ) | 15.21 | |||
| Unvested balance at December 31, 2018 | 519,272 | 14.69 | ||||
| Granted | 180,629 | 22.22 | ||||
| Vested | (247,534 | ) | 14.50 | |||
| Forfeited | (134 | ) | 15.21 | |||
| Unvested balance at December 31, 2019 | 452,233 | $ | 17.90 | |||
| For Year Ended December 31, | |||||||||||
| 2019 | 2018 | 2017 | |||||||||
| Stock-based compensation expense | $ | 4,104 | $ | 3,848 | $ | 2,416 | |||||
The following table summarizes the Company holds its 2019 Annual Meeting.status of the restricted stock award and performance award activity for the year ended December 31, 2022:
| Shares | Weighted Average Share Price | ||||||||||
| Unvested balance at December 31, 2021 | 891,333 | $ | 20.91 | ||||||||
| Granted: | |||||||||||
| RSAs | 159,663 | 19.56 | |||||||||
| Board Awards | 25,992 | 16.93 | |||||||||
| Vested | (501,479) | 20.60 | |||||||||
| Forfeited | (1,900) | 21.50 | |||||||||
| Unvested balance at December 31, 2022 | 573,609 | $ | 20.63 | ||||||||
| Grants | Vested | ||||||||||||||||||||||||||||
| Shares | Weighted Average Share Price | Grant Date Fair Value | Shares | Vest Date Fair Value | |||||||||||||||||||||||||
During year ended December 31, 2022(1) | |||||||||||||||||||||||||||||
| RSAs | 159,663 | $ | 19.56 | $ | 3,123 | 263,568 | $ | 5,020 | |||||||||||||||||||||
| PSAs | — | — | — | 217,645 | 4,134 | ||||||||||||||||||||||||
| Board Awards | 25,992 | 16.93 | 440 | 20,266 | 346 | ||||||||||||||||||||||||
F-26
| Grants | |||||||||||||||||
| Shares | Weighted Average Share Price | Grant Date Fair Value | |||||||||||||||
During year ended December 31, 2021(1) | |||||||||||||||||
| RSAs | 394,863 | $ | 21.92 | $ | 8,654 | ||||||||||||
| PSAs | 108,414 | 22.48 | 2,437 | ||||||||||||||
| Board Awards | 20,266 | 24.18 | 490 | ||||||||||||||
| During year ended December 31, 2020 | |||||||||||||||||
| RSAs | 134,790 | $ | 19.68 | $ | 2,653 | ||||||||||||
| PSAs | 107,790 | 19.06 | 2,054 | ||||||||||||||
| Board Awards | 27,611 | 16.48 | 455 | ||||||||||||||
(1) In 2021, the Compensation Committee changed the structure of the grants that resulted in two long-term equity incentive awards being granted to the Company’s named executive officers in 2021. The Compensation Committee also granted annual awards for 2022 in December 2021.
The fair value of the TSR Units is estimated on the date of the grant using a Monte Carlo valuation model. The risk-free rate is based on the U.S. Treasury yield curve in effect at the grant date for the expected performance period. Expected volatility is based on historical volatility for the most recent weighted average period ending on the grant date for the Company and the selected TSR peer group, and is calculated on a daily basis. The following table reflects the weighted-average key assumptions used in this valuation for awards granted during the year ended December 31, 2022 and 2021:
| For the Year Ended December 31, 2022 | For the Year Ended December 31, 2021 | ||||||||||||||||
| Risk-free interest rate | 3.91 | % | 0.60 | % | |||||||||||||
| Expected stock price volatility | 52.90 | % | 52.42 | % | |||||||||||||
| Expected service period | 3.04 years | 2.93 years | |||||||||||||||
| Expected dividend yield (assuming full reinvestment) | — | % | — | % | |||||||||||||
| Fair value per share at date of grant | $ | 26.53 | $ | 29.10 | |||||||||||||
The total fair value of the TSR Units granted during the year ended December 31, 2022 and 2021 was $2.5 million and $5.3 million, respectively.
The following table summarizes the stock-based compensation expense recognized (dollars in thousands):
| For Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Stock-based compensation expense | $ | 5,758 | $ | 10,832 | $ | 3,790 | |||||||||||
As of December 31, 2022, there was $11.6 million of unamortized stock-based compensation expense related to the unvested RSAs, PSAs, Board Awards, and TSR Units.
F-27
10. (LOSS) EARNINGS PER COMMON SHARE
The following table presents the calculation of basic and diluted EPS(loss) earnings per common share (“EPS”) for the Company’s common stock for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, 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 for the years ended December 31, 2019, 20182022, 2021 and 20172020 (amounts in thousands, except per share amounts):
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Numerator: | |||||||||||||||||
| Net (loss) income | $ | (7,506) | $ | 71,982 | $ | 80,867 | |||||||||||
| Less: Net income allocated to participating securities | (440) | (507) | (298) | ||||||||||||||
| Numerator for basic and diluted earnings available to common stockholders | $ | (7,946) | $ | 71,475 | $ | 80,569 | |||||||||||
| Denominator: | |||||||||||||||||
| Weighted-average basic common shares outstanding | 96,703 | 96,017 | 95,200 | ||||||||||||||
| Dilutive performance stock awards | — | 75 | 7 | ||||||||||||||
| Weighted-average diluted common shares outstanding | 96,703 | 96,092 | 95,207 | ||||||||||||||
| (Loss) earnings per common share, basic | $ | (0.08) | $ | 0.74 | $ | 0.85 | |||||||||||
| (Loss) earnings per common share, diluted | $ | (0.08) | $ | 0.74 | $ | 0.85 | |||||||||||
| Antidilutive unvested restricted stock awards, total shareholder units and performance awards excluded from the computation | 744 | 591 | 296 | ||||||||||||||
| Year Ended December 31, | |||||||||||
| 2019 | 2018 | 2017 | |||||||||
| Numerator: | |||||||||||
| Net income | $ | 46,359 | $ | 57,923 | $ | 25,874 | |||||
| Less: Net income allocated to participating securities | (296 | ) | (364 | ) | (354 | ) | |||||
| Numerator for basic and diluted earnings available to common stockholders | $ | 46,063 | $ | 57,559 | $ | 25,520 | |||||
| Denominator: | |||||||||||
| Weighted-average basic common shares outstanding | 93,088 | 79,386 | 72,647 | ||||||||
| Weighted-average diluted common shares outstanding | 93,098 | 79,392 | 72,647 | ||||||||
| Earnings per common share, basic | $ | 0.49 | $ | 0.73 | $ | 0.35 | |||||
| Earnings per common share, diluted | $ | 0.49 | $ | 0.72 | $ | 0.35 | |||||
The Company and its subsidiaries are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of business, which are not individually or in the aggregate anticipated to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Claims and lawsuits may include matters involving general or professional liability asserted against the Company’s tenants, which are the responsibility of the Company’s tenants and for which the Company is entitled to be indemnified by its tenants under the insurance and indemnification provisions in the applicable leases.
Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except that, for the facilities leased to subsidiaries of Ensign, under the Ensign Master Leases, and Pennant, the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20% of its initial investment in such property, subject to a corresponding rent increase at the time of funding. For the Company’s other triple-net master leases, the tenants also have the option to request capital expenditure funding that would generally be subject to a corresponding rent increase at the time of funding, which are subject to tenant compliance with the conditions to the Company’s approval and funding of their requests. As of December 31, 2019,2022, the Company had committed to fund expansions, construction and capital improvements at certain triple-net leased facilities totaling $13.5$15.7 million, of which $11.8$2.7 million is subject to rent increase at the time of funding.
F-28
| Number of Facilities | Number of Beds/Units | Percentage of Total Revenue(1) | ||||||||||||||||||||||||||||||||||||||||||
Operator(2) | SNF | Campus | ALF/ILF | SNF | Campus | ALF/ILF | ||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Ensign | 83 | 8 | 7 | 8,741 | 997 | 661 | 35 | % | ||||||||||||||||||||||||||||||||||||
| PMG | 13 | 2 | — | 1,742 | 402 | — | 16 | % | ||||||||||||||||||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| Ensign | 83 | 8 | 4 | 8,756 | 997 | 395 | 32 | % | ||||||||||||||||||||||||||||||||||||
| PMG | 13 | 2 | — | 1,742 | 402 | — | 15 | % | ||||||||||||||||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||
| Ensign | 77 | 8 | 4 | 8,129 | 1,027 | 390 | 32 | % | ||||||||||||||||||||||||||||||||||||
| PMG | 13 | 2 | — | 1,742 | 403 | — | 16 | % | ||||||||||||||||||||||||||||||||||||
(1) The Company’s rental income, exclusive of operating expense reimbursements.
(2) See Note 3, Real Estate Investments, Net, for further information regarding Ensign and PMG. Ensign is subject to the registration and reporting requirements of the SEC and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. Ensign’s financial statements, as filed with the SEC, can be found at http://www.sec.gov. The Company has not verified this information through an independent investigation or otherwise.
| Number of Facilities | Number of Beds/Units | Percentage of Total Revenue(1) | ||||||||||||||||||||||||||||||||||||||||||
| State | SNF | Campus | ALF/ILF | SNF | Campus | ALF/ILF | ||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| CA | 27 | 8 | 5 | 3,048 | 1,359 | 437 | 26 | % | ||||||||||||||||||||||||||||||||||||
| TX | 38 | 3 | 3 | 4,849 | 536 | 242 | 22 | % | ||||||||||||||||||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| CA | 27 | 8 | 5 | 3,048 | 1,359 | 449 | 25 | % | ||||||||||||||||||||||||||||||||||||
| TX | 37 | 3 | 3 | 4,694 | 536 | 242 | 20 | % | ||||||||||||||||||||||||||||||||||||
(1) The Company’s rental income, exclusive of operating expense reimbursements.
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Assets: | |||||||||||||||||||
| Real estate investments, net | $ | — | $ | 894,830 | $ | 519,370 | $ | — | $ | 1,414,200 | |||||||||
| Other real estate investments, net | — | 29,500 | 3,800 | — | 33,300 | ||||||||||||||
| Assets held for sale, net | — | 34,590 | — | — | 34,590 | ||||||||||||||
| Cash and cash equivalents | — | 20,327 | — | — | 20,327 | ||||||||||||||
| Accounts and other receivables, net | — | 2,549 | 22 | — | 2,571 | ||||||||||||||
| Prepaid expenses and other assets | — | 10,847 | 3 | — | 10,850 | ||||||||||||||
| Deferred financing costs, net | — | 3,023 | — | — | 3,023 | ||||||||||||||
| Investment in subsidiaries | 949,275 | 541,019 | — | (1,490,294 | ) | — | |||||||||||||
| Intercompany | — | — | 19,295 | (19,295 | ) | — | |||||||||||||
| Total assets | $ | 949,275 | $ | 1,536,685 | $ | 542,490 | $ | (1,509,589 | ) | $ | 1,518,861 | ||||||||
| Liabilities and Equity: | |||||||||||||||||||
| Senior unsecured notes payable, net | $ | — | $ | 295,911 | $ | — | $ | — | $ | 295,911 | |||||||||
| Senior unsecured term loan, net | — | 198,713 | — | — | 198,713 | ||||||||||||||
| Unsecured revolving credit facility | — | 60,000 | — | — | 60,000 | ||||||||||||||
| Accounts payable and accrued liabilities | — | 13,491 | 1,471 | — | 14,962 | ||||||||||||||
| Dividends payable | 21,684 | — | — | — | 21,684 | ||||||||||||||
| Intercompany | — | 19,295 | — | (19,295 | ) | — | |||||||||||||
| Total liabilities | 21,684 | 587,410 | 1,471 | (19,295 | ) | 591,270 | |||||||||||||
| Total equity | 927,591 | 949,275 | 541,019 | (1,490,294 | ) | 927,591 | |||||||||||||
| Total liabilities and equity | $ | 949,275 | $ | 1,536,685 | $ | 542,490 | $ | (1,509,589 | ) | $ | 1,518,861 | ||||||||
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Assets: | |||||||||||||||||||
| Real estate investments, net | $ | — | $ | 887,921 | $ | 328,316 | $ | — | $ | 1,216,237 | |||||||||
| Other real estate investments, net | — | 12,299 | 5,746 | — | 18,045 | ||||||||||||||
| Cash and cash equivalents | — | 36,792 | — | — | 36,792 | ||||||||||||||
| Accounts and other receivables, net | — | 9,359 | 2,028 | — | 11,387 | ||||||||||||||
| Prepaid expenses and other assets | — | 8,666 | 2 | — | 8,668 | ||||||||||||||
| Deferred financing costs, net | — | 633 | — | — | 633 | ||||||||||||||
| Investment in subsidiaries | 786,030 | 484,955 | — | (1,270,985 | ) | — | |||||||||||||
| Intercompany | — | — | 151,242 | (151,242 | ) | — | |||||||||||||
| Total assets | $ | 786,030 | $ | 1,440,625 | $ | 487,334 | $ | (1,422,227 | ) | $ | 1,291,762 | ||||||||
| Liabilities and Equity: | |||||||||||||||||||
| Senior unsecured notes payable, net | $ | — | $ | 295,153 | $ | — | $ | — | $ | 295,153 | |||||||||
| Senior unsecured term loan, net | — | 99,612 | — | — | 99,612 | ||||||||||||||
| Unsecured revolving credit facility | — | 95,000 | — | — | 95,000 | ||||||||||||||
| Accounts payable and accrued liabilities | — | 13,588 | 2,379 | — | 15,967 | ||||||||||||||
| Dividends payable | 17,783 | — | — | — | 17,783 | ||||||||||||||
| Intercompany | — | 151,242 | — | (151,242 | ) | — | |||||||||||||
| Total liabilities | 17,783 | 654,595 | 2,379 | (151,242 | ) | 523,515 | |||||||||||||
| Equity: | |||||||||||||||||||
| Common stock, $0.01 par value; 500,000,000 shares authorized, 85,867,044 shares issued and outstanding as of December 31, 2018 | 859 | — | — | — | 859 | ||||||||||||||
| Additional paid-in capital | 965,578 | 661,686 | 321,761 | (983,447 | ) | 965,578 | |||||||||||||
| Cumulative distributions in excess of earnings | (198,190 | ) | 124,344 | 163,194 | (287,538 | ) | (198,190 | ) | |||||||||||
| Total equity | 768,247 | 786,030 | 484,955 | (1,270,985 | ) | 768,247 | |||||||||||||
| Total liabilities and equity | $ | 786,030 | $ | 1,440,625 | $ | 487,334 | $ | (1,422,227 | ) | $ | 1,291,762 | ||||||||
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Revenues: | |||||||||||||||||||
| Rental income | $ | — | $ | 81,380 | $ | 74,287 | $ | — | $ | 155,667 | |||||||||
| Independent living facilities | — | — | 3,389 | — | 3,389 | ||||||||||||||
| Interest and other income | — | 3,001 | 1,344 | — | 4,345 | ||||||||||||||
| Total revenues | — | 84,381 | 79,020 | — | 163,401 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Depreciation and amortization | — | 30,436 | 21,386 | — | 51,822 | ||||||||||||||
| Interest expense | — | 28,125 | — | — | 28,125 | ||||||||||||||
| Property taxes | — | 2,887 | 161 | — | 3,048 | ||||||||||||||
| Independent living facilities | — | — | 2,898 | — | 2,898 | ||||||||||||||
| Impairment of real estate investments | — | 16,692 | — | — | 16,692 | ||||||||||||||
| Provision for loan losses | — | 1,076 | — | — | 1,076 | ||||||||||||||
| General and administrative | 4,218 | 10,868 | 72 | — | 15,158 | ||||||||||||||
| Total expenses | 4,218 | 90,084 | 24,517 | — | 118,819 | ||||||||||||||
| Gain on sale of real estate | — | 217 | 1,560 | — | 1,777 | ||||||||||||||
| Income in Subsidiary | 50,577 | 56,063 | — | (106,640 | ) | — | |||||||||||||
| Net income | $ | 46,359 | $ | 50,577 | $ | 56,063 | $ | (106,640 | ) | $ | 46,359 | ||||||||
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Revenues: | |||||||||||||||||||
| Rental income | $ | — | $ | 81,560 | $ | 58,513 | $ | — | $ | 140,073 | |||||||||
| Tenant reimbursements | — | 7,173 | 4,751 | — | 11,924 | ||||||||||||||
| Independent living facilities | — | — | 3,379 | — | 3,379 | ||||||||||||||
| Interest and other income | — | 1,369 | 196 | — | 1,565 | ||||||||||||||
| Total revenues | — | 90,102 | 66,839 | — | 156,941 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Depreciation and amortization | — | 27,553 | 18,213 | — | 45,766 | ||||||||||||||
| Interest expense | — | 27,860 | — | — | 27,860 | ||||||||||||||
| Property taxes | — | 7,173 | 4,751 | — | 11,924 | ||||||||||||||
| Independent living facilities | — | — | 2,964 | — | 2,964 | ||||||||||||||
| General and administrative | 3,856 | 8,623 | 76 | — | 12,555 | ||||||||||||||
| Total expenses | 3,856 | 71,209 | 26,004 | — | 101,069 | ||||||||||||||
| Gain on sale of real estate | — | 2,051 | — | — | 2,051 | ||||||||||||||
| Income in Subsidiary | 61,779 | 40,835 | — | (102,614 | ) | — | |||||||||||||
| Net income | $ | 57,923 | $ | 61,779 | $ | 40,835 | $ | (102,614 | ) | $ | 57,923 | ||||||||
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Revenues: | |||||||||||||||||||
| Rental income | $ | — | $ | 60,464 | $ | 57,169 | $ | — | $ | 117,633 | |||||||||
| Tenant reimbursements | — | 5,493 | 4,761 | — | 10,254 | ||||||||||||||
| Independent living facilities | — | — | 3,228 | — | 3,228 | ||||||||||||||
| Interest and other income | — | 215 | 1,652 | — | 1,867 | ||||||||||||||
| Total revenues | — | 66,172 | 66,810 | — | 132,982 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Depreciation and amortization | — | 20,048 | 19,111 | — | 39,159 | ||||||||||||||
| Interest expense | — | 24,196 | — | — | 24,196 | ||||||||||||||
| Loss on the extinguishment of debt | — | 11,883 | — | — | 11,883 | ||||||||||||||
| Property taxes | — | 5,493 | 4,761 | — | 10,254 | ||||||||||||||
| Independent living facilities | — | — | 2,733 | — | 2,733 | ||||||||||||||
| Impairment of real estate investment | — | — | 890 | — | 890 | ||||||||||||||
| Reserve for advances and deferred rent | — | 10,414 | — | — | 10,414 | ||||||||||||||
| General and administrative | 2,638 | 8,417 | 62 | — | 11,117 | ||||||||||||||
| Total expenses | 2,638 | 80,451 | 27,557 | — | 110,646 | ||||||||||||||
| Gain on disposition of other real estate investment | — | — | 3,538 | — | 3,538 | ||||||||||||||
| Income in Subsidiary | 28,512 | 42,791 | — | (71,303 | ) | — | |||||||||||||
| Net income | $ | 25,874 | $ | 28,512 | $ | 42,791 | $ | (71,303 | ) | $ | 25,874 | ||||||||
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||
| Net cash (used in) provided by operating activities | $ | (114 | ) | $ | 49,681 | $ | 76,728 | $ | — | $ | 126,295 | ||||||||
| Cash flows from investing activities: | |||||||||||||||||||
| Acquisitions of real estate, net of deposits applied | — | (109,294 | ) | (212,164 | ) | — | (321,458 | ) | |||||||||||
| Improvements to real estate | — | (1,360 | ) | (1,992 | ) | — | (3,352 | ) | |||||||||||
| Purchases of equipment, furniture and fixtures | — | (2,933 | ) | (4 | ) | — | (2,937 | ) | |||||||||||
| Investment in real estate mortgage and other loans receivable | — | (18,246 | ) | — | — | (18,246 | ) | ||||||||||||
| Principal payments received on real estate mortgage and other loans receivable | — | 24,283 | — | — | 24,283 | ||||||||||||||
| Repayment of other real estate investment | — | — | 2,204 | — | 2,204 | ||||||||||||||
| Net proceeds from sales of real estate | — | 218 | 3,281 | — | 3,499 | ||||||||||||||
| Distribution from Subsidiary | 80,619 | — | — | (80,619 | ) | — | |||||||||||||
| Intercompany financing | (193,286 | ) | (131,947 | ) | — | 325,233 | — | ||||||||||||
| Net cash used in investing activities | (112,667 | ) | (239,279 | ) | (208,675 | ) | 244,614 | (316,007 | ) | ||||||||||
| Cash flows from financing activities: | |||||||||||||||||||
| Proceeds from the issuance of common stock, net | 195,924 | — | — | — | 195,924 | ||||||||||||||
| Proceeds from the issuance of senior unsecured term loan | — | 200,000 | — | — | 200,000 | ||||||||||||||
| Borrowings under unsecured revolving credit facility | — | 243,000 | — | — | 243,000 | ||||||||||||||
| Payments on unsecured revolving credit facility | — | (278,000 | ) | — | — | (278,000 | ) | ||||||||||||
| Payments on senior unsecured term loan | — | (100,000 | ) | — | — | (100,000 | ) | ||||||||||||
| Payments of deferred financing costs | — | (4,534 | ) | — | — | (4,534 | ) | ||||||||||||
| Net-settle adjustment on restricted stock | (2,524 | ) | — | — | — | (2,524 | ) | ||||||||||||
| Dividends paid on common stock | (80,619 | ) | — | — | — | (80,619 | ) | ||||||||||||
| Distribution to Parent | — | (80,619 | ) | — | 80,619 | — | |||||||||||||
| Intercompany financing | — | 193,286 | 131,947 | (325,233 | ) | — | |||||||||||||
| Net cash provided by financing activities | 112,781 | 173,133 | 131,947 | (244,614 | ) | 173,247 | |||||||||||||
| Net decrease in cash and cash equivalents | — | (16,465 | ) | — | — | (16,465 | ) | ||||||||||||
| Cash and cash equivalents, beginning of period | — | 36,792 | — | — | 36,792 | ||||||||||||||
| Cash and cash equivalents, end of period | $ | — | $ | 20,327 | $ | — | $ | — | $ | 20,327 | |||||||||
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||
| Net cash (used in) provided by operating activities | $ | (10 | ) | $ | 40,092 | $ | 59,275 | $ | — | $ | 99,357 | ||||||||
| Cash flows from investing activities: | |||||||||||||||||||
| Acquisitions of real estate | — | (111,640 | ) | — | — | (111,640 | ) | ||||||||||||
| Improvements to real estate | — | (7,204 | ) | (26 | ) | — | (7,230 | ) | |||||||||||
| Purchases of equipment, furniture and fixtures | — | (1,713 | ) | (69 | ) | — | (1,782 | ) | |||||||||||
| Investment in real estate mortgage and other loans receivable | — | (5,648 | ) | — | — | (5,648 | ) | ||||||||||||
| Principal payments received on real estate mortgage and other loans receivable | — | 3,227 | — | — | 3,227 | ||||||||||||||
| Escrow deposit for acquisition of real estate | — | (5,000 | ) | — | — | (5,000 | ) | ||||||||||||
| Net proceeds from the sale of real estate | — | 13,004 | — | — | 13,004 | ||||||||||||||
| Distribution from Subsidiary | 62,999 | — | — | (62,999 | ) | — | |||||||||||||
| Intercompany financing | (178,584 | ) | 59,180 | — | 119,404 | — | |||||||||||||
| Net cash used in investing activities | (115,585 | ) | (55,794 | ) | (95 | ) | 56,405 | (115,069 | ) | ||||||||||
| Cash flows from financing activities: | |||||||||||||||||||
| Proceeds from the issuance of common stock, net | 179,882 | — | — | — | 179,882 | ||||||||||||||
| Borrowings under unsecured revolving credit facility | — | 65,000 | — | — | 65,000 | ||||||||||||||
| Payments on unsecured revolving credit facility | — | (135,000 | ) | — | — | (135,000 | ) | ||||||||||||
| Net-settle adjustment on restricted stock | (1,288 | ) | — | — | — | (1,288 | ) | ||||||||||||
| Dividends paid on common stock | (62,999 | ) | — | — | — | (62,999 | ) | ||||||||||||
| Distribution to Parent | — | (62,999 | ) | — | 62,999 | — | |||||||||||||
| Intercompany financing | — | 178,584 | (59,180 | ) | (119,404 | ) | — | ||||||||||||
| Net cash provided by (used in) financing activities | 115,595 | 45,585 | (59,180 | ) | (56,405 | ) | 45,595 | ||||||||||||
| Net increase in cash and cash equivalents | — | 29,883 | — | — | 29,883 | ||||||||||||||
| Cash and cash equivalents, beginning of period | — | 6,909 | — | — | 6,909 | ||||||||||||||
| Cash and cash equivalents, end of period | $ | — | $ | 36,792 | $ | — | $ | — | $ | 36,792 | |||||||||
Parent Guarantor | Issuers | Combined Subsidiary Guarantors | Elimination | Consolidated | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||
| Net cash (used in) provided by operating activities | $ | (222 | ) | $ | 25,745 | $ | 63,277 | $ | — | $ | 88,800 | ||||||||
| Cash flows from investing activities: | |||||||||||||||||||
| Acquisition of real estate | — | (296,517 | ) | — | — | (296,517 | ) | ||||||||||||
| Improvements to real estate | — | (681 | ) | (67 | ) | — | (748 | ) | |||||||||||
| Purchases of equipment, furniture and fixtures | — | (309 | ) | (94 | ) | — | (403 | ) | |||||||||||
| Investment in real estate mortgage loan receivable | — | (12,416 | ) | — | — | (12,416 | ) | ||||||||||||
| Sale of other real estate investment | — | — | 7,500 | — | 7,500 | ||||||||||||||
| Principal payments received on mortgage loan receivable | — | 25 | — | — | 25 | ||||||||||||||
| Distribution from Subsidiary | 52,587 | — | — | (52,587 | ) | — | |||||||||||||
| Intercompany financing | (169,235 | ) | 70,616 | — | 98,619 | — | |||||||||||||
| Net cash (used in) provided by investing activities | (116,648 | ) | (239,282 | ) | 7,339 | 46,032 | (302,559 | ) | |||||||||||
| Cash flows from financing activities: | |||||||||||||||||||
| Proceeds from the issuance of common stock, net | 170,323 | — | — | — | 170,323 | ||||||||||||||
| Proceeds from the issuance of senior unsecured notes payable | — | 300,000 | — | — | 300,000 | ||||||||||||||
| Borrowings under unsecured revolving credit facility | — | 238,000 | — | — | 238,000 | ||||||||||||||
| Payments on senior unsecured notes payable | — | (267,639 | ) | — | — | (267,639 | ) | ||||||||||||
| Payments on unsecured revolving credit facility | — | (168,000 | ) | — | — | (168,000 | ) | ||||||||||||
| Net-settle adjustment on restricted stock | (866 | ) | — | — | — | (866 | ) | ||||||||||||
| Payments of deferred financing costs | — | (6,063 | ) | — | — | (6,063 | ) | ||||||||||||
| Dividends paid on common stock | (52,587 | ) | — | — | — | (52,587 | ) | ||||||||||||
| Distribution to Parent | — | (52,587 | ) | — | 52,587 | — | |||||||||||||
| Intercompany financing | — | 169,235 | (70,616 | ) | (98,619 | ) | — | ||||||||||||
| Net cash provided by (used in) financing activities | 116,870 | 212,946 | (70,616 | ) | (46,032 | ) | 213,168 | ||||||||||||
| Net decrease in cash and cash equivalents | — | (591 | ) | — | — | (591 | ) | ||||||||||||
| Cash and cash equivalents, beginning of period | — | 7,500 | — | — | 7,500 | ||||||||||||||
| Cash and cash equivalents, end of period | $ | — | $ | 6,909 | $ | — | $ | — | $ | 6,909 | |||||||||
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
| For the Year Ended December 31, 2019 | ||||||||||||||||
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
| Operating data: | ||||||||||||||||
| Total revenues | $ | 39,658 | $ | 46,201 | $ | 33,314 | $ | 44,228 | ||||||||
| Net income (loss) | 16,053 | 19,698 | (10,054 | ) | 20,662 | |||||||||||
| Earnings per common share, basic | 0.18 | 0.21 | (0.11 | ) | 0.22 | |||||||||||
| Earnings per common share, diluted | 0.18 | 0.21 | (0.11 | ) | 0.22 | |||||||||||
| Other data: | ||||||||||||||||
| Weighted-average number of common shares outstanding, basic | 88,010 | 94,036 | 95,103 | 95,103 | ||||||||||||
| Weighted-average number of common shares outstanding, diluted | 88,010 | 94,036 | 95,103 | 95,144 | ||||||||||||
| For the Year Ended December 31, 2018 | ||||||||||||||||
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
| Operating data: | ||||||||||||||||
| Total revenues | $ | 38,101 | $ | 38,969 | $ | 39,510 | $ | 40,361 | ||||||||
| Net income | 14,607 | 13,267 | 14,510 | 15,539 | ||||||||||||
| Earnings per common share, basic | 0.19 | 0.17 | 0.18 | 0.18 | ||||||||||||
| Earnings per common share, diluted | 0.19 | 0.17 | 0.18 | 0.18 | ||||||||||||
| Other data: | ||||||||||||||||
| Weighted-average number of common shares outstanding, basic | 75,504 | 76,374 | 81,490 | 84,059 | ||||||||||||
| Weighted-average number of common shares outstanding, diluted | 75,504 | 76,374 | 81,490 | 84,084 | ||||||||||||
The Company evaluates subsequent events in accordance with ASC 855, Subsequent Events. The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Recent Acquisitions
Asset Sales
On February 14, 2020,January 13, 2023, the Company closed on the sale of one ALF consisting of 105 beds located in Florida with a carrying value of $3.3 million, which approximated the 6 Metron skilled nursing facilities which werenet sales proceeds received. The facility was classified as held for sale as of December 31, 2019. In connection with the sale for $36.0 million, the Company received $3.5 million in cash and provided subsidiaries of Cascade Capital Group, LLC, the purchaser of the properties, with a short-term mortgage loan secured by these properties for $32.4 million. The mortgage loan bears interest at 7.5% and has a maturity date of March 31, 2020. The Company does not expect to record a material gain or loss in connection with the sale.
F-29
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 20192022
(dollars in thousands)
| Initial Cost to Company | Costs Capitalized Since Acquisition | Gross Carrying Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description | Facility | Location | Encum. | Land | Building Improvs. | Improvs. | Land | Building Improvs. | Total (1) | Accum. Depr. | Const./Ren. Date | Acq. Date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Skilled Nursing Properties: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ensign Highland LLC | Highland Manor | Phoenix, AZ | $ | — | $ | 257 | $ | 976 | $ | 926 | $ | 257 | $ | 1,902 | $ | 2,159 | $ | (1,479) | 2013 | 2000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Meadowbrook Health Associates LLC | Sabino Canyon | Tucson, AZ | — | 425 | 3,716 | 1,940 | 425 | 5,656 | 6,081 | (3,505) | 2012 | 2000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Terrace Holdings AZ LLC | Desert Terrace | Phoenix, AZ | — | 113 | 504 | 971 | 113 | 1,475 | 1,588 | (1,026) | 2004 | 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rillito Holdings LLC | Catalina | Tucson, AZ | — | 471 | 2,041 | 3,055 | 471 | 5,096 | 5,567 | (3,562) | 2013 | 2003 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Valley Health Holdings LLC | North Mountain | Phoenix, AZ | — | 629 | 5,154 | 1,519 | 629 | 6,673 | 7,302 | (4,357) | 2009 | 2004 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cedar Avenue Holdings LLC | Upland | Upland, CA | — | 2,812 | 3,919 | 1,994 | 2,812 | 5,913 | 8,725 | (3,865) | 2011 | 2005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Granada Investments LLC | Camarillo | Camarillo, CA | — | 3,526 | 2,827 | 1,522 | 3,526 | 4,349 | 7,875 | (2,965) | 2010 | 2005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Plaza Health Holdings LLC | Park Manor | Walla Walla, WA | — | 450 | 5,566 | 1,055 | 450 | 6,621 | 7,071 | (4,407) | 2009 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mountainview Communitycare LLC | Park View Gardens | Santa Rosa, CA | — | 931 | 2,612 | 653 | 931 | 3,265 | 4,196 | (2,317) | 1963 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CM Health Holdings LLC | Carmel Mountain | San Diego, CA | — | 3,028 | 3,119 | 2,071 | 3,028 | 5,190 | 8,218 | (3,381) | 2012 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Polk Health Holdings LLC | Timberwood | Livingston, TX | — | 60 | 4,391 | 1,167 | 60 | 5,558 | 5,618 | (3,522) | 2009 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Snohomish Health Holdings LLC | Emerald Hills | Lynnwood, WA | — | 741 | 1,663 | 1,998 | 741 | 3,661 | 4,402 | (2,854) | 2009 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cherry Health Holdings LLC | Pacific Care | Hoquiam, WA | — | 171 | 1,828 | 2,038 | 171 | 3,866 | 4,037 | (2,951) | 2010 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Golfview Holdings LLC | Cambridge SNF | Richmond, TX | — | 1,105 | 3,110 | 1,067 | 1,105 | 4,177 | 5,282 | (2,554) | 2007 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tenth East Holdings LLC | Arlington Hills | Salt Lake City, UT | — | 332 | 2,426 | 2,507 | 332 | 4,933 | 5,265 | (3,618) | 2013 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trinity Mill Holdings LLC | Carrollton | Carrollton, TX | — | 664 | 2,294 | 902 | 664 | 3,196 | 3,860 | (2,551) | 2007 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cottonwood Health Holdings LLC | Holladay | Salt Lake City, UT | — | 965 | 2,070 | 958 | 965 | 3,028 | 3,993 | (2,578) | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Verde Villa Holdings LLC | Lake Village | Lewisville, TX | — | 600 | 1,890 | 470 | 600 | 2,360 | 2,960 | (1,645) | 2011 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mesquite Health Holdings LLC | Willow Bend | Mesquite, TX | — | 470 | 1,715 | 8,632 | 441 | 10,376 | 10,817 | (8,270) | 2012 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Arrow Tree Health Holdings LLC | Arbor Glen | Glendora, CA | — | 2,165 | 1,105 | 324 | 2,165 | 1,429 | 3,594 | (1,149) | 1965 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fort Street Health Holdings LLC | Draper | Draper, UT | — | 443 | 2,394 | 759 | 443 | 3,153 | 3,596 | (1,839) | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trousdale Health Holdings LLC | Brookfield | Downey, CA | — | 1,415 | 1,841 | 1,861 | 1,415 | 3,702 | 5,117 | (2,393) | 2013 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ensign Bellflower LLC | Rose Villa | Bellflower, CA | — | 937 | 1,168 | 357 | 937 | 1,525 | 2,462 | (1,039) | 2009 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RB Heights Health Holdings LLC | Osborn | Scottsdale, AZ | — | 2,007 | 2,793 | 1,762 | 2,007 | 4,555 | 6,562 | (2,885) | 2009 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| San Corrine Health Holdings LLC | Salado Creek | San Antonio, TX | — | 310 | 2,090 | 719 | 310 | 2,809 | 3,119 | (1,587) | 2005 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Temple Health Holdings LLC | Wellington | Temple, TX | — | 529 | 2,207 | 1,163 | 529 | 3,370 | 3,899 | (2,058) | 2008 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Anson Health Holdings LLC | Northern Oaks | Abilene, TX | — | 369 | 3,220 | 1,725 | 369 | 4,945 | 5,314 | (2,925) | 2012 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Willits Health Holdings LLC | Northbrook | Willits, CA | — | 490 | 1,231 | 500 | 490 | 1,731 | 2,221 | (1,018) | 2011 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lufkin Health Holdings LLC | Southland | Lufkin, TX | — | 467 | 4,644 | 782 | 467 | 5,426 | 5,893 | (1,926) | 1988 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lowell Health Holdings LLC | Littleton | Littleton, CO | — | 217 | 856 | 1,735 | 217 | 2,591 | 2,808 | (1,694) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Jefferson Ralston Holdings LLC | Arvada | Arvada, CO | — | 280 | 1,230 | 834 | 280 | 2,064 | 2,344 | (1,082) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-30
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(dollars in thousands)
| Initial Cost to Company | Gross Carrying Value | |||||||||||||||||||||||||||||||||||||||
| Description | Facility | Location | Encum. | Land | Building Improvs. | Costs Cap. Since Acq. | Land | Building Improvs. | Total (1) | Accum. Depr. | Const./Ren. Date | Acq. Date | ||||||||||||||||||||||||||||
| Skilled Nursing Properties: | ||||||||||||||||||||||||||||||||||||||||
| Ensign Highland LLC | Highland Manor | Phoenix, AZ | $ | — | $ | 257 | $ | 976 | $ | 926 | $ | 257 | $ | 1,902 | $ | 2,159 | $ | (1,223 | ) | 2013 | 2000 | |||||||||||||||||||
| Meadowbrook Health Associates LLC | Sabino Canyon | Tucson, AZ | — | 425 | 3,716 | 1,940 | 425 | 5,656 | 6,081 | (2,891 | ) | 2012 | 2000 | |||||||||||||||||||||||||||
| Terrace Holdings AZ LLC | Desert Terrace | Phoenix, AZ | — | 113 | 504 | 971 | 113 | 1,475 | 1,588 | (783 | ) | 2004 | 2002 | |||||||||||||||||||||||||||
| Rillito Holdings LLC | Catalina | Tucson, AZ | — | 471 | 2,041 | 3,055 | 471 | 5,096 | 5,567 | (2,759 | ) | 2013 | 2003 | |||||||||||||||||||||||||||
| Valley Health Holdings LLC | North Mountain | Phoenix, AZ | — | 629 | 5,154 | 1,519 | 629 | 6,673 | 7,302 | (3,523 | ) | 2009 | 2004 | |||||||||||||||||||||||||||
| Cedar Avenue Holdings LLC | Upland | Upland, CA | — | 2,812 | 3,919 | 1,994 | 2,812 | 5,913 | 8,725 | (3,276 | ) | 2011 | 2005 | |||||||||||||||||||||||||||
| Granada Investments LLC | Camarillo | Camarillo, CA | — | 3,526 | 2,827 | 1,522 | 3,526 | 4,349 | 7,875 | (2,409 | ) | 2010 | 2005 | |||||||||||||||||||||||||||
| Plaza Health Holdings LLC | Park Manor | Walla Walla, WA | — | 450 | 5,566 | 1,055 | 450 | 6,621 | 7,071 | (3,610 | ) | 2009 | 2006 | |||||||||||||||||||||||||||
| Mountainview Communitycare LLC | Park View Gardens | Santa Rosa, CA | — | 931 | 2,612 | 653 | 931 | 3,265 | 4,196 | (1,964 | ) | 1963 | 2006 | |||||||||||||||||||||||||||
| CM Health Holdings LLC | Carmel Mountain | San Diego, CA | — | 3,028 | 3,119 | 2,071 | 3,028 | 5,190 | 8,218 | (2,755 | ) | 2012 | 2006 | |||||||||||||||||||||||||||
| Polk Health Holdings LLC | Timberwood | Livingston, TX | — | 60 | 4,391 | 1,167 | 60 | 5,558 | 5,618 | (2,911 | ) | 2009 | 2006 | |||||||||||||||||||||||||||
| Snohomish Health Holdings LLC | Emerald Hills | Lynnwood, WA | — | 741 | 1,663 | 1,998 | 741 | 3,661 | 4,402 | (2,413 | ) | 2009 | 2006 | |||||||||||||||||||||||||||
| Cherry Health Holdings LLC | Pacific Care | Hoquiam, WA | — | 171 | 1,828 | 2,038 | 171 | 3,866 | 4,037 | (2,313 | ) | 2010 | 2006 | |||||||||||||||||||||||||||
| Golfview Holdings LLC | Cambridge SNF | Richmond, TX | — | 1,105 | 3,110 | 1,067 | 1,105 | 4,177 | 5,282 | (2,088 | ) | 2007 | 2006 | |||||||||||||||||||||||||||
| Tenth East Holdings LLC | Arlington Hills | Salt Lake City, UT | — | 332 | 2,426 | 2,507 | 332 | 4,933 | 5,265 | (2,771 | ) | 2013 | 2006 | |||||||||||||||||||||||||||
| Trinity Mill Holdings LLC | Carrollton | Carrollton, TX | — | 664 | 2,294 | 902 | 664 | 3,196 | 3,860 | (2,106 | ) | 2007 | 2006 | |||||||||||||||||||||||||||
| Cottonwood Health Holdings LLC | Holladay | Salt Lake City, UT | — | 965 | 2,070 | 958 | 965 | 3,028 | 3,993 | (2,120 | ) | 2008 | 2007 | |||||||||||||||||||||||||||
| Verde Villa Holdings LLC | Lake Village | Lewisville, TX | — | 600 | 1,890 | 470 | 600 | 2,360 | 2,960 | (1,330 | ) | 2011 | 2007 | |||||||||||||||||||||||||||
| Mesquite Health Holdings LLC | Willow Bend | Mesquite, TX | — | 470 | 1,715 | 8,661 | 470 | 10,376 | 10,846 | (6,512 | ) | 2012 | 2007 | |||||||||||||||||||||||||||
| Arrow Tree Health Holdings LLC | Arbor Glen | Glendora, CA | — | 2,165 | 1,105 | 324 | 2,165 | 1,429 | 3,594 | (938 | ) | 1965 | 2007 | |||||||||||||||||||||||||||
| Fort Street Health Holdings LLC | Draper | Draper, UT | — | 443 | 2,394 | 759 | 443 | 3,153 | 3,596 | (1,484 | ) | 2008 | 2007 | |||||||||||||||||||||||||||
| Trousdale Health Holdings LLC | Brookfield | Downey, CA | — | 1,415 | 1,841 | 1,861 | 1,415 | 3,702 | 5,117 | (1,878 | ) | 2013 | 2007 | |||||||||||||||||||||||||||
| Ensign Bellflower LLC | Rose Villa | Bellflower, CA | — | 937 | 1,168 | 357 | 937 | 1,525 | 2,462 | (866 | ) | 2009 | 2007 | |||||||||||||||||||||||||||
| RB Heights Health Holdings LLC | Osborn | Scottsdale, AZ | — | 2,007 | 2,793 | 1,762 | 2,007 | 4,555 | 6,562 | (2,340 | ) | 2009 | 2008 | |||||||||||||||||||||||||||
| San Corrine Health Holdings LLC | Salado Creek | San Antonio, TX | — | 310 | 2,090 | 719 | 310 | 2,809 | 3,119 | (1,384 | ) | 2005 | 2008 | |||||||||||||||||||||||||||
| Temple Health Holdings LLC | Wellington | Temple, TX | — | 529 | 2,207 | 1,163 | 529 | 3,370 | 3,899 | (1,680 | ) | 2008 | 2008 | |||||||||||||||||||||||||||
| Anson Health Holdings LLC | Northern Oaks | Abilene, TX | — | 369 | 3,220 | 1,725 | 369 | 4,945 | 5,314 | (2,351 | ) | 2012 | 2008 | |||||||||||||||||||||||||||
| Lafayette Health Holdings LLC | Julia Temple | Englewood, CO | — | 1,607 | 4,222 | 6,195 | 1,607 | 10,417 | 12,024 | (6,030) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Hillendahl Health Holdings LLC | Golden Acres | Dallas, TX | — | 2,133 | 11,977 | 1,421 | 2,133 | 13,398 | 15,531 | (6,543) | 1984 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Price Health Holdings LLC | Pinnacle | Price, UT | — | 193 | 2,209 | 849 | 193 | 3,058 | 3,251 | (1,316) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Silver Lake Health Holdings LLC | Provo | Provo, UT | — | 2,051 | 8,362 | 2,011 | 2,051 | 10,373 | 12,424 | (3,766) | 2011 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Jordan Health Properties LLC | Copper Ridge | West Jordan, UT | — | 2,671 | 4,244 | 1,507 | 2,671 | 5,751 | 8,422 | (2,186) | 2013 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Regal Road Health Holdings LLC | Sunview | Youngstown, AZ | — | 767 | 4,648 | 155 | 193 | 5,377 | 5,570 | (2,423) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Paredes Health Holdings LLC | Alta Vista | Brownsville, TX | — | 373 | 1,354 | 190 | 373 | 1,544 | 1,917 | (548) | 1969 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expressway Health Holdings LLC | Veranda | Harlingen, TX | — | 90 | 675 | 430 | 90 | 1,105 | 1,195 | (548) | 2011 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rio Grande Health Holdings LLC | Grand Terrace | McAllen, TX | — | 642 | 1,085 | 870 | 642 | 1,955 | 2,597 | (1,139) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fifth East Holdings LLC | Paramount | Salt Lake City, UT | — | 345 | 2,464 | 1,065 | 345 | 3,529 | 3,874 | (1,600) | 2011 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Emmett Healthcare Holdings LLC | River's Edge | Emmet, ID | — | 591 | 2,383 | 69 | 591 | 2,452 | 3,043 | (948) | 1972 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Burley Healthcare Holdings LLC | Parke View | Burley, ID | — | 250 | 4,004 | 424 | 250 | 4,428 | 4,678 | (1,855) | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Josey Ranch Healthcare Holdings LLC | Heritage Gardens | Carrollton, TX | — | 1,382 | 2,293 | 478 | 1,382 | 2,771 | 4,153 | (1,117) | 1996 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Everglades Health Holdings LLC | Victoria Ventura | Ventura, CA | — | 1,847 | 5,377 | 682 | 1,847 | 6,059 | 7,906 | (1,916) | 1990 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Irving Health Holdings LLC | Beatrice Manor | Beatrice, NE | — | 60 | 2,931 | 245 | 60 | 3,176 | 3,236 | (1,277) | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Falls City Health Holdings LLC | Careage Estates of Falls City | Falls City, NE | — | 170 | 2,141 | 82 | 170 | 2,223 | 2,393 | (822) | 1972 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gillette Park Health Holdings LLC | Careage of Cherokee | Cherokee, IA | — | 163 | 1,491 | 12 | 163 | 1,503 | 1,666 | (697) | 1967 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gazebo Park Health Holdings LLC | Careage of Clarion | Clarion, IA | — | 80 | 2,541 | 97 | 80 | 2,638 | 2,718 | (1,264) | 1978 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Oleson Park Health Holdings LLC | Careage of Ft. Dodge | Ft. Dodge, IA | — | 90 | 2,341 | 759 | 90 | 3,100 | 3,190 | (1,862) | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Arapahoe Health Holdings LLC | Oceanview | Texas City, TX | — | 158 | 4,810 | 759 | 128 | 5,599 | 5,727 | (2,459) | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dixie Health Holdings LLC | Hurricane | Hurricane, UT | — | 487 | 1,978 | 98 | 487 | 2,076 | 2,563 | (639) | 1978 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Memorial Health Holdings LLC | Pocatello | Pocatello, ID | — | 537 | 2,138 | 698 | 537 | 2,836 | 3,373 | (1,292) | 2007 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bogardus Health Holdings LLC | Whittier East | Whittier, CA | — | 1,425 | 5,307 | 1,079 | 1,425 | 6,386 | 7,811 | (2,674) | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Dora Health Holdings LLC | Ukiah | Ukiah, CA | — | 297 | 2,087 | 1,621 | 297 | 3,708 | 4,005 | (2,261) | 2013 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Silverada Health Holdings LLC | Rosewood | Reno, NV | — | 1,012 | 3,282 | 103 | 1,012 | 3,385 | 4,397 | (981) | 1970 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Orem Health Holdings LLC | Orem | Orem, UT | — | 1,689 | 3,896 | 3,235 | 1,689 | 7,131 | 8,820 | (3,509) | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wisteria Health Holdings | Wisteria | Abilene, TX | 746 | 9,903 | 290 | 746 | 10,193 | 10,939 | (2,641) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Renee Avenue Health Holdings LLC | Monte Vista | Pocatello, ID | — | 180 | 2,481 | 966 | 180 | 3,447 | 3,627 | (1,516) | 2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stillhouse Health Holdings LLC | Stillhouse | Paris, TX | — | 129 | 7,139 | 6 | 129 | 7,145 | 7,274 | (1,331) | 2009 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fig Street Health Holdings LLC | Palomar Vista | Escondido, CA | — | 329 | 2,653 | 1,094 | 329 | 3,747 | 4,076 | (1,820) | 2007 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lowell Lake Health Holdings LLC | Owyhee | Owyhee, ID | — | 49 | 1,554 | 29 | 49 | 1,583 | 1,632 | (387) | 1990 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Queensway Health Holdings LLC | Atlantic Memorial | Long Beach, CA | — | 999 | 4,237 | 2,331 | 999 | 6,568 | 7,567 | (3,106) | 2008 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long Beach Health Associates LLC | Shoreline | Long Beach, CA | — | 1,285 | 2,343 | 2,172 | 1,285 | 4,515 | 5,800 | (2,258) | 2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kings Court Health Holdings LLC | Richland Hills | Ft. Worth, TX | — | 193 | 2,311 | 318 | 193 | 2,629 | 2,822 | (789) | 1965 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 51st Avenue Health Holdings LLC | Legacy | Amarillo, TX | — | 340 | 3,925 | 32 | 340 | 3,957 | 4,297 | (1,124) | 1970 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ives Health Holdings LLC | San Marcos | San Marcos, TX | — | 371 | 2,951 | 274 | 371 | 3,225 | 3,596 | (882) | 1972 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Guadalupe Health Holdings LLC | The Courtyard (Victoria East) | Victoria, TX | — | 80 | 2,391 | 15 | 80 | 2,406 | 2,486 | (532) | 2013 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-31
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(dollars in thousands)
| Willits Health Holdings LLC | Northbrook | Willits, CA | — | 490 | 1,231 | 500 | 490 | 1,731 | 2,221 | (810 | ) | 2011 | 2008 | |||||||||||||||||||||||||||
| Lufkin Health Holdings LLC | Southland | Lufkin, TX | — | 467 | 4,644 | 782 | 467 | 5,426 | 5,893 | (1,476 | ) | 1988 | 2009 | |||||||||||||||||||||||||||
| Lowell Health Holdings LLC | Littleton | Littleton, CO | — | 217 | 856 | 1,735 | 217 | 2,591 | 2,808 | (1,276 | ) | 2012 | 2009 | |||||||||||||||||||||||||||
| Jefferson Ralston Holdings LLC | Arvada | Arvada, CO | — | 280 | 1,230 | 834 | 280 | 2,064 | 2,344 | (835 | ) | 2012 | 2009 | |||||||||||||||||||||||||||
| Lafayette Health Holdings LLC | Julia Temple | Englewood, CO | — | 1,607 | 4,222 | 6,195 | 1,607 | 10,417 | 12,024 | (4,507 | ) | 2012 | 2009 | |||||||||||||||||||||||||||
| Hillendahl Health Holdings LLC | Golden Acres | Dallas, TX | — | 2,133 | 11,977 | 1,421 | 2,133 | 13,398 | 15,531 | (5,005 | ) | 1984 | 2009 | |||||||||||||||||||||||||||
| Price Health Holdings LLC | Pinnacle | Price, UT | — | 193 | 2,209 | 849 | 193 | 3,058 | 3,251 | (994 | ) | 2012 | 2009 | |||||||||||||||||||||||||||
| Silver Lake Health Holdings LLC | Provo | Provo, UT | — | 2,051 | 8,362 | 2,011 | 2,051 | 10,373 | 12,424 | (2,903 | ) | 2011 | 2009 | |||||||||||||||||||||||||||
| Jordan Health Properties LLC | Copper Ridge | West Jordan, UT | — | 2,671 | 4,244 | 1,507 | 2,671 | 5,751 | 8,422 | (1,627 | ) | 2013 | 2009 | |||||||||||||||||||||||||||
| Regal Road Health Holdings LLC | Sunview | Youngstown, AZ | — | 767 | 4,648 | 729 | 767 | 5,377 | 6,144 | (1,875 | ) | 2012 | 2009 | |||||||||||||||||||||||||||
| Paredes Health Holdings LLC | Alta Vista | Brownsville, TX | — | 373 | 1,354 | 190 | 373 | 1,544 | 1,917 | (422 | ) | 1969 | 2009 | |||||||||||||||||||||||||||
| Expressway Health Holdings LLC | Veranda | Harlingen, TX | — | 90 | 675 | 430 | 90 | 1,105 | 1,195 | (407 | ) | 2011 | 2009 | |||||||||||||||||||||||||||
| Rio Grande Health Holdings LLC | Grand Terrace | McAllen, TX | — | 642 | 1,085 | 870 | 642 | 1,955 | 2,597 | (828 | ) | 2012 | 2009 | |||||||||||||||||||||||||||
| Fifth East Holdings LLC | Paramount | Salt Lake City, UT | — | 345 | 2,464 | 1,065 | 345 | 3,529 | 3,874 | (1,227 | ) | 2011 | 2009 | |||||||||||||||||||||||||||
| Emmett Healthcare Holdings LLC | River's Edge | Emmet, ID | — | 591 | 2,383 | 69 | 591 | 2,452 | 3,043 | (726 | ) | 1972 | 2010 | |||||||||||||||||||||||||||
| Burley Healthcare Holdings LLC | Parke View | Burley, ID | — | 250 | 4,004 | 424 | 250 | 4,428 | 4,678 | (1,451 | ) | 2011 | 2010 | |||||||||||||||||||||||||||
| Josey Ranch Healthcare Holdings LLC | Heritage Gardens | Carrollton, TX | — | 1,382 | 2,293 | 478 | 1,382 | 2,771 | 4,153 | (842 | ) | 1996 | 2010 | |||||||||||||||||||||||||||
| Everglades Health Holdings LLC | Victoria Ventura | Ventura, CA | — | 1,847 | 5,377 | 682 | 1,847 | 6,059 | 7,906 | (1,541 | ) | 1990 | 2011 | |||||||||||||||||||||||||||
| Irving Health Holdings LLC | Beatrice Manor | Beatrice, NE | — | 60 | 2,931 | 245 | 60 | 3,176 | 3,236 | (950 | ) | 2011 | 2011 | |||||||||||||||||||||||||||
| Falls City Health Holdings LLC | Careage Estates of Falls City | Falls City, NE | — | 170 | 2,141 | 82 | 170 | 2,223 | 2,393 | (604 | ) | 1972 | 2011 | |||||||||||||||||||||||||||
| Gillette Park Health Holdings LLC | Careage of Cherokee | Cherokee, IA | — | 163 | 1,491 | 12 | 163 | 1,503 | 1,666 | (515 | ) | 1967 | 2011 | |||||||||||||||||||||||||||
| Gazebo Park Health Holdings LLC | Careage of Clarion | Clarion, IA | — | 80 | 2,541 | 97 | 80 | 2,638 | 2,718 | (941 | ) | 1978 | 2011 | |||||||||||||||||||||||||||
| Oleson Park Health Holdings LLC | Careage of Ft. Dodge | Ft. Dodge, IA | — | 90 | 2,341 | 759 | 90 | 3,100 | 3,190 | (1,358 | ) | 2012 | 2011 | |||||||||||||||||||||||||||
| Arapahoe Health Holdings LLC | Oceanview | Texas City, TX | — | 158 | 4,810 | 759 | 128 | 5,599 | 5,727 | (1,811 | ) | 2012 | 2011 | |||||||||||||||||||||||||||
| Dixie Health Holdings LLC | Hurricane | Hurricane, UT | — | 487 | 1,978 | 98 | 487 | 2,076 | 2,563 | (468 | ) | 1978 | 2011 | |||||||||||||||||||||||||||
| Memorial Health Holdings LLC | Pocatello | Pocatello, ID | — | 537 | 2,138 | 698 | 537 | 2,836 | 3,373 | (968 | ) | 2007 | 2011 | |||||||||||||||||||||||||||
| Bogardus Health Holdings LLC | Whittier East | Whittier, CA | — | 1,425 | 5,307 | 1,079 | 1,425 | 6,386 | 7,811 | (2,042 | ) | 2011 | 2011 | |||||||||||||||||||||||||||
| South Dora Health Holdings LLC | Ukiah | Ukiah, CA | — | 297 | 2,087 | 1,621 | 297 | 3,708 | 4,005 | (2,011 | ) | 2013 | 2011 | |||||||||||||||||||||||||||
| Silverada Health Holdings LLC | Rosewood | Reno, NV | — | 1,012 | 3,282 | 103 | 1,012 | 3,385 | 4,397 | (714 | ) | 1970 | 2011 | |||||||||||||||||||||||||||
| Orem Health Holdings LLC | Orem | Orem, UT | — | 1,689 | 3,896 | 3,235 | 1,689 | 7,131 | 8,820 | (2,655 | ) | 2011 | 2011 | |||||||||||||||||||||||||||
| Renee Avenue Health Holdings LLC | Monte Vista | Pocatello, ID | — | 180 | 2,481 | 966 | 180 | 3,447 | 3,627 | (1,069 | ) | 2013 | 2012 | |||||||||||||||||||||||||||
| Stillhouse Health Holdings LLC | Stillhouse | Paris, TX | — | 129 | 7,139 | 6 | 129 | 7,145 | 7,274 | (954 | ) | 2009 | 2012 | |||||||||||||||||||||||||||
| Fig Street Health Holdings LLC | Palomar Vista | Escondido, CA | — | 329 | 2,653 | 1,094 | 329 | 3,747 | 4,076 | (1,530 | ) | 2007 | 2012 | |||||||||||||||||||||||||||
| Lowell Lake Health Holdings LLC | Owyhee | Owyhee, ID | — | 49 | 1,554 | 29 | 49 | 1,583 | 1,632 | (275 | ) | 1990 | 2012 | |||||||||||||||||||||||||||
| Queensway Health Holdings LLC | Atlantic Memorial | Long Beach, CA | — | 999 | 4,237 | 2,331 | 999 | 6,568 | 7,567 | (2,771 | ) | 2008 | 2012 | |||||||||||||||||||||||||||
| Long Beach Health Associates LLC | Shoreline | Long Beach, CA | — | 1,285 | 2,343 | 2,172 | 1,285 | 4,515 | 5,800 | (1,786 | ) | 2013 | 2012 | |||||||||||||||||||||||||||
| 49th Street Health Holdings LLC | Omaha | Omaha, NE | — | 129 | 2,418 | 24 | 129 | 2,442 | 2,571 | (793) | 1960 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Willows Health Holdings LLC | Cascade Vista | Redmond, WA | — | 1,388 | 2,982 | 202 | 1,388 | 3,184 | 4,572 | (1,134) | 1970 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tulalip Bay Health Holdings LLC | Mountain View | Marysville, WA | — | 1,722 | 2,642 | (980) | 742 | 2,642 | 3,384 | (837) | 1966 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sky Holdings AZ LLC | Bella Vita Health and Rehabilitation Center | Glendale, AZ | — | 228 | 1,124 | 1,380 | 228 | 2,504 | 2,731 | (1,927) | 2004 | 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lemon River Holdings LLC | Plymouth Tower | Riverside, CA | — | 152 | 357 | 1,493 | 152 | 1,850 | 2,002 | (1,403) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Bethany Rehabilitation Center | Lakewood, CO | — | 1,668 | 15,375 | 56 | 1,668 | 15,431 | 17,099 | (3,058) | 1989 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Mira Vista Care Center | Mount Vernon, WA | — | 1,601 | 7,425 | — | 1,601 | 7,425 | 9,026 | (1,439) | 1989 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Shoreline Health and Rehabilitation Center | Shoreline, WA | — | 1,462 | 5,034 | — | 1,462 | 5,034 | 6,496 | (954) | 1987 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Shamrock Nursing and Rehabilitation Center | Dublin, GA | — | 251 | 7,855 | — | 251 | 7,855 | 8,106 | (1,473) | 2010 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Premier Estates of Cincinnati-Riverview | Cincinnati, OH | — | 833 | 18,086 | 792 | 833 | 18,878 | 19,711 | (3,408) | 1992 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | West Cove Care & Rehabilitation Center | Toledo, OH | — | 93 | 10,365 | 88 | 93 | 10,453 | 10,546 | (1,879) | 2007 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Casa de Paz | Sioux City, IA | — | 119 | 7,727 | — | 119 | 7,727 | 7,846 | (1,336) | 1974 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Denison Care Center | Denison, IA | — | 96 | 2,784 | — | 96 | 2,784 | 2,880 | (481) | 2015 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Garden View Care Center | Shenandoah, IA | — | 105 | 3,179 | — | 105 | 3,179 | 3,284 | (550) | 2013 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Grandview Health Care Center | Dayton, IA | — | 39 | 1,167 | — | 39 | 1,167 | 1,206 | (202) | 2014 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Grundy Care Center | Grundy Center, IA | — | 65 | 1,935 | — | 65 | 1,935 | 2,000 | (335) | 2011 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Iowa City Rehab and Health Care Center | Iowa City, IA | — | 522 | 5,690 | — | 522 | 5,690 | 6,212 | (984) | 2014 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Lenox Care Center | Lenox, IA | — | 31 | 1,915 | — | 31 | 1,915 | 1,946 | (331) | 2012 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Osage | Osage, IA | — | 126 | 2,255 | — | 126 | 2,255 | 2,381 | (390) | 2014 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Pleasant Acres Care Center | Hull, IA | — | 189 | 2,544 | — | 189 | 2,544 | 2,733 | (440) | 2014 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Cedar Falls Health Care Center | Cedar Falls, IA | — | 324 | 4,366 | — | 324 | 4,366 | 4,690 | (737) | 2015 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Premier Estates of Highlands | Norwood, OH | — | 364 | 2,199 | 623 | 143 | 943 | 1,086 | (22) | 2012 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Shaw Mountain at Cascadia | Boise, ID | — | 1,801 | 6,572 | 395 | 1,801 | 6,967 | 8,768 | (1,316) | 1989 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Oaks | Petaluma, CA | — | 3,646 | 2,873 | 110 | 3,646 | 2,983 | 6,629 | (519) | 2015 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Arbor Nursing Center | Lodi, CA | — | 768 | 10,712 | — | 768 | 10,712 | 11,480 | (1,718) | 1982 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Broadmoor Medical Lodge | Rockwall, TX | — | 1,232 | 22,152 | — | 1,232 | 22,152 | 23,384 | (3,370) | 1984 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Decatur Medical Lodge | Decatur, TX | — | 990 | 24,909 | — | 990 | 24,909 | 25,899 | (3,788) | 2013 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Royse City Medical Lodge | Royse City, TX | — | 606 | 14,660 | — | 606 | 14,660 | 15,266 | (2,230) | 2009 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Saline Care Nursing & Rehabilitation Center | Harrisburg, IL | — | 1,022 | 5,713 | — | 1,022 | 5,713 | 6,735 | (833) | 2009 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Carrier Mills Nursing & Rehabilitation Center | Carrier Mills, IL | — | 775 | 8,377 | — | 775 | 8,377 | 9,152 | (1,222) | 1968 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | StoneBridge Nursing & Rehabilitation Center | Benton, IL | — | 439 | 3,475 | — | 439 | 3,475 | 3,914 | (507) | 2014 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | DuQuoin Nursing & Rehabilitation Center | DuQuoin, IL | — | 511 | 3,662 | — | 511 | 3,662 | 4,173 | (534) | 2014 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-32
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(dollars in thousands)
| Kings Court Health Holdings LLC | Richland Hills | Ft. Worth, TX | — | 193 | 2,311 | 318 | 193 | 2,629 | 2,822 | (558 | ) | 1965 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 51st Avenue Health Holdings LLC | Legacy | Amarillo, TX | — | 340 | 3,925 | 32 | 340 | 3,957 | 4,297 | (781 | ) | 1970 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ives Health Holdings LLC | San Marcos | San Marcos, TX | — | 371 | 2,951 | 274 | 371 | 3,225 | 3,596 | (605 | ) | 1972 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Guadalupe Health Holdings LLC | The Courtyard (Victoria East) | Victoria, TX | — | 80 | 2,391 | 15 | 80 | 2,406 | 2,486 | (368 | ) | 2013 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 49th Street Health Holdings LLC | Omaha | Omaha, NE | — | 129 | 2,418 | 24 | 129 | 2,442 | 2,571 | (547 | ) | 1960 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Willows Health Holdings LLC | Cascade Vista | Redmond, WA | — | 1,388 | 2,982 | 202 | 1,388 | 3,184 | 4,572 | (796 | ) | 1970 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tulalip Bay Health Holdings LLC | Mountain View | Marysville, WA | — | 1,722 | 2,642 | (980 | ) | 742 | 2,642 | 3,384 | (572 | ) | 1966 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sky Holdings AZ LLC | Bella Vita Health and Rehabilitation Center | Glendale, AZ | — | 228 | 1,124 | 1,380 | 228 | 2,504 | 2,731 | (1,613 | ) | 2004 | 2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lemon River Holdings LLC | Plymouth Tower | Riverside, CA | — | 152 | 357 | 1,493 | 152 | 1,850 | 2,002 | (1,040 | ) | 2012 | 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Bethany Rehabilitation Center | Lakewood, CO | — | 1,668 | 15,375 | 56 | 1,668 | 15,431 | 17,099 | (1,898 | ) | 1989 | 2015 | CTR Partnership, L.P. | Pinckneyville Nursing & Rehabilitation Center | Pinckneyville, IL | — | 406 | 3,411 | — | 406 | 3,411 | 3,817 | (497) | 2014 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Mira Vista Care Center | Mount Vernon, WA | — | 1,601 | 7,425 | — | 1,601 | 7,425 | 9,026 | (882 | ) | 1989 | 2015 | CTR Partnership, L.P. | Wellspring Health and Rehabilitation of Cascadia | Nampa, ID | — | 775 | 5,044 | 121 | 775 | 5,165 | 5,940 | (715) | 2011 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Shoreline Health and Rehabilitation Center | Shoreline, WA | — | 1,462 | 5,034 | — | 1,462 | 5,034 | 6,496 | (577 | ) | 1987 | 2015 | CTR Partnership, L.P. | The Rio at Fox Hollow | Brownsville, TX | — | 1,178 | 12,059 | — | 1,178 | 12,059 | 13,237 | (1,683) | 2016 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Shamrock Nursing and Rehabilitation Center | Dublin, GA | — | 251 | 7,855 | — | 251 | 7,855 | 8,106 | (884 | ) | 2010 | 2015 | CTR Partnership, L.P. | The Rio at Cabezon | Albuquerque, NM | — | 2,055 | 9,749 | — | 2,055 | 9,749 | 11,804 | (1,361) | 2016 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | BeaverCreek Health and Rehab | Beavercreek, OH | — | 892 | 17,159 | 13 | 892 | 17,172 | 18,064 | (1,824 | ) | 2014 | 2015 | CTR Partnership, L.P. | Eldorado Rehab & Healthcare | Eldorado, IL | — | 940 | 2,093 | — | 940 | 2,093 | 3,033 | (288) | 1993 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Premier Estates of Cincinnati-Riverview | Cincinnati, OH | — | 833 | 18,086 | 192 | 833 | 18,278 | 19,111 | (1,947 | ) | 1992 | 2015 | CTR Partnership, L.P. | Secora Health and Rehabilitation of Cascadia | Portland, OR | — | 1,481 | 2,216 | 110 | 1,481 | 2,326 | 3,807 | (305) | 2012 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Englewood Health and Rehab | Englewood, OH | — | 1,014 | 18,541 | 88 | 1,014 | 18,629 | 19,643 | (1,991 | ) | 1962 | 2015 | CTR Partnership, L.P. | Mountain Valley | Kellogg, ID | — | 916 | 7,874 | — | 916 | 7,874 | 8,790 | (1,050) | 1971 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Portsmouth Health and Rehab | Portsmouth, OH | — | 282 | 9,726 | 192 | 282 | 9,918 | 10,200 | (1,067 | ) | 2008 | 2015 | CTR Partnership, L.P. | Caldwell Care | Caldwell, ID | — | 906 | 7,020 | 516 | 906 | 7,536 | 8,442 | (936) | 1947 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | West Cove Care & Rehabilitation Center | Toledo, OH | — | 93 | 10,365 | — | 93 | 10,365 | 10,458 | (1,101 | ) | 2007 | 2015 | CTR Partnership, L.P. | Canyon West | Caldwell, ID | — | 312 | 10,410 | 461 | 312 | 10,871 | 11,183 | (1,388) | 1969 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | BellBrook Health and Rehab | Bellbrook, OH | — | 214 | 2,573 | 25 | 214 | 2,598 | 2,812 | (275 | ) | 2003 | 2015 | CTR Partnership, L.P. | Lewiston Health and Rehabilitation | Lewiston, ID | — | 625 | 12,087 | 200 | 625 | 12,287 | 12,912 | (1,586) | 1964 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Xenia Health and Rehab | Xenia, OH | — | 205 | 3,564 | 23 | 205 | 3,587 | 3,792 | (380 | ) | 1981 | 2015 | CTR Partnership, L.P. | The Orchards | Nampa, ID | — | 785 | 8,923 | 116 | 785 | 9,039 | 9,824 | (1,171) | 1958 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Jamestown Place Health and Rehab | Jamestown, OH | — | 266 | 4,725 | 127 | 266 | 4,852 | 5,118 | (522 | ) | 1967 | 2015 | CTR Partnership, L.P. | Weiser Care | Weiser, ID | — | 80 | 4,419 | 30 | 80 | 4,449 | 4,529 | (580) | 1964 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Casa de Paz | Sioux City, IA | — | 119 | 7,727 | — | 119 | 7,727 | 7,846 | (757 | ) | 1974 | 2016 | CTR Partnership, L.P. | Aspen Park | Moscow, ID | — | 698 | 5,092 | 274 | 698 | 5,366 | 6,064 | (729) | 1965 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Denison Care Center | Denison, IA | — | 96 | 2,784 | — | 96 | 2,784 | 2,880 | (273 | ) | 2015 | 2016 | CTR Partnership, L.P. | Ridgmar Medical Lodge | Fort Worth, TX | — | 681 | 6,587 | 1,256 | 681 | 7,843 | 8,524 | (1,198) | 2006 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Garden View Care Center | Shenandoah, IA | — | 105 | 3,179 | — | 105 | 3,179 | 3,284 | (311 | ) | 2013 | 2016 | CTR Partnership, L.P. | Mansfield Medical Lodge | Mansfield, TX | — | 607 | 4,801 | 1,073 | 607 | 5,874 | 6,481 | (889) | 2006 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Grandview Health Care Center | Dayton, IA | — | 39 | 1,167 | — | 39 | 1,167 | 1,206 | (114 | ) | 2014 | 2016 | CTR Partnership, L.P. | Grapevine Medical Lodge | Grapevine, TX | — | 1,602 | 4,536 | 891 | 1,602 | 5,427 | 7,029 | (832) | 2006 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Grundy Care Center | Grundy Center, IA | — | 65 | 1,935 | — | 65 | 1,935 | 2,000 | (189 | ) | 2011 | 2016 | CTR Partnership, L.P. | The Oaks at Lakewood | Tacoma, WA | — | 1,001 | 1,779 | — | 1,001 | 1,779 | 2,780 | (233) | 1989 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Iowa City Rehab and Health Care Center | Iowa City, IA | — | 522 | 5,690 | — | 522 | 5,690 | 6,212 | (557 | ) | 2014 | 2016 | CTR Partnership, L.P. | The Oaks at Timberline | Vancouver, WA | — | 446 | 869 | — | 446 | 869 | 1,315 | (114) | 1972 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Lenox Care Center | Lenox, IA | — | 31 | 1,915 | — | 31 | 1,915 | 1,946 | (188 | ) | 2012 | 2016 | CTR Partnership, L.P. | Providence Waterman Nursing Center | San Bernardino, CA | — | 3,831 | 19,791 | — | 3,831 | 19,791 | 23,622 | (2,598) | 1967 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Osage | Osage, IA | — | 126 | 2,255 | — | 126 | 2,255 | 2,381 | (221 | ) | 2014 | 2016 | CTR Partnership, L.P. | Providence Orange Tree | Riverside, CA | — | 2,897 | 14,700 | 345 | 2,897 | 15,045 | 17,942 | (1,975) | 1969 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Pleasant Acres Care Center | Hull, IA | — | 189 | 2,544 | — | 189 | 2,544 | 2,733 | (249 | ) | 2014 | 2016 | CTR Partnership, L.P. | Providence Ontario | Ontario, CA | — | 4,204 | 21,880 | — | 4,204 | 21,880 | 26,084 | (2,872) | 1980 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Cedar Falls Health Care Center | Cedar Falls, IA | — | 324 | 4,366 | — | 324 | 4,366 | 4,690 | (409 | ) | 2015 | 2016 | CTR Partnership, L.P. | Greenville Nursing & Rehabilitation Center | Greenville, IL | — | 188 | 3,972 | — | 188 | 3,972 | 4,160 | (603) | 1973 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Premier Estates of Highlands | Norwood, OH | — | 364 | 2,199 | 282 | 364 | 2,481 | 2,845 | (217 | ) | 2012 | 2016 | CTR Partnership, L.P. | Copper Ridge Health and Rehabilitation Center | Butte, MT | — | 220 | 4,974 | 39 | 220 | 5,013 | 5,233 | (675) | 2010 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | Prairie Heights Healthcare Center | Aberdeen, SD | — | 1,372 | 7,491 | — | 1,372 | 7,491 | 8,863 | (925) | 1965 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | The Meadows on University | Fargo, ND | — | 989 | 3,275 | — | 989 | 3,275 | 4,264 | (378) | 1966 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | The Suites - Parker | Parker, CO | — | 1,178 | 17,857 | — | 1,178 | 17,857 | 19,035 | (1,865) | 2012 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | Huntington Park Nursing Center | Huntington Park, CA | — | 3,131 | 8,876 | 299 | 3,131 | 9,175 | 12,306 | (976) | 1955 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | Shoreline Care Center | Oxnard, CA | — | 1,699 | 9,004 | — | 1,699 | 9,004 | 10,703 | (905) | 1962 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | Downey Care Center | Downey, CA | — | 2,502 | 6,141 | — | 2,502 | 6,141 | 8,643 | (619) | 1967 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | Courtyard Healthcare Center | Davis, CA | — | 2,351 | 9,256 | — | 2,351 | 9,256 | 11,607 | (949) | 1969 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Alpine Skilled Nursing and Rehabilitation | Ruston, LA | — | 2,688 | 23,825 | — | 2,688 | 23,825 | 26,513 | (2,357) | 2014 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | The Bradford Skilled Nursing and Rehabilitation | Shreveport, LA | — | 3,758 | 21,325 | 17 | 3,758 | 21,342 | 25,100 | (2,127) | 1980 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-33
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(dollars in thousands)
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Colonial Oaks Skilled Nursing and Rehabilitation | Bossier City, LA | — | 1,635 | 21,180 | — | 1,635 | 21,180 | 22,815 | (2,045) | 2013 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | The Guest House Skilled Nursing and Rehabilitation | Shreveport, LA | — | 3,437 | 20,889 | 2,845 | 3,437 | 23,734 | 27,171 | (2,160) | 2006 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Pilgrim Manor Skilled Nursing and Rehabilitation | Bossier City, LA | — | 2,979 | 24,617 | 2,100 | 2,979 | 26,717 | 29,696 | (2,407) | 2008 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Shreveport Manor Skilled Nursing and Rehabilitation | Shreveport, LA | — | 676 | 10,238 | 361 | 676 | 10,599 | 11,275 | (1,058) | 2008 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Booker T. Washington Skilled Nursing and Rehabilitation | Shreveport, LA | — | 2,452 | 9,148 | 113 | 2,452 | 9,261 | 11,713 | (963) | 2013 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Legacy West Rehabilitation and Healthcare | Corsicana, TX | — | 120 | 6,682 | 436 | 120 | 7,118 | 7,238 | (782) | 2002 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Legacy at Jacksonville | Jacksonville, TX | — | 173 | 7,481 | 127 | 173 | 7,608 | 7,781 | (806) | 2006 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Gulf Coast Buyer 1 LLC | Pecan Tree Rehabilitation and Healthcare | Gainesville, TX | — | 219 | 10,097 | 255 | 219 | 10,352 | 10,571 | (1,064) | 1990 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lakewest SNF Realty, LLC | Lakewest SNF Realty, LLC | Lakewest Rehabilitation and Skilled Care | Dallas, TX | — | — | 6,905 | — | — | 6,905 | 6,905 | (708) | 2011 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Shaw Mountain at Cascadia | Boise, ID | — | 1,801 | 6,572 | 395 | 1,801 | 6,967 | 8,768 | (705 | ) | 1989 | 2016 | CTR Partnership, L.P. | Cascadia of Nampa | Nampa, ID | — | 880 | 14,117 | — | 880 | 14,117 | 14,997 | (1,344) | 2017 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Oaks | Petaluma, CA | — | 3,646 | 2,873 | 110 | 3,646 | 2,983 | 6,629 | (270 | ) | 2015 | 2016 | CTR Partnership, L.P. | Valley Skilled Nursing | Modesto, CA | — | 798 | 7,671 | — | 798 | 7,671 | 8,469 | (647) | 2016 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Arbor Nursing Center | Lodi, CA | — | 768 | 10,712 | — | 768 | 10,712 | 11,480 | (915 | ) | 1982 | 2016 | CTR Partnership, L.P. | Cascadia of Boise | Boise, ID | — | 1,597 | 15,692 | — | 1,597 | 15,692 | 17,289 | (1,235) | 2018 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Broadmoor Medical Lodge | Rockwall, TX | — | 1,232 | 22,152 | — | 1,232 | 22,152 | 23,384 | (1,706 | ) | 1984 | 2016 | CTR Partnership, L.P. | Cooney Healthcare and Rehabilitation | Helena, MT | — | 867 | 7,431 | 20 | 867 | 7,451 | 8,318 | (458) | 1984 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Decatur Medical Lodge | Decatur, TX | — | 990 | 24,909 | — | 990 | 24,909 | 25,899 | (1,920 | ) | 2013 | 2016 | CTR Partnership, L.P. | Elkhorn Healthcare and Rehabilitation | Clancy, MT | — | 183 | 7,380 | 430 | 183 | 7,810 | 7,993 | (465) | 1960 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Royse City Medical Lodge | Royse City, TX | — | 606 | 14,660 | — | 606 | 14,660 | 15,266 | (1,130 | ) | 2009 | 2016 | CTR Partnership, L.P. | Beacon Harbor Healthcare and Rehabilitation | Rockwall, TX | — | 1,295 | 17,069 | — | 1,295 | 17,069 | 18,364 | (989) | 1996 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Saline Care Nursing & Rehabilitation Center | Harrisburg, IL | — | 1,022 | 5,713 | — | 1,022 | 5,713 | 6,735 | (405 | ) | 2009 | 2017 | CTR Partnership, L.P. | Pleasant Manor Healthcare and Rehabilitation | Waxahachie, TX | — | 629 | 7,433 | — | 629 | 7,433 | 8,062 | (434) | 1972 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Carrier Mills Nursing & Rehabilitation Center | Carrier Mills, IL | — | 775 | 8,377 | — | 775 | 8,377 | 9,152 | (593 | ) | 1968 | 2017 | CTR Partnership, L.P. | Rowlett Health and Rehabilitation Center | Rowlett, TX | — | 1,036 | 10,516 | — | 1,036 | 10,516 | 11,552 | (606) | 1990 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 160 North Patterson Avenue, LLC | 160 North Patterson Avenue, LLC | Buena Vista Care Center | Goleta, CA | — | 7,987 | 7,237 | — | 7,987 | 7,237 | 15,224 | (351) | 1967 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | StoneBridge Nursing & Rehabilitation Center | Benton, IL | — | 439 | 3,475 | — | 439 | 3,475 | 3,914 | (246 | ) | 2014 | 2017 | CTR Partnership, L.P. | El Centro Post-Acute Care | El Centro, CA | — | 1,283 | 8,133 | 135 | 1,283 | 8,268 | 9,551 | (367) | 1962 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | DuQuoin Nursing & Rehabilitation Center | DuQuoin, IL | — | 511 | 3,662 | — | 511 | 3,662 | 4,173 | (259 | ) | 2014 | 2017 | CTR Partnership, L.P. | Sedona Trace Health and Wellness | Austin, TX | — | 3,282 | 12,763 | — | 3,282 | 12,763 | 16,045 | (507) | 2017 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Pinckneyville Nursing & Rehabilitation Center | Pinckneyville, IL | — | 406 | 3,411 | — | 406 | 3,411 | 3,817 | (242 | ) | 2014 | 2017 | CTR Partnership, L.P. | Cedar Pointe Health and Wellness Suites | Cedar Park, TX | — | 3,325 | 11,738 | — | 3,325 | 11,738 | 15,063 | (461) | 2017 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Wellspring Health and Rehabilitation of Cascadia | Nampa, ID | — | 774 | 5,044 | — | 774 | 5,044 | 5,818 | (336 | ) | 2011 | 2017 | CTR Partnership, L.P. | Ennis Care Center | Ennis,TX | — | 568 | 8,055 | — | 568 | 8,055 | 8,623 | (201) | 1982 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Rio at Fox Hollow | Brownsville, TX | — | 1,178 | 12,059 | — | 1,178 | 12,059 | 13,237 | (779 | ) | 2016 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Rio at Cabezon | Albuquerque, NM | — | 2,055 | 9,749 | — | 2,055 | 9,749 | 11,804 | (630 | ) | 2016 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Eldorado Rehab & Healthcare | Eldorado, IL | — | 940 | 2,093 | — | 940 | 2,093 | 3,033 | (131 | ) | 1993 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Secora Health and Rehabilitation of Cascadia | Portland, OR | — | 1,481 | 2,216 | — | 1,481 | 2,216 | 3,697 | (139 | ) | 2012 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Mountain Valley | Kellogg, ID | — | 916 | 7,874 | — | 916 | 7,874 | 8,790 | (459 | ) | 1971 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Caldwell Care | Caldwell, ID | — | 906 | 7,020 | — | 906 | 7,020 | 7,926 | (410 | ) | 1947 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Canyon West | Caldwell, ID | — | 312 | 10,410 | — | 312 | 10,410 | 10,722 | (607 | ) | 1969 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Lewiston Health and Rehabilitation | Lewiston, ID | — | 625 | 12,087 | — | 625 | 12,087 | 12,712 | (680 | ) | 1964 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Orchards | Nampa, ID | — | 785 | 8,923 | — | 785 | 8,923 | 9,708 | (502 | ) | 1958 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Weiser Care | Weiser, ID | — | 80 | 4,419 | — | 80 | 4,419 | 4,499 | (249 | ) | 1964 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Aspen Park | Moscow, ID | — | 698 | 5,092 | 274 | 698 | 5,366 | 6,064 | (292 | ) | 1965 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Ridgmar Medical Lodge | Fort Worth, TX | — | 681 | 6,587 | 1,256 | 681 | 7,843 | 8,524 | (453 | ) | 2006 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Mansfield Medical Lodge | Mansfield, TX | — | 607 | 4,801 | 1,171 | 607 | 5,972 | 6,579 | (325 | ) | 2006 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Grapevine Medical Lodge | Grapevine, TX | — | 1,602 | 4,536 | 891 | 1,602 | 5,427 | 7,029 | (313 | ) | 2006 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Brookfield Health and Rehab | Battle Ground, WA | — | 320 | 500 | — | 320 | 500 | 820 | (29 | ) | 2012 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Oaks at Forest Bay | Seattle, WA | — | 6,347 | 815 | — | 6,347 | 815 | 7,162 | (46 | ) | 1997 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Oaks at Lakewood | Tacoma, WA | — | 1,000 | 1,779 | — | 1,000 | 1,779 | 2,779 | (100 | ) | 1989 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Oaks at Timberline | Vancouver, WA | — | 445 | 869 | — | 445 | 869 | 1,314 | (49 | ) | 1972 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Providence Waterman Nursing Center | San Bernardino, CA | — | 3,831 | 19,791 | — | 3,831 | 19,791 | 23,622 | (1,113 | ) | 1967 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Providence Orange Tree | Riverside, CA | — | 2,897 | 14,700 | — | 2,897 | 14,700 | 17,597 | (827 | ) | 1969 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 157,842 | 947,010 | 97,380 | 156,008 | 1,044,124 | 1,200,131 | (246,446) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Multi-Service Campus Properties: | Multi-Service Campus Properties: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ensign Southland LLC | Ensign Southland LLC | Southland Care | Norwalk, CA | — | 966 | 5,082 | 2,213 | 966 | 7,295 | 8,261 | (5,864) | 2011 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mission CCRC LLC | Mission CCRC LLC | St. Joseph's Villa | Salt Lake City, UT | — | 1,962 | 11,035 | 464 | 1,962 | 11,499 | 13,461 | (3,932) | 1994 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wayne Health Holdings LLC | Wayne Health Holdings LLC | Careage of Wayne | Wayne, NE | — | 130 | 3,061 | 122 | 130 | 3,183 | 3,313 | (1,202) | 1978 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4th Street Holdings LLC | 4th Street Holdings LLC | West Bend Care Center | West Bend, IA | — | 180 | 3,352 | — | 180 | 3,352 | 3,532 | (1,199) | 2006 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-34
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(dollars in thousands)
| Big Sioux River Health Holdings LLC | Big Sioux River Health Holdings LLC | Hillcrest Health | Hawarden, IA | — | 110 | 3,522 | 75 | 110 | 3,597 | 3,707 | (1,211) | 1974 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prairie Health Holdings LLC | Prairie Health Holdings LLC | Colonial Manor of Randolph | Randolph, NE | — | 130 | 1,571 | 22 | 130 | 1,593 | 1,723 | (918) | 2011 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Salmon River Health Holdings LLC | Salmon River Health Holdings LLC | Discovery Care Center | Salmon, ID | — | 168 | 2,496 | — | 168 | 2,496 | 2,664 | (650) | 2012 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Providence Ontario | Ontario, CA | — | 4,204 | 21,880 | — | 4,204 | 21,880 | 26,084 | (1,231 | ) | 1980 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Greenville Nursing & Rehabilitation Center | Greenville, IL | — | 188 | 3,972 | — | 188 | 3,972 | 4,160 | (247 | ) | 1973 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Copper Ridge Health and Rehabilitation Center | Butte, MT | — | 220 | 4,974 | — | 220 | 4,974 | 5,194 | (262 | ) | 2010 | 2018 | CTR Partnership, L.P. | Liberty Nursing Center of Willard | Willard, OH | — | 144 | 11,097 | 50 | 144 | 11,147 | 11,291 | (2,042) | 1985 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Prairie Heights Healthcare Center | Aberdeen, SD | — | 1,372 | 7,491 | — | 1,372 | 7,491 | 8,863 | (303 | ) | 1965 | 2018 | CTR Partnership, L.P. | Premier Estates of Middletown/Premier Retirement Estates of Middletown | Middletown, OH | — | 990 | 7,484 | 380 | 990 | 7,864 | 8,854 | (1,451) | 1985 | 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Meadows on University | Fargo, ND | — | 989 | 3,275 | — | 989 | 3,275 | 4,264 | (106 | ) | 1966 | 2018 | CTR Partnership, L.P. | Premier Estates of Norwood Towers/Premier Retirement Estates of Norwood Towers | Norwood, OH | — | 1,316 | 10,071 | 1,021 | 1,316 | 11,092 | 12,408 | (1,875) | 1991 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Suites - Parker | Parker, CO | — | 1,178 | 17,857 | — | 1,178 | 17,857 | 19,035 | (495 | ) | 2012 | 2018 | CTR Partnership, L.P. | Turlock Nursing and Rehabilitation Center | Turlock, CA | — | 1,258 | 16,526 | — | 1,258 | 16,526 | 17,784 | (2,651) | 1986 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Huntington Park Nursing Center | Huntington Park, CA | — | 3,131 | 8,876 | 76 | 3,131 | 8,952 | 12,083 | (207 | ) | 1955 | 2019 | CTR Partnership, L.P. | Bridgeport Medical Lodge | Bridgeport, TX | — | 980 | 27,917 | — | 980 | 27,917 | 28,897 | (4,246) | 2014 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Shoreline Care Center | Oxnard, CA | — | 1,699 | 9,004 | — | 1,699 | 9,004 | 10,703 | (212 | ) | 1962 | 2019 | CTR Partnership, L.P. | The Villas at Saratoga | Saratoga, CA | — | 8,709 | 9,736 | 1,397 | 8,709 | 11,133 | 19,842 | (1,399) | 2004 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Downey Care Center | Downey, CA | — | 2,502 | 6,141 | — | 2,502 | 6,141 | 8,643 | (145 | ) | 1967 | 2019 | CTR Partnership, L.P. | Madison Park Healthcare | Huntington, WV | — | 601 | 6,385 | — | 601 | 6,385 | 6,986 | (691) | 1924 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Courtyard Healthcare Center | Davis, CA | — | 2,351 | 9,256 | — | 2,351 | 9,256 | 11,607 | (222 | ) | 1969 | 2019 | CTR Partnership, L.P. | Oakview Heights Nursing & Rehabilitation Center | Mt. Carmel, IL | — | 298 | 8,393 | — | 298 | 8,393 | 8,691 | (930) | 2004 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Alpine Skilled Nursing and Rehabilitation | Ruston, LA | — | 2,688 | 23,825 | — | 2,688 | 23,825 | 26,513 | (475 | ) | 2014 | 2019 | Gulf Coast Buyer 1 LLC | Spring Lake Skilled Nursing and Rehabilitation | Shreveport, LA | — | 3,217 | 21,195 | 2,729 | 3,217 | 23,924 | 27,141 | (2,490) | 2008 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | The Bradford Skilled Nursing and Rehabilitation | Shreveport, LA | — | 3,758 | 21,325 | 17 | 3,758 | 21,342 | 25,100 | (425 | ) | 1980 | 2019 | Gulf Coast Buyer 1 LLC | The Village at Heritage Oaks | Corsicana, TX | — | 143 | 11,429 | 482 | 143 | 11,911 | 12,054 | (1,266) | 2007 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Colonial Oaks Skilled Nursing and Rehabilitation | Bossier City, LA | — | 1,635 | 21,180 | — | 1,635 | 21,180 | 22,815 | (412 | ) | 2013 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | The Guest House Skilled Nursing and Rehabilitation | Shreveport, LA | — | 3,437 | 20,889 | 184 | 3,437 | 21,073 | 24,510 | (422 | ) | 2006 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Pilgrim Manor Skilled Nursing and Rehabilitation | Bossier City, LA | — | 2,979 | 24,617 | — | 2,979 | 24,617 | 27,596 | (486 | ) | 2008 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Shreveport Manor Skilled Nursing and Rehabilitation | Shreveport, LA | — | 676 | 10,238 | 193 | 676 | 10,431 | 11,107 | (198 | ) | 2008 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Booker T. Washington Skilled Nursing and Rehabilitation | Shreveport, LA | — | 2,452 | 9,148 | 113 | 2,452 | 9,261 | 11,713 | (191 | ) | 2013 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Legacy West Rehabilitation and Healthcare | Corsicana, TX | — | 120 | 6,682 | 276 | 120 | 6,958 | 7,078 | (141 | ) | 2002 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Legacy at Jacksonville | Jacksonville, TX | — | 173 | 7,481 | 52 | 173 | 7,533 | 7,706 | (156 | ) | 2006 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Pecan Tree Rehabilitation and Healthcare | Gainesville, TX | — | 219 | 10,097 | 124 | 219 | 10,221 | 10,440 | (202 | ) | 1990 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lakewest SNF Realty, LLC | Lakewest Rehabilitation and Skilled Care | Dallas, TX | — | — | 6,905 | — | — | 6,905 | 6,905 | (129 | ) | 2011 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Cascadia of Nampa | Nampa, ID | — | 880 | 14,117 | — | 880 | 14,117 | 14,997 | (219 | ) | 2017 | 2019 | CTR Partnership, L.P. | City Creek Post-Acute and Assisted Living | Sacramento, CA | — | 3,980 | 10,106 | 1,488 | 3,980 | 11,594 | 15,574 | (1,075) | 1990 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Valley Skilled Nursing | Modesto, CA | — | 798 | 7,671 | — | 798 | 7,671 | 8,469 | (50 | ) | 2016 | 2019 | CTR Partnership, L.P. | Crestwood Health and Rehabilitation Center | Wills Point, TX | — | 143 | 6,075 | — | 143 | 6,075 | 6,218 | (368) | 1980 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Northshore Healthcare Holdings LLC | Northshore Healthcare Holdings LLC | San Juan Capistrano Senior Living | San Juan Capistrano, CA | — | 11,176 | 25,298 | — | 11,176 | 25,298 | 36,474 | (1,205) | 1999 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Northshore Healthcare Holdings LLC | Northshore Healthcare Holdings LLC | Camarillo Senior Living | Camarillo, CA | — | 7,516 | 30,552 | — | 7,516 | 30,552 | 38,068 | (1,441) | 2000 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Northshore Healthcare Holdings LLC | Northshore Healthcare Holdings LLC | Bayshire Carlsbad | Carlsbad, CA | — | 7,398 | 19,714 | — | 7,398 | 19,714 | 27,112 | (944) | 1999 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Northshore Healthcare Holdings LLC | Northshore Healthcare Holdings LLC | Bayshire Rancho Mirage | Rancho Mirage, CA | — | 4,024 | 16,790 | — | 4,024 | 16,790 | 20,814 | (820) | 2000 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | CTR Partnership, L.P. | Imboden Creek Living Center | Decatur, IL | — | 131 | 12,499 | 81 | 131 | 12,580 | 12,711 | (289) | 2003 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 145,149 | 889,318 | 89,189 | 144,139 | 979,517 | 1,123,655 | (162,361 | ) | — | 55,670 | 281,386 | 10,524 | 55,670 | 291,910 | 347,580 | (40,159) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Multi-Service Campus Properties: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ensign Southland LLC | Southland Care | Norwalk, CA | — | 966 | 5,082 | 2,213 | 966 | 7,295 | 8,261 | (4,986 | ) | 2011 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assisted and Independent Living Properties: | Assisted and Independent Living Properties: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Avenue N Holdings LLC | Avenue N Holdings LLC | Cambridge ALF | Rosenburg, TX | — | 124 | 2,301 | 392 | 124 | 2,693 | 2,817 | (1,533) | 2007 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Moenium Holdings LLC | Moenium Holdings LLC | Grand Court | Mesa, AZ | — | 1,893 | 5,268 | 1,210 | 1,893 | 6,478 | 8,371 | (3,888) | 1986 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lafayette Health Holdings LLC | Lafayette Health Holdings LLC | Chateau Des Mons | Englewood, CO | — | 420 | 1,160 | 189 | 420 | 1,349 | 1,769 | (508) | 2011 | 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expo Park Health Holdings LLC | Expo Park Health Holdings LLC | Canterbury Gardens | Aurora, CO | — | 570 | 1,692 | 248 | 570 | 1,940 | 2,510 | (1,022) | 1986 | 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wisteria Health Holdings LLC | Wisteria | Abilene, TX | — | 746 | 9,903 | 290 | 746 | 10,193 | 10,939 | (2,077 | ) | 2008 | 2011 | Wisteria Health Holdings LLC | Wisteria IND | Abilene, TX | — | 244 | 3,241 | 81 | 244 | 3,322 | 3,566 | (1,860) | 2008 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mission CCRC LLC | St. Joseph's Villa | Salt Lake City, UT | — | 1,962 | 11,035 | 464 | 1,962 | 11,499 | 13,461 | (3,016 | ) | 1994 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Everglades Health Holdings LLC | Everglades Health Holdings LLC | Lexington | Ventura, CA | — | 1,542 | 4,012 | 113 | 1,542 | 4,125 | 5,667 | (1,059) | 1990 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Flamingo Health Holdings LLC | Flamingo Health Holdings LLC | Desert Springs ALF | Las Vegas, NV | — | 908 | 4,767 | 281 | 908 | 5,048 | 5,956 | (3,022) | 1986 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 18th Place Health Holdings LLC | 18th Place Health Holdings LLC | Rose Court | Phoenix, AZ | — | 1,011 | 2,053 | 490 | 1,011 | 2,543 | 3,554 | (1,142) | 1974 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Boardwalk Health Holdings LLC | Boardwalk Health Holdings LLC | Park Place | Reno, NV | — | 367 | 1,633 | 52 | 367 | 1,685 | 2,052 | (625) | 1993 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-35
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(dollars in thousands)
| Wayne Health Holdings LLC | Careage of Wayne | Wayne, NE | — | 130 | 3,061 | 122 | 130 | 3,183 | 3,313 | (889 | ) | 1978 | 2011 | |||||||||||||||||||||||||||
| 4th Street Holdings LLC | West Bend Care Center | West Bend, IA | — | 180 | 3,352 | — | 180 | 3,352 | 3,532 | (886 | ) | 2006 | 2011 | |||||||||||||||||||||||||||
| Big Sioux River Health Holdings LLC | Hillcrest Health | Hawarden, IA | — | 110 | 3,522 | 75 | 110 | 3,597 | 3,707 | (892 | ) | 1974 | 2011 | |||||||||||||||||||||||||||
| Prairie Health Holdings LLC | Colonial Manor of Randolph | Randolph, NE | — | 130 | 1,571 | 22 | 130 | 1,593 | 1,723 | (678 | ) | 2011 | 2011 | |||||||||||||||||||||||||||
| Salmon River Health Holdings LLC | Discovery Care Center | Salmon, ID | — | 168 | 2,496 | — | 168 | 2,496 | 2,664 | (463 | ) | 2012 | 2012 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Centerville Campus | Dayton, OH | — | 3,912 | 22,458 | 117 | 3,781 | 22,706 | 26,487 | (2,432 | ) | 2007 | 2015 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Liberty Nursing Center | Willard, OH | — | 143 | 11,097 | 50 | 143 | 11,147 | 11,290 | (1,195 | ) | 1985 | 2015 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Premier Estates of Middletown | Middletown, OH | — | 990 | 7,484 | 172 | 990 | 7,656 | 8,646 | (822 | ) | 1985 | 2015 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Premier Estates of Norwood Towers | Norwood, OH | — | 1,316 | 10,071 | 499 | 1,316 | 10,570 | 11,886 | (960 | ) | 1991 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Turlock Nursing and Rehabilitation Center | Turlock, CA | — | 1,258 | 16,526 | — | 1,258 | 16,526 | 17,784 | (1,412 | ) | 1986 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Bridgeport Medical Lodge | Bridgeport, TX | — | 980 | 27,917 | — | 980 | 27,917 | 28,897 | (2,152 | ) | 2014 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Villas at Saratoga | Saratoga, CA | — | 8,709 | 9,736 | 1,635 | 8,709 | 11,371 | 20,080 | (346 | ) | 2004 | 2018 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Madison Park Healthcare | Huntington, WV | — | 601 | 6,385 | — | 601 | 6,385 | 6,986 | (193 | ) | 1924 | 2018 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Oakview Heights Nursing & Rehabilitation Center | Mt. Carmel, IL | — | 298 | 8,393 | — | 298 | 8,393 | 8,691 | (218 | ) | 2004 | 2019 | |||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | Spring Lake Skilled Nursing and Rehabilitation | Shreveport, LA | — | 3,217 | 21,195 | 710 | 3,217 | 21,905 | 25,122 | (431 | ) | 2008 | 2019 | |||||||||||||||||||||||||||
| Gulf Coast Buyer 1 LLC | The Village at Heritage Oaks | Corsicana, TX | — | 143 | 11,429 | 196 | 143 | 11,625 | 11,768 | (234 | ) | 2007 | 2019 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | City Creek Post-Acute and Assisted Living | Sacramento, CA | — | 3,980 | 10,106 | — | 3,980 | 10,106 | 14,086 | (69 | ) | 1990 | 2019 | |||||||||||||||||||||||||||
| — | 29,939 | 202,819 | 6,565 | 29,808 | 209,515 | 239,323 | (24,351 | ) | ||||||||||||||||||||||||||||||||
| Assisted and Independent Living Properties: | ||||||||||||||||||||||||||||||||||||||||
| Avenue N Holdings LLC | Cambridge ALF | Rosenburg, TX | — | 124 | 2,301 | 392 | 124 | 2,693 | 2,817 | (1,276 | ) | 2007 | 2006 | |||||||||||||||||||||||||||
| Moenium Holdings LLC | Grand Court | Mesa, AZ | — | 1,893 | 5,268 | 1,210 | 1,893 | 6,478 | 8,371 | (3,232 | ) | 1986 | 2007 | |||||||||||||||||||||||||||
| Lafayette Health Holdings LLC | Chateau Des Mons | Englewood, CO | — | 420 | 1,160 | 189 | 420 | 1,349 | 1,769 | (395 | ) | 2011 | 2009 | |||||||||||||||||||||||||||
| Expo Park Health Holdings LLC | Canterbury Gardens | Aurora, CO | — | 570 | 1,692 | 248 | 570 | 1,940 | 2,510 | (772 | ) | 1986 | 2010 | |||||||||||||||||||||||||||
| Wisteria Health Holdings LLC | Wisteria IND | Abilene, TX | — | 244 | 3,241 | 81 | 244 | 3,322 | 3,566 | (1,297 | ) | 2008 | 2011 | |||||||||||||||||||||||||||
| Everglades Health Holdings LLC | Lexington | Ventura, CA | — | 1,542 | 4,012 | 113 | 1,542 | 4,125 | 5,667 | (811 | ) | 1990 | 2011 | |||||||||||||||||||||||||||
| Flamingo Health Holdings LLC | Desert Springs ALF | Las Vegas, NV | — | 908 | 4,767 | 281 | 908 | 5,048 | 5,956 | (2,248 | ) | 1986 | 2011 | |||||||||||||||||||||||||||
| 18th Place Health Holdings LLC | Rose Court | Phoenix, AZ | — | 1,011 | 2,053 | 490 | 1,011 | 2,543 | 3,554 | (831 | ) | 1974 | 2011 | |||||||||||||||||||||||||||
| Boardwalk Health Holdings LLC | Park Place | Reno, NV | — | 367 | 1,633 | 51 | 367 | 1,684 | 2,051 | (452 | ) | 1993 | 2012 | |||||||||||||||||||||||||||
| Willows Health Holdings LLC | Cascade Plaza | Redmond, WA | — | 2,835 | 3,784 | 395 | 2,835 | 4,179 | 7,014 | (1,048 | ) | 2013 | 2013 | |||||||||||||||||||||||||||
| Lockwood Health Holdings LLC | Santa Maria | Santa Maria, CA | — | 1,792 | 2,253 | 585 | 1,792 | 2,838 | 4,630 | (1,086 | ) | 1967 | 2013 | |||||||||||||||||||||||||||
| Saratoga Health Holdings LLC | Lake Ridge | Orem, UT | — | 444 | 2,265 | 176 | 444 | 2,441 | 2,885 | (408 | ) | 1995 | 2013 | |||||||||||||||||||||||||||
| Sky Holdings AZ LLC | Desert Sky Assisted Living | Glendale, AZ | — | 61 | 304 | 372 | 61 | 676 | 737 | (435 | ) | 2004 | 2002 | |||||||||||||||||||||||||||
| Lemon River Holdings LLC | The Grove Assisted Living | Riverside, CA | — | 342 | 802 | 3,360 | 342 | 4,162 | 4,504 | (2,340 | ) | 2012 | 2009 | |||||||||||||||||||||||||||
| Willows Health Holdings LLC | Cascade Plaza | Redmond, WA | — | 2,835 | 3,784 | 395 | 2,835 | 4,179 | 7,014 | (1,500) | 2013 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lockwood Health Holdings LLC | Santa Maria | Santa Maria, CA | — | 1,792 | 2,253 | 585 | 1,792 | 2,838 | 4,630 | (1,560) | 1967 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Saratoga Health Holdings LLC | Lake Ridge | Orem, UT | — | 444 | 2,265 | 176 | 444 | 2,441 | 2,885 | (576) | 1995 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sky Holdings AZ LLC | Desert Sky Assisted Living | Glendale, AZ | — | 61 | 304 | 372 | 61 | 676 | 738 | (520) | 2004 | 2002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lemon River Holdings LLC | The Grove Assisted Living | Riverside, CA | — | 342 | 802 | 3,360 | 342 | 4,162 | 4,504 | (3,156) | 2012 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mission CCRC LLC | St. Joseph's Villa IND | Salt Lake City, UT | — | 411 | 2,312 | 258 | 411 | 2,570 | 2,981 | (1,778) | 1994 | 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Prelude Cottages of Woodbury | Woodbury, MN | — | 430 | 6,714 | 76 | 430 | 6,790 | 7,220 | (1,352) | 2011 | 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Lamplight Inn of West Allis | West Allis, WI | — | 97 | 6,102 | 106 | 77 | 4,181 | 4,258 | — | 2013 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Fort Myers Assisted Living | Fort Myers, FL | — | 1,489 | 3,531 | 1,006 | 1,489 | 4,537 | 6,026 | (712) | 1980 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Croatan Village | New Bern, NC | — | 312 | 6,919 | — | 301 | 5,663 | 5,964 | — | 2010 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Countryside Village | Pikeville, NC | — | 131 | 4,157 | — | 125 | 3,402 | 3,527 | — | 2011 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Clarkston | Village of Clarkston, MI | — | 603 | 9,326 | — | 522 | 5,329 | 5,851 | — | 2010 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Goodrich | Goodrich, MI | — | 241 | 4,112 | 459 | 207 | 3,862 | 4,069 | — | 2014 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Burton | Burton, MI | — | 492 | 9,199 | — | 426 | 7,751 | 8,177 | — | 2014 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Lapeer | Lapeer, MI | — | 302 | 5,773 | — | 261 | 4,066 | 4,327 | — | 2008 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Arbor Place | Lodi, CA | — | 392 | 3,605 | — | 392 | 3,605 | 3,997 | (578) | 1984 | 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Applewood of Brookfield | Brookfield, WI | — | 493 | 14,002 | 39 | 241 | 6,026 | 6,267 | — | 2013 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Applewood of New Berlin | New Berlin, WI | — | 356 | 10,812 | — | 190 | 5,033 | 5,223 | — | 2016 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Memory Care Cottages in White Bear Lake | White Bear Lake, MN | — | 1,611 | 5,633 | — | 1,611 | 5,633 | 7,244 | (775) | 2016 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Vista Del Lago | Escondido, CA | — | 4,362 | 7,997 | — | 4,362 | 7,997 | 12,359 | (698) | 2015 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Inn at Barton Creek | Bountiful, UT | — | 2,480 | 4,804 | 15 | 2,480 | 4,819 | 7,299 | (380) | 1999 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Bridgeton Essentia Neighborhood | Bridgeton, NJ | — | 245 | 5,795 | — | 190 | 4,510 | 4,700 | (33) | 2021 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CTR Partnership, L.P. | Rio Grande Essentia Neighborhood | Rio Grande, NJ | — | 224 | 5,652 | — | 224 | 5,652 | 5,876 | (169) | 2021 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | 27,224 | 155,677 | 10,345 | 26,492 | 139,044 | 165,537 | (29,108) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | $ | 241,304 | $ | 1,392,128 | $ | 118,249 | $ | 238,738 | $ | 1,483,133 | $ | 1,721,871 | $ | (315,914) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mission CCRC LLC | St. Joseph's Villa IND | Salt Lake City, UT | — | 411 | 2,312 | 258 | 411 | 2,570 | 2,981 | (1,250 | ) | 1994 | 2011 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Prelude Cottages of Woodbury | Woodbury, MN | — | 430 | 6,714 | — | 430 | 6,714 | 7,144 | (839 | ) | 2011 | 2014 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | English Meadows Senior Living Community | Christiansburg, VA | — | 250 | 6,114 | 3 | 250 | 6,117 | 6,367 | (765 | ) | 2011 | 2014 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Bristol Court Assisted Living | Saint Petersburg, FL | — | 645 | 7,322 | 13 | 645 | 7,335 | 7,980 | (827 | ) | 2010 | 2015 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Asbury Place Assisted Living | Pensacola, FL | — | 212 | 4,992 | 72 | 212 | 5,064 | 5,276 | (543 | ) | 1997 | 2015 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | New Haven Assisted Living of San Angelo | San Angelo, TX | — | 284 | 4,478 | — | 284 | 4,478 | 4,762 | (438 | ) | 2012 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Lamplight Inn of Fort Wayne | Fort Wayne, IN | — | 452 | 8,703 | — | 452 | 8,703 | 9,155 | (834 | ) | 2015 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Lamplight Inn of West Allis | West Allis, WI | — | 97 | 6,102 | — | 97 | 6,102 | 6,199 | (585 | ) | 2013 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Lamplight Inn of Baltimore | Baltimore, MD | — | — | 3,697 | — | — | 3,697 | 3,697 | (354 | ) | 2014 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Fort Myers Assisted Living | Fort Myers, FL | — | 1,489 | 3,531 | 405 | 1,489 | 3,936 | 5,425 | (353 | ) | 1980 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | English Meadows Elks Home Campus | Bedford, VA | — | 451 | 9,023 | 142 | 451 | 9,165 | 9,616 | (865 | ) | 2014 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Croatan Village | New Bern, NC | — | 312 | 6,919 | — | 312 | 6,919 | 7,231 | (634 | ) | 2010 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Countryside Village | Pikeville, NC | — | 131 | 4,157 | — | 131 | 4,157 | 4,288 | (381 | ) | 2011 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Clarkston | Village of Clarkston, MI | — | 603 | 9,326 | — | 603 | 9,326 | 9,929 | (835 | ) | 2010 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Goodrich | Goodrich, MI | — | 241 | 4,112 | — | 241 | 4,112 | 4,353 | (368 | ) | 2014 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Burton | Burton, MI | — | 492 | 9,199 | — | 492 | 9,199 | 9,691 | (824 | ) | 2014 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | The Pines of Lapeer | Lapeer, MI | — | 302 | 5,773 | — | 302 | 5,773 | 6,075 | (517 | ) | 2008 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Arbor Place | Lodi, CA | — | 392 | 3,605 | — | 392 | 3,605 | 3,997 | (308 | ) | 1984 | 2016 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Applewood of Brookfield | Brookfield, WI | — | 493 | 14,002 | — | 493 | 14,002 | 14,495 | (1,021 | ) | 2013 | 2017 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Applewood of New Berlin | New Berlin, WI | — | 356 | 10,812 | — | 356 | 10,812 | 11,168 | (788 | ) | 2016 | 2017 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Tangerine Cove of Brooksville | Brooksville, FL | — | 995 | 927 | 161 | 995 | 1,088 | 2,083 | (77 | ) | 1984 | 2017 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Memory Care Cottages in White Bear Lake | White Bear Lake, MN | — | 1,611 | 5,633 | — | 1,611 | 5,633 | 7,244 | (352 | ) | 2016 | 2017 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Culpeper | Culpepper, VA | — | 318 | 3,897 | 69 | 318 | 3,966 | 4,284 | (257 | ) | 1997 | 2017 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Louisa | Louisa, VA | — | 407 | 4,660 | 72 | 407 | 4,732 | 5,139 | (313 | ) | 2002 | 2017 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Warrenton | Warrenton, VA | — | 1,238 | 7,247 | 85 | 1,238 | 7,332 | 8,570 | (462 | ) | 1999 | 2017 | |||||||||||||||||||||||||||
| CTR Partnership, L.P. | Vista Del Lago | Escondido, CA | — | 4,362 | 7,997 | — | 4,362 | 7,997 | 12,359 | (70 | ) | 2015 | 2019 | |||||||||||||||||||||||||||
| — | 29,527 | 196,789 | 9,223 | 29,527 | 206,012 | 235,539 | (31,491 | ) | ||||||||||||||||||||||||||||||||
| Independent Living Properties: | ||||||||||||||||||||||||||||||||||||||||
| Hillview Health Holdings LLC | Lakeland Hills | Dallas, TX | — | 680 | 4,872 | 1,011 | 680 | 5,883 | 6,563 | (2,156 | ) | 1996 | 2011 | |||||||||||||||||||||||||||
| — | 680 | 4,872 | 1,011 | 680 | 5,883 | 6,563 | (2,156 | ) | ||||||||||||||||||||||||||||||||
| — | $ | 205,295 | $ | 1,293,798 | $ | 105,988 | $ | 204,154 | $ | 1,400,927 | $ | 1,605,081 | $ | (220,359 | ) | |||||||||||||||||||||||||
(1) The aggregate cost of real estate for federal income tax purposes was $1.6 billion.$1.7 billion.
F-36
SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 20192022
(dollars in thousands)
| Year Ended December 31, | ||||||||||||||||||||
| Real estate: | 2022 | 2021 | 2020 | |||||||||||||||||
| Balance at the beginning of the period | $ | 1,873,806 | $ | 1,683,205 | $ | 1,605,081 | ||||||||||||||
| Acquisitions | 21,252 | 190,133 | 84,630 | |||||||||||||||||
| Improvements | 5,896 | 4,521 | 7,223 | |||||||||||||||||
| Impairment | (29,803) | — | — | |||||||||||||||||
| Sales and/or transfers to assets held for sale, net | (149,280) | (4,053) | (13,729) | |||||||||||||||||
| Balance at the end of the period | $ | 1,721,871 | $ | 1,873,806 | $ | 1,683,205 | ||||||||||||||
| Accumulated depreciation: | ||||||||||||||||||||
| Balance at the beginning of the period | $ | (304,785) | $ | (259,803) | $ | (220,359) | ||||||||||||||
| Depreciation expense | (42,131) | (45,498) | (41,914) | |||||||||||||||||
| Impairment | 10,232 | — | — | |||||||||||||||||
| Sales and/or transfers to assets held for sale, net | 20,770 | 516 | 2,470 | |||||||||||||||||
| Balance at the end of the period | $ | (315,914) | $ | (304,785) | $ | (259,803) | ||||||||||||||
| Year Ended December 31, | ||||||||||||
| Real estate: | 2019 | 2018 | 2017 | |||||||||
| Balance at the beginning of the period | $ | 1,368,157 | $ | 1,266,484 | $ | 986,215 | ||||||
| Acquisitions | 318,070 | 106,208 | 280,477 | |||||||||
| Improvements | 3,103 | 7,230 | 744 | |||||||||
| Impairment | (21,465 | ) | — | — | ||||||||
| Sales of real estate | (62,784 | ) | (11,765 | ) | (952 | ) | ||||||
| Balance at the end of the period | $ | 1,605,081 | $ | 1,368,157 | $ | 1,266,484 | ||||||
| Accumulated depreciation: | ||||||||||||
| Balance at the beginning of the period | $ | (185,926 | ) | $ | (152,185 | ) | $ | (121,797 | ) | |||
| Depreciation expense | (40,373 | ) | (34,676 | ) | (30,493 | ) | ||||||
| Impairment | 5,220 | — | — | |||||||||
| Sales of real estate | 720 | 935 | 105 | |||||||||
| Balance at the end of the period | $ | (220,359 | ) | $ | (185,926 | ) | $ | (152,185 | ) | |||
F-37
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 20192022
(dollars in thousands)
| Description | Contractual Interest Rate | Maturity Date | Periodic Payment Terms | Prior Liens | Principal Balance | Book Value (3) | Carrying Amount of Loans Subject to Delinquent Principal or Interest | ||||||||||||||||
| First Mortgage: | |||||||||||||||||||||||
| Ohio (3 SNF facilities) | 10.0 | % | 2020 | (1) | $ | — | $ | 26,500 | $ | 26,500 | $ | — | |||||||||||
| Third Mortgage: | |||||||||||||||||||||||
| California (1 SNF facility) | 8.0 | % | 2019 | (2) | 5,500 | (4) | 3,000 | 3,000 | 3,000 | ||||||||||||||
| Loan Loss Allowance | — | — | — | — | |||||||||||||||||||
| $ | 5,500 | $ | 29,500 | $ | 29,500 | $ | 3,000 | ||||||||||||||||
| Description | Contractual Interest Rate | Maturity Date | Periodic Payment Terms | Prior Liens | Principal Balance | Book Value (1) | Carrying Amount of Loans Subject to Delinquent Principal or Interest | |||||||||||||||||||||||||||||||||||||
| Mortgage Secured Loans: | ||||||||||||||||||||||||||||||||||||||||||||
| West Virginia (18 SNF facilities) | 8.4 | % | 2027 | (3) | $ | 482,000 | (4) | $ | 75,000 | $ | 72,543 | N/A | ||||||||||||||||||||||||||||||||
| California (5 SNF facilities) | 10.2 | % | (2) | 2025 | (3) | 53,400 | (5) | 22,250 | 21,345 | N/A | ||||||||||||||||||||||||||||||||||
| Georgia (4 SNF facilities) | 9.0 | % | (2) | 2025 | (3) | 72,700 | (5) | 24,900 | 23,796 | N/A | ||||||||||||||||||||||||||||||||||
| Mezzanine Loans: | ||||||||||||||||||||||||||||||||||||||||||||
| West Virginia (18 SNF facilities) | 11.0 | % | 2032 | (3) | 557,000 | (4) | 25,000 | 24,012 | N/A | |||||||||||||||||||||||||||||||||||
| Virginia (9 SNF facilities) | 12.0 | % | 2025 | (3) | 114,309 | (6) | 15,000 | 14,672 | N/A | |||||||||||||||||||||||||||||||||||
| $ | 1,279,409 | $ | 162,150 | $ | 156,368 | |||||||||||||||||||||||||||||||||||||||
(1) The aggregate cost for federal income tax purposes was $162.2 million as of December 31, 2022.
(2) Interest rates are variable and represent the rate in effect as of December 31, 2022.
(3) Interest is due monthly, and principal is due at the maturity date.
(4) The secured term loan was structured with an “A” tranche, a “B” tranche, and a “C” tranche, with the “C” tranche being the most subordinate. The Company’s loan constituted the entirety of the “C” tranche. The Company also extended a mezzanine loan to the borrower group. Accordingly, the amounts of the prior liens at December 31, 2022 are estimated.
(5) The secured term loan was structured with an “A” and a “B” tranche, with the “B” tranche being subordinate to the “A” tranche pursuant to the terms of a written agreement between the lenders. The Company’s loan constituted the entirety of the “B” tranche. Accordingly, the amounts of the prior liens at December 31, 2022 are estimated.
(6) The first mortgage loans on these properties are not held by the Company. Accordingly, the amounts of the prior liens at December 31, 2022 are estimated.
Changes in mortgage secured and mezzanine loans are summarized as follows:follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Balance at beginning of period | $ | 15,155 | $ | 15,000 | $ | 29,500 | ||||||||||||||
| Additions during period: | ||||||||||||||||||||
| New mortgage and mezzanine loans | 147,150 | — | 61,258 | |||||||||||||||||
| Interest income added to principal | 1,165 | 155 | — | |||||||||||||||||
| Deductions during period: | ||||||||||||||||||||
| Paydowns/Repayments | — | — | (75,758) | |||||||||||||||||
| Unrealized loss | (7,102) | |||||||||||||||||||
| Balance at end of period | $ | 156,368 | $ | 15,155 | $ | 15,000 | ||||||||||||||
| Year Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| Balance at beginning of period | $ | 12,375 | $ | 12,517 | $ | — | ||||||
| Additions during period: | ||||||||||||
| New mortgage loans | 40,889 | — | 12,542 | |||||||||
| Deductions during period: | ||||||||||||
| Paydowns/Repayments | (23,764 | ) | (142 | ) | (25 | ) | ||||||
| Balance at end of period | $ | 29,500 | $ | 12,375 | $ | 12,517 | ||||||