CareTrust REIT Inc
For the period ended Dec 31, 2023. Filed Feb 8, 2024.
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FY2023 · Filed Feb 8, 2024
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Item 16. Form 10-K Summary
None.
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 8, 2024 | |
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 8, 2024 |
| David M. Sedgwick | ||
| /s/ WILLIAM M. WAGNER | Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) | February 8, 2024 |
| William M. Wagner | ||
| /s/ DIANA LAING | Director | February 8, 2024 |
| Diana Laing | ||
| /s/ ANNE OLSON | Director | February 8, 2024 |
| Anne Olson | ||
| /s/ SPENCER PLUMB | Director | February 8, 2024 |
| Spencer Plumb | ||
| /s/ CAREINA WILLIAMS | Director | February 8, 2024 |
| Careina Williams | ||
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) with respect to CareTrust REIT, Inc. | F-2 |
|---|---|
| Consolidated Balance Sheets as of December 31, 2023 and 2022 | F-4 |
| Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 | F-5 |
| Consolidated Statements of Equity for the years ended December 31, 2023, 2022 and 2021 | F-6 |
| Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 | F-7 |
| Notes to Consolidated Financial Statements | F-8 |
| Schedule III: Real Estate Assets and Accumulated Depreciation | F-37 |
| Schedule IV: Mortgage Loans on Real Estate | F-45 |
To the stockholders and the Board of Directors of CareTrust REIT, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CareTrust REIT, Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 8, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company'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.
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. There are inherent uncertainties in making these assumptions.
We identified the impairment of real estate investments held for sale 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. 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 estimate of fair value.
As of December 31, 2023, the Company had real estate investments held for sale of $15.0 million, net of impairment loss of $26.8 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 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.
We assessed the reasonableness of the valuation methodology used and the concluded real estate investment fair value by obtaining sales comparison data, while also engaging in discussions with management to understand portfolio-specific factors impacting the Company’s fair value determination.
We used the assistance of our fair value specialists in obtaining relevant market data, where necessary.
We considered the properties disposed in the period and subsequent period to evaluate if the retrospective review provides any indication of error or bias in the fair value estimates.
Read and considered terms of executed arrangements and evidence regarding terms for arrangements in the process of negotiation at or near the valuation date.
/s/Deloitte & Touche LLP
Costa Mesa, California
February 8, 2024
We have served as the Company's auditor since 2019.
(in thousands, except share and per share amounts)
| December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Assets: | ||
| Real estate investments, net | $1,567,119 | $1,421,410 |
| Other real estate related investments (including accrued interest of $1,727 and $1,320 as of December 31, 2023 and 2022, respectively) | 180,368 | 156,368 |
| Assets held for sale, net | 15,011 | 12,291 |
| Cash and cash equivalents | 294,448 | 13,178 |
| Accounts and other receivables | 395 | 416 |
| Prepaid expenses and other assets, net | 23,337 | 11,690 |
| Deferred financing costs, net | 4,160 | 5,428 |
| Total assets | $2,084,838 | $1,620,781 |
| Liabilities and Equity: | ||
| Senior unsecured notes payable, net | $396,039 | $395,150 |
| Senior unsecured term loan, net | 199,559 | 199,348 |
| Unsecured revolving credit facility | — | 125,000 |
| Accounts payable, accrued liabilities and deferred rent liabilities | 33,992 | 24,360 |
| Dividends payable | 36,531 | 27,550 |
| Total liabilities | 666,121 | 771,408 |
| Commitments and contingencies (Note 12) | ||
| Equity: | ||
| Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2023 and 2022 | — | — |
| Common stock, $0.01 par value; 500,000,000 shares authorized, 129,992,796 and 99,010,112 shares issued and outstanding as of December 31, 2023 and 2022, respectively | 1,300 | 990 |
| Additional paid-in capital | 1,883,147 | 1,245,337 |
| Cumulative distributions in excess of earnings | (467,628) | (396,954) |
| Total stockholders' equity | 1,416,819 | 849,373 |
| Noncontrolling interests | 1,898 | — |
| Total equity | 1,418,717 | 849,373 |
| Total liabilities and equity | $2,084,838 | $1,620,781 |
(in thousands, except per share amounts)
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Revenues: | |||
| Rental income | $198,599 | $187,506 | $190,195 |
| Interest and other income | 19,171 | 8,626 | 2,156 |
| Total revenues | 217,770 | 196,132 | 192,351 |
| Expenses: | |||
| Depreciation and amortization | 51,199 | 50,316 | 55,340 |
| Interest expense | 40,883 | 30,008 | 23,677 |
| Property taxes | 6,170 | 4,333 | 3,574 |
| Impairment of real estate investments | 36,301 | 79,062 | — |
| Provision for loan losses, net | — | 3,844 | — |
| Property operating expenses | 3,423 | 5,039 | — |
| General and administrative | 21,805 | 20,165 | 26,874 |
| Total expenses | 159,781 | 192,767 | 109,465 |
| Other loss: | |||
| Loss on extinguishment of debt | — | — | (10,827) |
| Gain (loss) on sale of real estate, net | 2,218 | (3,769) | (77) |
| Unrealized loss on other real estate related investments, net | (6,485) | (7,102) | — |
| Total other loss | (4,267) | (10,871) | (10,904) |
| Net income (loss) | 53,722 | (7,506) | 71,982 |
| Net loss attributable to noncontrolling interests | (13) | — | — |
| Net income (loss) attributable to CareTrust REIT, Inc. | $53,735 | $(7,506) | $71,982 |
| Earnings (loss) per common share attributable to CareTrust REIT, Inc: | |||
| Basic | $0.50 | $(0.08) | $0.74 |
| Diluted | $0.50 | $(0.08) | $0.74 |
| Weighted-average number of common shares: | |||
| Basic | 105,956 | 96,703 | 96,017 |
| Diluted | 106,152 | 96,703 | 96,092 |
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except share and per share amounts)
| Common Stock · AdditionalPaid-inCapital · CumulativeDistributionsin Excessof Earnings · Total Stockholders’ Equity · Noncontrolling Interests · TotalEquity | |||||||
|---|---|---|---|---|---|---|---|
| Shares | Amount | ||||||
| Balance as of December 31, 2020 | 95,215,797 | $952 | $1,164,402 | $(251,212) | $914,142 | $— | $914,142 |
| Issuance of common stock, net | 990,000 | 10 | 22,936 | — | 22,946 | — | 22,946 |
| Vesting of restricted common stock, net of shares withheld for employee taxes | 90,876 | 1 | (1,331) | — | (1,330) | — | (1,330) |
| Amortization of stock-based compensation | — | — | 10,832 | — | 10,832 | — | 10,832 |
| Common dividends ($1.06 per share) | — | — | — | (102,815) | (102,815) | — | (102,815) |
| Net income | — | — | — | 71,982 | 71,982 | — | 71,982 |
| Balance as of December 31, 2021 | 96,296,673 | 963 | 1,196,839 | (282,045) | 915,757 | — | 915,757 |
| Issuance of common stock, net | 2,405,000 | 24 | 47,212 | — | 47,236 | — | 47,236 |
| Vesting of restricted common stock, net of shares withheld for employee taxes | 308,439 | 3 | (4,472) | — | (4,469) | — | (4,469) |
| Amortization of stock-based compensation | — | — | 5,758 | — | 5,758 | — | 5,758 |
| Common dividends ($1.10 per share) | — | — | — | (107,403) | (107,403) | — | (107,403) |
| Net loss | — | — | — | (7,506) | (7,506) | — | (7,506) |
| Balance as of December 31, 2022 | 99,010,112 | 990 | 1,245,337 | (396,954) | 849,373 | — | 849,373 |
| Issuance of common stock, net | 30,868,714 | 309 | 634,137 | — | 634,446 | — | 634,446 |
| Vesting of restricted common stock, net of shares withheld for employee taxes | 113,970 | 1 | (1,480) | — | (1,479) | — | (1,479) |
| Amortization of stock-based compensation | — | — | 5,153 | — | 5,153 | — | 5,153 |
| Common dividends ($1.12 per share) | — | — | — | (124,409) | (124,409) | — | (124,409) |
| Distributions to noncontrolling interests | — | — | — | — | — | (41) | (41) |
| Contributions from noncontrolling interests | — | — | — | — | — | 1,952 | 1,952 |
| Net income (loss) | — | — | — | 53,735 | 53,735 | (13) | 53,722 |
| Balance as of December 31, 2023 | 129,992,796 | $1,300 | $1,883,147 | $(467,628) | $1,416,819 | $1,898 | $1,418,717 |
(in thousands)
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Cash flows from operating activities: | |||
| Net income (loss) | $53,722 | $(7,506) | $71,982 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
| Depreciation and amortization (including below-market ground leases) | 51,257 | 50,378 | 55,394 |
| Amortization of deferred financing costs | 2,436 | 2,095 | 2,052 |
| Loss on extinguishment of debt | — | — | 10,827 |
| Unrealized losses on other real estate related investments, net | 6,485 | 7,102 | — |
| Amortization of stock-based compensation | 5,153 | 5,758 | 10,832 |
| Straight-line rental income | 29 | (17) | (32) |
| Amortization of below market rent | (384) | — | — |
| Adjustment for collectibility of rental income | — | 1,417 | — |
| Noncash interest income | (407) | (1,165) | (155) |
| (Gain) loss on sale of real estate, net | (2,218) | 3,769 | 77 |
| Impairment of real estate investments | 36,301 | 79,062 | — |
| Provision for loan losses, net | — | 3,844 | — |
| Change in operating assets and liabilities: | |||
| Accounts and other receivables | (9) | 604 | (562) |
| Prepaid expenses and other assets, net | (21) | 123 | 399 |
| Accounts payable, accrued liabilities and deferred rent liabilities | 2,423 | (1,049) | 6,057 |
| Net cash provided by operating activities | 154,767 | 144,415 | 156,871 |
| Cash flows from investing activities: | |||
| Acquisitions of real estate, net of deposits applied | (233,776) | (21,915) | (192,718) |
| Purchases of equipment, furniture and fixtures and improvements to real estate | (10,976) | (7,292) | (6,013) |
| Preferred equity investments | (1,782) | — | — |
| Investment in real estate related investments and other loans receivable | (60,319) | (149,650) | (1,253) |
| Principal payments received on real estate related investments and other loans receivable | 26,525 | 6,308 | 393 |
| Escrow deposits for potential acquisitions of real estate | (3,800) | — | — |
| Net proceeds from sales of real estate | 16,313 | 45,149 | 6,958 |
| Net cash used in investing activities | (267,815) | (127,400) | (192,633) |
| Cash flows from financing activities: | |||
| Proceeds from the issuance of common stock, net | 634,446 | 47,236 | 22,946 |
| Proceeds from the issuance of senior unsecured notes payable | — | — | 400,000 |
| Borrowings under unsecured revolving credit facility | 185,000 | 160,000 | 220,000 |
| Payments on senior unsecured notes payable | — | — | (300,000) |
| Payments on unsecured revolving credit facility | (310,000) | (115,000) | (190,000) |
| Payments on debt extinguishment and deferred financing costs | (68) | (5,361) | (14,095) |
| Net-settle adjustment on restricted stock | (1,479) | (4,469) | (1,331) |
| Dividends paid on common stock | (115,492) | (106,138) | (100,782) |
| Contributions from noncontrolling interests | 1,952 | — | — |
| Distributions to noncontrolling interests | (41) | — | — |
| Net cash provided by (used in) financing activities | 394,318 | (23,732) | 36,738 |
| Net increase (decrease) in cash and cash equivalents | 281,270 | (6,717) | 976 |
| Cash and cash equivalents as of the beginning of period | 13,178 | 19,895 | 18,919 |
| Cash and cash equivalents as of the end of period | $294,448 | $13,178 | $19,895 |
| Supplemental disclosures of cash flow information: | |||
| Interest paid | $40,028 | $25,912 | $22,838 |
| Supplemental schedule of noncash investing and financing activities: | |||
| Increase in dividends payable | $8,982 | $1,265 | $2,033 |
| Right-of-use asset obtained in exchange for new operating lease obligation | $369 | $— | $— |
| Transfer of pre-acquisition costs to acquired assets | $— | $7 | $358 |
| Sale of real estate settled with notes receivable | $2,000 | $12,000 | $— |
- 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, 2023, the Company owned directly or through a joint venture and leased to independent operators,226 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 23,928 operational beds and units located in 28 states with the highest concentration of properties by rental income located in California and Texas. As of December 31, 2023, the Company also had other real estate related investments consisting ofone preferred equity investment, eight real estate secured loans receivable andone mezzanine loan receivable with a carrying value of $180.4 million.
- 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 prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
Consolidation—The accompanying consolidated financial statements include the accounts of CareTrust REIT, its wholly-owned subsidiaries, and variable interest entities (“VIEs”) over which the Company exercises control. All intercompany transactions and account balances within the Company have been eliminated, and net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.
Variable Interest Entities—The Company is required to continually evaluate its VIE relationships and consolidate these entities when it is determined to be the primary beneficiary of their operations. A VIE is broadly defined as an entity where either: (i) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) substantially all of an entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights, or (iii) the equity investors as a group lack any of the following: (a) the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of an entity, or (c) the right to receive the expected residual returns of an entity. Criterion (iii) above is generally applied to limited partnerships and similarly structured entities by assessing whether a simple majority of the limited partners hold substantive rights to participate in the significant decisions of the entity or have the ability to remove the decision maker or liquidate the entity without cause. If neither of those criteria are met, the entity is a VIE.
The designation of an entity as a VIE is reassessed upon certain events, including, but not limited to: (i) a change to the contractual arrangements of the entity or in the ability of a party to exercise its participation or kick-out rights, (ii) a change to the capitalization structure of the entity, or (iii) acquisitions or sales of interests that constitute a change in control.
A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. The Company’s consideration of various factors include, but is not limited to, which activities most significantly impact the entity’s economic performance and the ability to direct those activities, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions, its ability to manage its ownership interest relative to the other interest holders, and its ability to replace the VIE manager and/or liquidate the entity.
For any investment in a joint venture that is not considered to be VIE, the Company would evaluate the type of ownership rights held by limited partner(s) that may preclude consolidation by the majority interest holder. The assessment of limited partners’ rights and their impact on the control of a joint venture should be made at inception of the joint venture and continually reassessed. See Note 11, Variable Interest Entities, for additional information.
Noncontrolling Interests—The Company presents the portion of any equity that the Company does not own in entities that the Company controls (and thus consolidates) as noncontrolling interests and classifies those interests as a component of consolidated equity, separate from stockholders' equity, on the Company’s consolidated balance sheets. For consolidated joint ventures, the Company allocates net income or loss utilizing the hypothetical liquidation at book value method, in which the Company allocates income or loss based on the change in each unitholders’ claim on the net assets of the joint venture partners at period end after adjusting for any distributions or contributions made during such period. The Company includes net income (loss) attributable to the noncontrolling interests in net income (loss) in the consolidated statements of operations.
Lessor Accounting—The Company recognizes lease revenue in accordance with Accounting Standards Codification (“ASC”) 842, Leases. The Company’s lease agreements typically contain annual escalators based on the percentage change in the Consumer 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 straight-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 tenant is solely responsible for the costs 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 required to be excluded from variable payments and from recognition in the lessor’s statements of operations. Otherwise, tenant recoveries for taxes and insurance are classified as additional rental revenues recognized by the lessor on a gross basis in its statements of operations.
The Company’s assessment of collectibility of its tenant receivables includes a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement are probable of collection. The Company considers the operator’s performance and anticipated trends, payment history, and the existence and creditworthiness of guarantees, among other factors, in making this determination. For such leases that are deemed probable of collection, revenue continues to be recorded on a straight-line basis over the lease term, if applicable. For such leases that are deemed not probable of 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. Such write-offs and recoveries are recorded as decreases or increases through rental income on the Company’s consolidated statements of operations. For the years ended December 31, 2023 and 2021, the Company didnot record any recovery adjustments or write-off adjustments to rental income. For the year ended December 31, 2022, the Company didnot record any recovery adjustments and wrote-off $1.4 million of rental income. See Note 3, Real Estate Investments, Netfor further detail.
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.
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.
The Company recognizes acquired “above or below market” leases at their fair value (for asset acquisitions) using discount rates which reflect the risks associated with the leases acquired. The fair value is based on the present value of the difference between (i) the contractual amounts due pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each in-place lease, generally measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the extended term for any leases with renewal options that are reasonably certain to be exercised. Other intangible assets acquired include amounts for in-place lease values that are based on an evaluation of the specific characteristics of each property and the acquired tenant lease(s). Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes estimates of lost rents at market rates during the hypothetical expected lease-up periods, which are dependent on local market conditions and expected trends. In estimating costs to execute similar leases, the Company considers leasing commissions, legal, and other related costs. As of December 31, 2023, the Company had gross below market lease liabilities of $7.3 million, accumulated amortization of $0.4 million and a weighted average remaining amortization period of 3 years.
Impairment of Long-Lived Assets—At each reporting period, the Company evaluates its real estate investments held for 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 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, 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.
For the years ended December 31, 2023 and 2022, the Company recorded an impairment charge of $36.3 million and $79.1 million, respectively. See Note 4, Impairment of Real Estate Investments, Asset Held For Sale, Net and Asset Sales, for additional information.
Other Real Estate Related Investments—Included in other real estate related investments on the Company’s consolidated balance sheets at December 31, 2023, areone preferred equity investment, eight real estate secured loans receivable andone mezzanine loan receivable. The Company elected the fair value option for all secured and mezzanine loans receivable. 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 interest rates and other credit enhancements. Interest income is recognized as earned within interest and other income in the consolidated statements of operations. The preferred equity investment is accounted for at unpaid principal balance, plus accrued return, net of reserves. The Company recognizes return income on a monthly basis based on the outstanding investment including any accrued and unpaid return, to the extent there is outside contributed equity or cumulative earnings from operations. As the preferred member of the joint venture, the Company is not entitled to share in the joint venture’s earnings or losses. Rather, the Company is entitled to receive a preferred return, which is deferred if the cash flow of the joint venture is insufficient to pay all of the accrued preferred return. The unpaid accrued preferred return is added to the balance of the preferred equity investment up to the estimated economic outcome assuming a hypothetical liquidation of the book value of the joint venture. Any unpaid accrued preferred return, whether recorded or unrecorded by the Company, will be repaid upon redemption or as available cash flow is distributed from the joint venture.
Prepaid expenses and other assets—Prepaid expenses and other assets consist of prepaid expenses, deposits, pre-acquisition costs and other loans receivable. During the year ended December 31, 2022, the Company determined that the remaining contractual obligations undertwo other loans receivable were not collectible and recorded a $4.6 million expected credit loss, net of a loan loss recovery of $0.8 million related to a loan previously written-off. The Company did not record an expected credit loss or recovery during the year ended December 31, 2023. 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 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 cash 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 sheets. For the unsecured revolving credit facility, deferred financing costs are included in assets on the Company’s consolidated balance sheets. Amortization of deferred financing costs is classified as interest expense in the consolidated statements of operations. Accumulated amortization of deferred financing costs was $4.8 million and $2.5 million at December 31, 2023 and 2022, 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 (loss) in the Company’s consolidated 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 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. 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 income (loss) reflects stock-based compensation expense of $5.2 million, $5.8 million and $10.8 million for the years ended December 31, 2023, 2022 and 2021, 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 13, 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 280, Segment Reporting. The Company hasone reportable segment consisting of investments in healthcare-related real estate assets.
Earnings Per Share—The Company calculates earnings 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—On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating its adoption timeline and the impact on its disclosures.
- REAL ESTATE INVESTMENTS, NET
The following table summarizes the Company’s investment in owned properties, and properties held in consolidated joint ventures, held for use at December 31, 2023 and 2022 (dollars in thousands):
| December 31, 2023 | December 31, 2022 | |
|---|---|---|
| Land | $279,276 | $238,738 |
| Buildings and improvements | 1,620,014 | 1,483,133 |
| Integral equipment, furniture and fixtures | 100,504 | 97,199 |
| Identified intangible assets | 5,283 | 2,832 |
| Real estate investments | 2,005,077 | 1,821,902 |
| Accumulated depreciation and amortization | (437,958) | (400,492) |
| Real estate investments, net | $1,567,119 | $1,421,410 |
As of December 31, 2023,94 of the Company’s 226 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 and were subsequently modified. 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, 2023, annualized contractual rental income from the Ensign Master Leases was $63.8 million and is 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 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). During the year ended December 31, 2020, the Company acquired four additional facilities leased to subsidiaries of Ensign on a triple-net basis under two separate master lease agreements, each of which contains a purchase option. As of December 31, 2023, annualized contractual rental income from thefour additional Ensign facilities was $4.0 million and is 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 (2) the prior year’s rent. In addition to rent, the subsidiaries of Ensign that are tenants under thefour additional facilities are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). The obligations under the lease agreements for thefour additional facilities are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases. See below under “Lease Amendments and Terminations” for further detail on Ensign lease amendments. Ensign provides a guaranty for properties leased to The Pennant Group, Inc. (“Pennant”) under the Pennant Master Lease (defined below), which represent $7.3 million of total annualized contractual rental income as of December 31, 2023.
As of December 31, 2023,15 of the Company’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 offifteen years, withtwo five-year renewal options. As of December 31, 2023, annualized contractual rental income from the PMG Master Lease was $31.2 million and is escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero) or 3.0%, 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, 2023,108 of the Company’s 226 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 fortwo of the Company’s 226 facilities which are being repurposed to behavioral health facilities. Two of the Company’s 226 facilities are non-operational and are leased under a long term lease with rent commencing 12 months following lease commencement. In addition, as of December 31, 2023, the master lease forone of the Company’s 226 facilities was terminated and the facility is non-operational while undergoing renovations. See below under “Lease Amendments and Terminations” for further detail. As of December 31, 2023,14 facilities were held for sale. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale, Net and Asset Sales for additional information.
As of December 31, 2023, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, assets held for sale and assets being repurposed, was as follows (dollars in thousands):
| Year | Amount |
|---|---|
| 2024 | $200,650 |
| 2025 | 201,648 |
| 2026 | 200,530 |
| 2027 | 197,378 |
| 2028 | 195,140 |
| Thereafter | 970,806 |
| $1,966,152 |
Tenant Purchase Options
Certain of the Company’s operators hold purchase options allowing them to acquire properties they currently lease from the Company. A summary of these purchase options is presented below (dollars in thousands):
| Asset Type(1) · Properties · Lease Expiration · Option Period Open Date(2) · Option Type(3) · Current Cash Rent(4) | |||||||
|---|---|---|---|---|---|---|---|
| SNF | 1 | March 2029 | 4/1/2022 | (5) | A / B(7) | $832 | |
| SNF / Campus | 1 | (8) | October 2032 | 1/1/2024 | (6) | A | 947 |
| SNF | 4 | November 2034 | 12/1/2024 | (5) | A | 3,988 | |
(1)Excludes a purchase option on an 11 building SNF portfolio classified as held for sale as of December 31, 2023 and representing $5.1 million of current cash rent. Tenant is currently not eligible to elect the option.
(2)The Company has not received notice of exercise for the option periods that are currently open.
(3)Option type includes:
A - Fixed base price.
B - Fixed capitalization rate on lease revenue.
(4)Based on annualized cash revenue for contracts in place as of December 31, 2023.
(5)Option window is open until the expiration of the lease term.
(6)Option window is open forsix months from the option period open date.
(7)Purchase option reflects two option types.
(8)Excludesone property classified as held for sale as of December 31, 2023 and subsequently sold in the first quarter of 2024.
Rental Income
The following table summarizes components of the Company’s rental income (dollars in thousands):
| For the Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Rental Income | |||
| Contractual rent due(1) | $198,244 | $188,906 | $190,100 |
| Straight-line rent | (29) | 17 | 32 |
| Amortization of below-market lease intangible | 384 | — | — |
| Adjustment for collectibility(2) | — | (1,417) | — |
| Lease termination revenue(3) | — | — | 63 |
| Total | $198,599 | $187,506 | $190,195 |
(1)Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company. For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received. Tenant operating expense reimbursements for the years ended December 31, 2023, 2022 and 2021 were $5.5 million, $2.8 million, and $3.6 million, respectively.
(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)In connection with the agreement to terminate its lease agreements with Metron Integrated Health Systems (“Metron”) and to sell the facilities to a third-party, the Company received certain lease termination payments from Metron.
Recent Real Estate Acquisitions
The following table summarizes the Company’s acquisitions for the years ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands):
| Type of Property · Purchase Price(1) · Initial Annual Cash Rent(2) · Number of Properties · Number of Beds/Units(3) | |||||
|---|---|---|---|---|---|
| Skilled nursing(4) (5) | $169,181 | $13,764 | 10 | 1,256 | |
| Multi-service campuses(5) | 25,276 | 1,916 | 1 | 168 | |
| Assisted living | 39,318 | 3,495 | 4 | 241 | |
| Total | $233,775 | $19,175 | 15 | 1,665 | |
| Skilled nursing | $8,918 | $815 | 1 | 135 | |
| Multi-service campuses | 13,003 | 1,235 | 1 | 130 | |
| Total | $21,921 | $2,050 | 2 | 265 | |
| Skilled nursing | $57,973 | $4,499 | 4 | 509 | |
| Multi-service campuses | 125,708 | 8,604 | (6) | 4 | 640 |
| Assisted living | 12,395 | — | (7) | 2 | 98 |
| Total | $196,076 | $13,103 | 10 | 1,247 | |
(4)Includes three SNFs held through joint ventures. See Note 11, Variable Interest Entities, for additional information. One SNF is currently leased under a short-term lease and a new long-term lease has been entered into with one of the Company’s existing operators and it is expected that this lease will become effective once regulatory approval is obtained. Initial annual cash rent does not consider a rent deferral of $420,000 in the first year upon commencement of the long-term lease to be repaid in 15 installments beginning in year 2. Thetwo other SNFs held through a joint venture are under separate leases with an initial annual rent of $2.0 million. The leases provide for a rent reset in which the joint venture may propose rent, capped at 10% of gross revenues, effective January 1, 2027. If the proposed rent reset is not accepted, the joint venture has the option to replace the current tenant.
(5)One acquisition including three SNFs andone multi-service campus provides for annual fixed increases from $6.8 million in year one to $7.6 million in year two and $8.9 million in year three.
(6)Initial annual cash rent represents the first twelve months of rent upon commencement of the Company’s long-term net leases, which occurred during the three months ended June 30, 2021, upon the tenant’s receipt of licensing approval and increases to $9.4 million in the second year with CPI-based annual escalators thereafter.
(7)Initial annual cash rent is zero until transfer of operations upon receipt of licensing approval.
Lease Amendments and Terminations
New Embassy Lease and Hillstone Lease Amendment and Termination. Effective January 1, 2024, the Company entered into a new triple-net master lease with Embassy Healthcare Holdings, Inc. (“Embassy”) with respect toone multi-service campus, formerly leased to an affiliate of Hillstone Healthcare, Inc. (“Hillstone”). The Embassy lease had an initial term at the date of the lease of approximately 10 years withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the lease is approximately $0.6 million and the master lease provides Embassy with a partial rent abatement until required authorizations with respect to the ALF portion of the facility are obtained and occupancy levels reach a certain percentage.
On March 24, 2023, the Company amended its master lease with affiliates of Hillstone. In connection with the lease amendment, the Company agreed to defer rent of approximately $0.7 million for 12 months from December 2022 through November 2023 to be repaid as a percentage of adjusted gross revenues of one underlying facility, as defined in the amended lease, beginning January 1, 2025, until deferred rent has been paid in full. On December 31, 2023, the Company terminated its master lease with Hillstone. Annual cash rent under the Hillstone master lease prior to lease termination was approximately $1.3 million. Hillstone paid a lease termination fee of approximately $0.8 million to cover unpaid contractual rent.
Noble NJ Lease Termination and New Ridgeline NJ Lease. On October 24, 2023, the Company entered into a new master lease (the “Ridgeline NJ Lease”) with affiliates of Ridgeline Properties, LLC (“Ridgeline”) to leasetwo ALFs in New Jersey which were non-operational and under a short-term lease (the “Noble NJ Lease”) which was terminated in connection with the Ridgeline NJ Lease. The Ridgeline NJ Lease had an initial term at the date of the lease of approximately 10 years from the facility opening date, which is expected to occur in the second quarter of 2024 upon final regulatory approval and final licensing of both facilities, withtwo five-year renewal options and CPI-based escalators. Annual cash rent under the Ridgeline NJ Lease is approximately $1.0 million beginning on the first day of the second lease year.
Premier Termination and Amended Ridgeline Lease. Effective September 1, 2023, six ALFs in Michigan and North Carolina were removed from the master lease with affiliates of Premier Senior Living, LLC (“Premier”) and the Company terminated the Premier master lease. Annual cash rent under the Premier master lease prior to lease termination was approximately $2.7 million. In connection with the lease termination, the Company amended its existing triple-net master lease with affiliates of Ridgeline with respect to thesix ALFs. The Ridgeline lease had a remaining term at the date of the lease amendment of approximately 15 years withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the amended lease increased by approximately $2.7 million. The amended lease provides for $0.2 million in rent abatement and a $0.2 million rent deferral to be repaid beginning in December 2024.
Amended Pennant Lease. On July 6, 2023, the Company amended its master lease with affiliates of Pennant (the “Pennant Master Lease”). In connection with the lease amendment, the Company extended the initial lease term. The Pennant Master Lease, as amended, had a remaining term at the date of amendment of approximately 15 years, withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the amended Pennant Master Lease remained unchanged.
Amended Momentum Lease. On April 1, 2023, the Company acquiredone SNF. In connection with the acquisition, the Company amended its existing triple-net master lease with affiliates of Momentum Skilled Services (“Momentum”) to include theone SNF and extended the initial lease term. The Momentum master lease, as amended, had a remaining term at the date of amendment of approximately 15 years, withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the amended lease increased by approximately $1.0 million.
Noble VA Lease Termination and New Pennant Lease. Effective March 16, 2023, two ALFs in Wisconsin were removed from a master lease with affiliates of Noble VA Holdings (“Noble VA”) and the Company terminated the applicable Noble VA master lease. Annual cash rent under the applicable Noble VA master lease prior to lease termination was approximately $2.3 million. In connection with the lease termination, the Company entered into a new lease (the “New Pennant Lease”) with Pennant with respect to thetwo ALFs. The New Pennant Lease had an initial term at the date of the lease of approximately 15 years withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the new lease was approximately $0.8 million and the master lease provides Pennant with three months deferred rent to be repaid before the expiration or termination of the lease.
Noble Partial Lease Termination and New Landmark Leases. In June and August of 2022, one ALF in Florida andone ALF in Maryland were removed from a master lease with affiliates of Noble Senior Services (“Noble”) and the Company amended the applicable Noble master lease to reflect the removal of thetwo ALFs. Annual cash rent under the applicable Noble master lease decreased by approximately $1.1 million. In connection with the partial lease termination, the Company entered into a lease with Landmark Recovery of Maryland, LLC and Landmark Recovery of Florida, LLC (collectively “Landmark”) to repurpose the facilities to behavioral health treatment centers. Rent under the leases will commence 12 -18 months following commencement of the lease term or, if earlier, upon Landmark obtaining all licensure, permits, and other required regulatory authorizations with respect to operating the facility. The leases will expire on the 20 th anniversary of the rent commencement date and both containone 10-year renewal option and CPI-based rent escalators.
Pennant Partial Lease Termination and Amended Ensign Master Leases. On April 1, 2022, operations attwo ALFs in California and Washington operated by Pennant were transferred to Ensign. In connection with the transfers, the Company amended the Pennant Master Lease to reflect the removal of thetwo ALFs and amendedtwo existing Ensign Master Leases to include thetwo ALFs. The applicable Ensign Master Leases, as amended, had a remaining term at the date of amendment of approximately five years and 16 years, respectively, both with three five-year renewal options and CPI-based rent escalators. Annual 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 Pennant Master Lease, as amended, decreased by $0.8 million.
On March 1, 2022, operations atone ALF in Arizona operated by affiliates of Pennant were transferred to affiliates of Ensign. In connection with the transfer, the Company amended the Pennant Master Lease to reflect the removal of the ALF and amended an existing Ensign Master Lease to include theone ALF. The applicable Ensign Master Lease, as amended, had a remaining term at the date of amendment of approximately 11 years, withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the applicable Ensign Master Lease, as amended, increased by approximately $0.3 million and annual cash rent under the Pennant Master Lease, as amended, decreased by the same amount.
Amended Eduro Master Lease. On February 1, 2022, the Company acquiredone SNF. In conjunction with the acquisition, the Company amended its existing triple-net master lease with affiliates of Eduro Healthcare, LLC (“Eduro”) to include theone SNF and extended the initial lease term. The Eduro master lease, as amended, had a remaining term at the date of amendment of approximately 12 years, withtwo 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 acquiredone 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 theone multi-service campus. The WLC master lease, as amended, had a remaining term at the date of amendment of approximately 12 years, withtwo 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 itstwo 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 acquiretwo 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 thetwo facilities. The Company closed on the acquisition of thetwo facilities in December 2021 and the deferred rent, as well as all contractual rent for the fourth quarter of 2021, was paid in full. Thetwo facilities were leased back to Noble under a short-term lease agreement while the Company pursued other tenants for the long-term.
Amended Ensign Master Lease. On August 1, 2021, the Company acquiredtwo skilled nursing facilities. The facilities were leased to affiliates of Ensign. In conjunction with the acquisition of thetwo facilities, the Company amended and extended the initial term of an existing Ensign Master Lease to include thetwo skilled nursing facilities. The Ensign Master Lease, as amended, had a remaining term at the date of amendment of approximately 17 years, with three five-year renewal options and CPI-based rent escalators. Annual cash rent under the amended lease increased by approximately $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.
Five Oaks Lease Termination and Amended Ensign Master Lease. On June 1, 2021, operating affiliates of Ensign acquired certain operations and assets of Five Oaks Healthcare, LLC (“Five Oaks”) under an agreement with Five Oaks. The agreement granted Ensign the right to occupy and operate four of the Company’s skilled nursing facilities in Washington that were previously being operated by Five Oaks. In conjunction with consenting to the transfer, the Company terminated the existing Five Oaks master lease, and amended and extended the term of an existing triple-net master lease with Ensign to include thefour skilled nursing facilities. The Ensign lease, as amended, had a remaining term at the date of amendment of approximately 15 years, with three five-year renewal options and CPI-based rent escalators. Annual cash rent under the terminated Five Oaks master lease was approximately $2.6 million, and annual cash rent under the amended Ensign lease increased by the same amount.
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 were transferred to affiliates of Noble VA. In connection with the transfer, the Company partially terminated the Premier master lease and amended the existing triple-net master lease with Noble VA to include thetwo assisted living facilities. The Noble VA master lease, as amended, had a remaining term at the date of amendment of approximately 13 years, withtwo 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 approximately $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 “Noble VA Lease Termination and New Pennant Lease” and “Amended Noble Master Leases and New Noble NJ Master Lease” for additional information regarding the Company’s leases with Noble.
- IMPAIRMENT OF REAL ESTATE INVESTMENTS, ASSETS HELD FOR SALE, NET AND ASSET SALES
Impairment of Real Estate Investments Held for Sale
During the year ended December 31, 2023, the Company recognized aggregate impairment charges of $36.3 million, of which $26.8 million related to properties held for sale, $8.0 million related to properties held for investment, and $1.5 million related to properties that were sold. During the year ended December 31, 2022, the Company recognized aggregate impairment charges of $79.1 million, of which $14.4 million related to properties held for sale, $19.7 million related to properties held for investment, and $45.0 million related to properties that were sold. These charges are reported in impairment of real estate investments in the consolidated statements of operations. During the year ended December 31, 2021, the Company didnot recognize any impairment charges.
As of December 31, 2023, there were 14 facilities classified as held for sale, all of which have been marked down to fair value less estimated costs to sell.
The fair values of the assets held for sale were based on estimated sales prices, which are considered to be Level 3 measurements within the fair value hierarchy. Estimated sales prices were determined using a market approach (comparable sales model), which relies on certain assumptions by management, including: (i) comparable market transactions, (ii) estimated prices per unit, and (iii) binding agreements for sales and non-binding offers to purchase from unrelated third-parties. There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations on assets held for sale during the twelve months ended December 31, 2023, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $8,000 to $85,000, with a weighted average price per unit of $20,000. For the Company’s impairment calculations on assets held for sale during the twelve months ended December 31, 2022, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $20,000 to $85,000, with a weighted average price per unit of $55,000.
Impairment of Real Estate Investments Held for Investment
During the year ended December 31, 2023, the Company recognized an impairment charge of $8.0 million related toone SNF. The Company wrote down its carrying value of $8.7 million to its estimated fair value of $0.7 million, which is included in real estate investments, net on the Company’s consolidated balance sheets. The fair value of the asset was based on comparable market transactions and considered Level 3 measurements within the fair value hierarchy. For the Company’s impairment calculation, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit of $7,000.
During the year ended December 31, 2022, the Company recognized an impairment charge of $1.7 million related toone SNF. The Company wrote down its carrying value of $2.8 million to its estimated fair value of $1.1 million, which is included in real estate investments, net on the Company’s condensed consolidated balance sheets. The fair value of the asset was based on comparable market transactions and considered Level 3 measurements within the fair value hierarchy. For the Company’s impairment calculation, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit of $20,000.
During the third quarter of 2022, the Company determined thatone 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 $4.9 million, or a weighted average price per unit of $125,000. During the year ended December 31, 2022, the Company recognized approximately $1.4 million in impairment charges related to thisone ALF.
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 at September 30, 2022, no longer met the held for sale criteria. The Company reclassified thenine 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 year ended December 31, 2022, the Company recognized approximately $16.6 million in impairment charges related to these nine ALFs. The fair value of assets reclassified as real estate investments held for use was 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, which are considered to be Level 3 measurements within the fair value hierarchy. There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations, the Company’s fair value estimates primarily relied on an income approach. When utilizing an income approach, assumptions include, but are not limited to, terminal capitalization rates ranging from 7.5% to 8.75% and discount rates ranging from 8.5% to 9.75%.
Asset Sales and Held for Sale Reclassifications
The following table summarizes the Company’s dispositions for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands):
| Twelve Months Ended December 31, | |||||
|---|---|---|---|---|---|
| 2023 | 2022(1) | 2021(1) | |||
| Number of facilities | 5 | 13 | 1 | ||
| Net sales proceeds(2) | $18,313 | $57,149 | $7,178 | ||
| Net carrying value | 16,095 | 60,918 | 7,255 | ||
| Net gain (loss) on sale | $2,218 | $(3,769) | $(77) | ||
(1)Net sales proceeds, net carrying value and net gain (loss) on sale also reflect a land parcel that was sold in each of the years ended December 31, 2022 and 2021, which is not included in the number of facilities.
(2)Net sales proceeds includes $2 million of seller financing in connection with the sale ofone ALF in June 2023. Net sales proceeds includes $12 million of seller financing in connection with the sale ofsix SNFs andone multi-service campus in September 2022.
The following table summarizes the Company’s assets held for sale activity for the year ended December 31, 2023 (dollars in thousands):
| Net Carrying Value | Number of Facilities | |
|---|---|---|
| December 31, 2022 | $12,291 | 5 |
| Additions to assets held for sale | 47,114 | 14 |
| Assets sold | (16,095) | (5) |
| Impairment of real estate held for sale | (28,299) | — |
| December 31, 2023 | $15,011 | 14 |
- OTHER REAL ESTATE RELATED AND OTHER INVESTMENTS
As of December 31, 2023 and 2022, the Company’s other real estate related investments, at fair value, consisted of the following (dollar amounts in thousands):
| Investment · Facility Count and Type · Principal Balance as of December 31, 2023 · Fair Value as of December 31, 2023 · Fair Value as of December 31, 2022 · Weighted Average Contractual Interest Rate · Maturity Date | |||||||
|---|---|---|---|---|---|---|---|
| Mortgage secured loans receivable | 30 SNF, 3 ALF, 2 Campus & ILF | $165,197 | $156,769 | $117,684 | 8.9% | (1), (2) | 5/31/2024 - 6/29/2033 |
| Mezzanine loans receivable | 18 SNF/Campus | 25,000 | 21,799 | 38,684 | 11.0% | 6/30/2032 | |
| Total | $190,197 | $178,568 | $156,368 | ||||
(1)Rates are net of subservicing fee, if applicable.
(2)Two mortgage secured loans receivable use term secured overnight financing rate (“SOFR”). Term SOFR used as of December 31, 2023 was 5.35%. Rates are net of subservicing fees.
The following table summarizes the Company’s other real estate related investments activity for the years ended December 31, 2023, 2022, and 2021 (dollars in thousands):
| For the Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Origination of other real estate related investments | $53,834 | $147,150 | $— |
| Accrued interest, net | 388 | 1,165 | 155 |
| Unrealized loss on other real estate related investments, net | (6,485) | (7,102) | — |
| Prepayments of other real estate related investments | (25,537) | — | — |
| Net increase in other real estate related investments, at fair value | $22,200 | $141,213 | $155 |
2023 Other Real Estate Related Investment Transactions
On December 15, 2023, a partial payment of $10.5 million was made onone $22.3 million mortgage loan receivable. See below under “2022 Other Real Estate Related Investment Transactions” for further detail. On March 30, 2023, one $15.0 million mezzanine loan was prepaid in full. The $15.0 million mezzanine loan was originated in 2020 fornine skilled nursing facilities secured by membership interests in the borrower, with an annual interest rate of 12%.
On November 29, 2023, the Company extended a $6.3 million mortgage loan to an assisted living real estate owner. The mortgage loan is secured byone ALF and bears interest at a rate of 9.9%. The mortgage loan is set to mature on June 1, 2026, withtwo six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee of 2% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with the loan being refinanced pursuant to a loan (or loans) provided by Fannie Mae, Freddie Mac, Federal Housing Administration, or a similar governmental authority. The Company elected the fair value option for the mortgage loan.
On September 29, 2023, the Company extended a $3.6 million mortgage 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). The Company’s $3.6 million secured mortgage loan constituted the entirety of the “B” tranche with its payments subordinated accordingly and bears interest at a rate of 12.0%. The mortgage loan is secured bythree SNFs. The mortgage loan is set to mature on September 29, 2026, withtwo six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 0% to 2% of any proposed financing in connection with the loan being refinanced by the U.S. Department of Housing and Urban Development (“HUD”). The Company elected the fair value option for the mortgage loan.
On July 17, 2023, the Company extended a $15.7 million mortgage loan to a skilled nursing real estate owner. The mortgage loan is secured bytwo SNFs and bears interest at a rate of 9.0%. The mortgage loan is set to mature on August 1, 2028, withone five-year extension option and may (subject to certain restrictions) be prepaid in whole 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 the loan being refinanced pursuant to a loan (or loans) provided by Fannie Mae, Freddie Mac, Federal Housing Administration, or a similar governmental authority. The Company elected the fair value option for the mortgage loan.
On June 29, 2023, the Company extended a $26.0 million mortgage loan to a skilled nursing real estate owner. The mortgage loan is secured byone SNF campus andone ILF and bears interest at a rate of 9.0%. The mortgage loan is set to mature on June 29, 2033 and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 0% to 3% of the loan plus unpaid interest payments. The Company elected the fair value option for the mortgage loan.
On June 1, 2023, the Company closed on the sale ofone ALF. In connection with the sale, the Company provided affiliates of the purchaser of the properties with a $2.0 million mortgage loan which bears interest at a rate of 9.0%. The mortgage loan is secured by the ALF and is set to mature on May 31, 2024. The mortgage loan has aone-year extension option and may be prepaid in whole before the maturity date. The Company elected the fair value option for the mortgage loan.
2022 Other Real Estate Related Investment Transactions
In September 2022, the Company 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). The Company’s $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 byfour skilled nursing facilities operated by an operator in the Southeast. The “B” tranche secured term loan is set to mature on September 8, 2025, withtwo 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 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 1.0% and less a subservicing fee of 100% over 9.00%. The “B” tranche secured term loan requires monthly interest payments. The Company elected the fair value option for the “B” tranche secured term loan.
In August 2022, the Company 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). The Company’s $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 byfive skilled nursing facilities, four of which are operated by an existing operator andone of which is operated by a large, regional skilled nursing operator. The “B” tranche secured term loan is set to mature on August 1, 2025, withtwo 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 HUD, Federal Housing Administration, or a similar governmental authority. The "B" tranche secured term loan bears interest at a rate based on term secured overnight financing rate, 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 1.0% and less a subservicing fee of 50% over 8.25%. The “B” tranche secured term loan requires monthly interest payments. The Company elected the fair value option for the “B” tranche secured term loan. In December 2023, in accordance with the terms and conditions set forth in the loan agreement, the borrower elected to cause one of the skilled nursing facilities to be released from the loan, and in connection with the same, the borrower partially prepaid the loan in the amount of $10.5 million.
In June 2022, the Company 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). 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 loan being refinanced pursuant to a loan (or loans) provided by or insured by HUD, 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 managed.
Preferred Equity Investment
In December 2023, the Company completed a $1.8 million preferred equity investment in E3 Acquisition, LLC, which owns the borrowers under the $3.6 million mortgage loan noted above under “2023 Other Real Estate Related Investment Transactions.” The preferred equity investment yields a return of 15% calculated on the outstanding carrying value of the investment. The preferred equity investment is expected to be repaid with proceeds from the refinancing of the Company’s $3.6 million mortgage loan with HUD, provided, however, that if the repayment occurs sooner than 15 months from the investment date, the Company will receive the amount had the preferred equity investment remained outstanding for the full 15 months.
Other Loans Receivables
As of December 31, 2023 and 2022, 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):
| Investment | Principal Balance as of December 31, 2023 | Book Value as of December 31, 2023 | Book Value as of December 31, 2022 | Weighted Average Contractual Interest Rate | Maturity Date |
|---|---|---|---|---|---|
| Other loans receivable | $17,094 | $17,156 | $9,600 | 8.8% | 6/30/2024 - 5/31/2026 |
| Expected credit loss | — | (2,094) | (2,094) | ||
| Total | $17,094 | $15,062 | $7,506 | ||
The following table summarizes the Company’s other loans receivable activity for theyears ended December 31, 2023, 2022 and 2021 (dollars in thousands):
| For the Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Origination of loans receivable | $8,486 | $14,500 | $1,253 |
| Principal payments | (988) | (6,307) | (393) |
| Accrued interest, net | 58 | (4) | (6) |
| Provision for loan losses, net | — | (3,844) | — |
| Net increase in other loans receivable | $7,556 | $4,345 | $854 |
Expected credit losses and recoveries are recorded in provision for loan losses, 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 totwo other loans receivable that have been placed on non-accrual status, including an unfunded loan commitment of $0.4 million, net of a loan loss recovery of $0.8 million related to a loan previously written-off. During the year ended December 31, 2022, the Company fully reserved and wrote-off $2.5 million, related toone other loan receivable, in connection with the sale ofsix SNFs andone multi-service campus. During the years ended December 31, 2023 and 2021, the Company hadno additional expected credit loss and did not consider any loan receivable investments to be impaired.
The following table summarizes the interest and other income recognized from the Company’s loans receivable and other investments during the years ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands):
| For the Year Ended December 31, | |||
|---|---|---|---|
| Investment | 2023 | 2022 | 2021 |
| Mortgage secured loans receivable | $13,329 | $4,853 | $— |
| Mezzanine loans receivable | 3,683 | 3,489 | 1,825 |
| Preferred equity investments | 18 | — | — |
| Other loans receivable | 847 | 284 | 331 |
| Other | 1,294 | — | — |
| Total | $19,171 | $8,626 | $2,156 |
- 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.
Items Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s assets measured at fair value on a recurring basis as of December 31, 2023 and 2022, 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, 2023 | |
|---|---|---|---|---|
| Assets: | ||||
| Mortgage secured loans receivable | $— | $— | $156,769 | $156,769 |
| Mezzanine loan receivable | — | — | 21,799 | 21,799 |
| Total | $— | $— | $178,568 | $178,568 |
| 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 |
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, 2022 | $117,684 | $38,684 |
| Loan originations | 53,834 | — |
| Accrued interest, net | 543 | (155) |
| Unrealized losses on other real estate related investments, net | (4,755) | (1,730) |
| Repayments | (10,537) | (15,000) |
| Balance as of December 31, 2023 | $156,769 | $21,799 |
Real estate secured and mezzanine loans receiv able: 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, 2023, the Company recorded an unrealized loss of $8.1 million on the Company’s secured and mezzanine loans receivable due to rising interest rates and a $0.3 million loss due to a loan origination fee paid, partially offset by unrealized gains of $0.7 million due to a decrease in projected forward interest rates and a reversal of a previously recognized unrealized loss of $1.2 million related to the repayment ofone mezzanine loan receivable and partial repayment ofone mortgage loan receivable. During the year ended December 31, 2022, the Company recorded an unrealized loss of $7.1 million on the Company’s secured and 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 the secured and mezzanine loans receivable. As of December 31, 2023 and 2022, 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 Level 3 fair value measurements comprising the investments in secured and mezzanine loans receivables as of December 31, 2023:
| Type | Book Value as of December 31, 2023 | Valuation Technique | Unobservable Inputs | Range |
|---|---|---|---|---|
| Mortgage secured loans receivable | $156,769 | Discounted cash flow | Discount Rate | 10% - 15% |
| Mezzanine loan receivable | 21,799 | Discounted cash flow | Discount Rate | 12% - 15% |
For the year ended December 31, 2023, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.
Items Measured at Fair Value on a Non-Recurring Basis
Real Estate Investments: The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of its real estate assets may not be recoverable. The Company estimates fair values using Level 3 inputs and uses a combined income and market approach. Specifically, 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. For the years ended December 31, 2023 and 2022, the Company recorded impairment charges of $36.3 million and $79.1 million, respectively. For the year ended December 31, 2021, there wereno 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 value, carrying amount and fair value of the Notes (as defined in Note 7, Debt, below) as of December 31, 2023 and 2022 using Level 2 inputs is as follows (dollars in thousands):
| December 31, 2023 · December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|
| Level | FaceValue | CarryingAmount | FairValue | FaceValue | CarryingAmount | FairValue | |
| Financial assets: | |||||||
| Preferred equity investment | 3 | $1,782 | $1,801 | $1,801 | $— | $— | $— |
| Financial liabilities: | |||||||
| Senior unsecured notes payable | 2 | $400,000 | $396,039 | $362,500 | $400,000 | $395,150 | $345,036 |
Cash and cash equivalents, accounts and other receivables, accounts payable, and accrued liabilities: The carrying values for these instruments approximate their fair values due to the short-term nature of these instruments.
Preferred equity investments: The fair value of the preferred equity investment was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. The Company utilized discount rates ranging from 14% to 16% with a weighted average of 15% in its fair value calculation. As such, the Company classifies these instruments as Level 3.
Senior unsecured notes payable: The fair value ofthe Notes was determined using third-party quotes derived from orderly trades.
Unsecured revolving credit facility and senior unsecured term loan: The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates and spreads for similar debt arrangements.
- DEBT
The following table summarizes the balance of the Company’s indebtedness as of December 31, 2023 and 2022 (dollars in thousands):
| December 31, 2023 | December 31, 2022 | |||||
|---|---|---|---|---|---|---|
| Principal | Deferred | Carrying | Principal | Deferred | Carrying | |
| Amount | Loan Fees | Amount | Amount | Loan Fees | Amount | |
| Senior unsecured notes payable | $400,000 | $(3,961) | $396,039 | $400,000 | $(4,850) | $395,150 |
| Senior unsecured term loan | 200,000 | (441) | 199,559 | 200,000 | (652) | 199,348 |
| Unsecured revolving credit facility(1) | — | — | — | 125,000 | — | 125,000 |
| $600,000 | $(4,402) | $595,598 | $725,000 | $(5,502) | $719,498 | |
(1)Deferred financing fees are included in deferred financing costs, net on the balance sheet, and not reflected as a reduction to the unsecured revolving credit facility.
Senior Unsecured Notes Payable
2028 Senior Notes. On June 17, 2021, the Company’s wholly owned subsidiary, CTR Partnership, L.P. (the “Operating Partnership”), and its wholly owned subsidiary, CareTrust Capital Corp. (together with the Operating Partnership, the “Issuers”) completed a private offering of $400.0 million aggregate principal amount of 3.875% Senior Notes due 2028 (the “Notes”) to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended. The Notes were issued at par, resulting in gross proceeds of $400.0 million and net proceeds of approximately $393.8 million after deducting underwriting fees and other offering expenses. The Notes mature on June 30, 2028. The Notes accrue interest at a rate of 3.875% per annum payable semiannually in arrears on June 30 and December 30 of each year, commencing on December 30, 2021.
The Issuers may redeem some or all of the Notes at any time prior to March 30, 2028 at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date, plus a “make-whole” premium. At any time on or after March 30, 2028, the Issuers may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount of the Notes redeemed plus accrued interest on the Notes, if any, to, but not including, the redemption date. In addition, at any time on or prior to June 30, 2024, up to 40% of the aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings at a redemption price of 103.875% of the aggregate principal amount of Notes to be redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date. If certain changes of control of the Company occur, the Issuers will be required to make an offer to holders of the Notes to repurchase their Notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date.
The obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by the Company and all of CareTrust’s existing and future subsidiaries (other than the Issuers) that guarantee obligations under the Amended Credit Facility (as defined below); provided, however, that such guarantees are subject to automatic release under certain customary circumstances.
The indenture governing the Notes contains customary covenants such as limiting the ability of the Company and its restricted subsidiaries to: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; enter into transactions with affiliates; merge or consolidate or sell all or substantially all of their assets; and create restrictions on the ability of the Issuers and their restricted subsidiaries to pay dividends or other amounts to the Issuers. The indenture governing the Notes also requires the Company and its restricted subsidiaries to maintain a specified ratio of unencumbered assets to unsecured indebtedness. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The indenture governing the Notes also contains customary events of default.
As of December 31, 2023, the Company was in compliance with all applicable financial covenants under the 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 December 16, 2022, the Operating Partnership, as the borrower, the Company, as guarantor, CareTrust GP, LLC, and certain of the Operating Partnership’s wholly owned subsidiaries, entered into a second amended and restated credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender ( as amended from time to time, the “Second Amended Credit Agreement”). The Second Amended Credit Agreement, which amends and restates the Company’s amended and restated credit and guaranty agreement, dated as of February 8, 2019 (as amended, the “Prior Credit Agreement”) provides for: (i) an unsecured revolving credit facility (the “Revolving Facility”) with revolving commitments in an aggregate principal amount of $600.0 million, including a letter of credit subfacility for 10% of the then available revolving commitments and a swingline loan subfacility for 10% of the then available revolving commitments and (ii) the continuation of the unsecured term loan credit facility which was previously extended under the Prior Credit Agreement (the “Term Loan” and together with the Revolving Facility, the “Second Amended Credit Facility”) in an aggregate principal amount of $200.0 million. Future borrowings under the Second Amended Credit Facility will be used for working capital purposes, for capital expenditures, to fund acquisitions and for general corporate purposes.
On October 10, 2023, the Operating Partnership, the Company, CareTrust GP, LLC, certain of the Operating Partnership’s wholly owned subsidiaries and KeyBank National Association entered into the First Amendment to the Second Amended Credit Agreement (the “First Amendment”). The First Amendment restates the definition of Consolidated Total Asset Value to include net proceeds from at-the-market forward commitments executed but not yet closed as of the relevant date as if such proceeds had actually been received.
The interest rates applicable to loans under the Revolving Facility are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.10% to 0.55% per annum or Adjusted Term SOFR or Adjusted Daily Simple SOFR (each as defined in the Second Amended Credit Agreement) plus a margin ranging from 1.10% to 1.55% per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt). The interest rates applicable to loans under the Term Loan are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.50% to 1.20% per annum or Adjusted Term SOFR or Adjusted Daily Simple SOFR plus a margin ranging from 1.50% to 2.20% per annum based on the debt to asset value ratio of the Company and its consolidated subsidiaries (subject to decrease at the Operating Partnership’s election if the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt). In addition, the Operating Partnership will pay a facility fee on the revolving commitments under the Revolving Facility ranging from 0.15% to 0.35% per annum, based on the debt to asset value ratio of the Company and its consolidated subsidiaries (unless the Company obtains certain specified investment grade ratings on its senior long-term unsecured debt and the Operating Partnership elects to decrease the applicable margin as described above, in which case the Operating Partnership will pay a facility fee on the revolving commitments ranging from 0.125% to 0.30% per annum based on the credit ratings of the Company’s senior long-term unsecured debt). As of December 31, 2023, the Operating Partnership had $200.0 million of borrowings outstanding under the Term Loan andno borrowings outstanding under the Revolving Facility.
The Revolving Facility has a maturity date of February 9, 2027, and includes, at the sole discretion of the Operating Partnership, two six-month extension options. The Term Loan has a maturity date of February 8, 2026.
The Second Amended Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Second Amended Credit Agreement (other than the Operating Partnership). The Second Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend organizational documents and pay certain dividends and other restricted payments. The Second Amended Credit Agreement requires the Company to comply with financial maintenance covenants to be tested quarterly, consisting of a maximum debt to asset value ratio, a minimum fixed charge coverage ratio, a minimum tangible net worth, a maximum cash distributions to operating income ratio, a maximum secured debt to asset value ratio, a maximum secured recourse debt to asset value ratio, a maximum unsecured debt to unencumbered properties asset value ratio, a minimum unsecured interest coverage ratio and a minimum rent coverage ratio. The Second Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Second Amended Credit Facility or other material indebtedness, the failure to satisfy certain covenants (including the financial maintenance covenants), the occurrence of change of control and specified events of bankruptcy and insolvency.
As of December 31, 2023, the Company was in compliance with all applicable financial covenants under the Second Amended Credit Agreement.
Schedule of Debt Maturities
As of December 31, 2023, the Company’s debt maturities were (dollars in thousands):
| Year | Amount |
|---|---|
| 2024 | $— |
| 2025 | — |
| 2026 | 200,000 |
| 2027 | — |
| 2028 | 400,000 |
| Thereafter | — |
| $600,000 |
- EQUITY
Common Stock
At-The-Market Offering—On February 24, 2023, the Company entered into an equity distribution agreement to issue and sell, from time to time, up to $500.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “Previous ATM Program”). On September 15, 2023, the Company terminated the Previous ATM Program and entered into a new equity distribution agreement to issue and sell, from time to time, up to $500.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “New ATM Program” and together with the Previous ATM Program, the “ATM Program”). In addition to the issuance and sale of shares of its common stock, the Company may also enter into one or more forward sales agreements (each, an “ATM forward contract”) with sales agents for the sale of the Company’s shares of common stock under the ATM Program.
The Company expects to fully physically settle forward equity sales by delivery of shares of common stock to the forward purchaser and receive cash proceeds upon one or more settlement dates, which are typically a one-year term, at the Company’s discretion, prior to the final settlement date, at which time the Company expects to receive aggregate net cash proceeds at settlement equal to the number of shares sold on a forward basis multiplied by the relevant forward price per share. The weighted average forward sale price that the Company expects to receive upon physical settlement will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends through the settlement. There were no outstanding ATM forward contracts that had not settled as of December 31, 2023.
The following tables summarize ATM Program activity (or activity under any predecessor at-the-market equity offering programs) for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share amounts):
| For the Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Number of shares | 30,869 | 2,405 | 990 |
| Average sales price per share | $20.86 | $20.00 | $23.74 |
| Gross proceeds(1) | $643,802 | $48,100 | $23,505 |
(1)Total gross proceeds is before $8.3 million, $0.6 million, and $0.3 million of commissions paid to the sales agents and forward adjustments during the years ended December 31, 2023, 2022 and 2021, respectively, under the ATM Program. In addition, total gross proceeds is before other costs related to the ATM Program.
As of December 31, 2023, the Company had $274.1 million available for future issuances under the ATM Program.
Dividends on Common Stock —The following table summarizes the cash dividends per share of common stock declared by the Company’s board of directors for 2023, 2022 and 2021 (dollars in thousands, except per share amounts):
| For the Three Months Ended | ||||
|---|---|---|---|---|
| 2023 | March 31, | June 30, | September 30, | December 31, |
| Dividends declared per share | $0.28 | $0.28 | $0.28 | $0.28 |
| Dividends payment date | April 14, 2023 | July 14, 2023 | October 13, 2023 | January 12, 2024 |
| Dividends payable as of record date[1] | $27,846 | $27,853 | $32,403 | $36,531 |
| Dividends record date | March 31, 2023 | June 30, 2023 | September 29, 2023 | December 29, 2023 |
| 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 |
| 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 |
(1)Dividends payable includes dividends on performance stock awards that will be paid if and when the shares subject to such awards vest if deemed probable of meeting their performance condition.
- STOCK-BASED COMPENSATION
All stock-based awards are subject to the terms of the CareTrust REIT, Inc. and CTR Partnership, L.P. Incentive Award Plan (the “Plan”). The Plan provides for the granting of stock-based compensation, including stock options, restricted stock, performance awards, restricted stock units, relative total stockholder return-based stock awards and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company. Under the Plan,5,000,000 shares have been authorized for awards.
Under the Plan, restricted stock awards (“RSAs”) vest in equal annual installments over athree year period for the RSAs granted after 2020 and afour year period for the RSAs granted in 2020. RSAs granted to non-employee members of the board of directors (“Board Awards”) vest in full on the earlier to occur of the Company’s next Annual Meeting of Stockholders orone year. Performance stock awards (“PSAs”) granted are subject to both time and performance based conditions and vest over aone-tothree year period for PSAs granted in 2021 and over aone-to-four year period for PSAs granted in 2020. The amount of such PSAs that will ultimately vest is dependent on the Company’s Normalized Funds from Operations (“NFFO”) per share, as defined by the Compensation Committee, meeting or exceeding a specified per share amount for the applicable vesting period. Relative total shareholder return units (“TSR Units”) granted since 2021 are subject to both time and market based conditions and cliff vest after athree-year period. The amount of such market awards that will ultimately vest is dependent on the Company’s total shareholder return (“TSR”) performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs and will range from 0% to 200% of the TSR Units initially granted. The RSAs, PSAs, and Board Awards are valued on the date of grant based on the closing price of the Company’s common stock, while the TSR Units are valued on the date of grant using a Monte Carlo valuation model. The vesting of certain awards may accelerate, as defined in the grant agreement, upon retirement, a change in control or other events.
The following table summarizes the status of the restricted stock award and performance award activity for the year ended December 31, 2023:
| Shares | Weighted Average Share Price | |
|---|---|---|
| Unvested balance at December 31, 2022 | 573,609 | $20.63 |
| Granted: | ||
| RSAs | 166,122 | 22.41 |
| Board Awards | 24,768 | 19.38 |
| Vested | (185,767) | 20.94 |
| Forfeited | (68,136) | 20.85 |
| Unvested balance at December 31, 2023 | 510,596 | $21.01 |
As of December 31, 2023, the weighted-average remaining vesting period of such awards was 1.7 years.
The following table summarizes the Company’s RSAs and Board Awards grants during the year ended December 31, 2023 (dollars in thousands, except per share amounts):
| Grants · Vested | |||||
|---|---|---|---|---|---|
| Shares | Weighted Average Share Price | Grant Date Fair Value | Shares | Vest Date Fair Value | |
| During year ended December 31, 2023(1) | |||||
| RSAs | 166,122 | $22.41 | $3,722 | 138,438 | $2,855 |
| PSAs | — | — | — | 21,337 | 438 |
| Board Awards | 24,768 | 19.38 | 480 | 25,992 | 504 |
(1)The Compensation Committee granted annual awards for 2024 in December 2023.
The following table summarizes the Company’s RSA, PSA and Board Award grants during the years ended December 31, 2022 and 2021 (dollars in thousands, except per share amounts):
| Grants | |||
|---|---|---|---|
| Shares | Weighted Average Share Price | Grant Date Fair Value | |
| During year ended December 31, 2022(1) | |||
| RSAs | 159,663 | $19.56 | $3,123 |
| Board Awards | 25,992 | 16.93 | 440 |
| During year ended December 31, 2021(2) | |||
| RSAs | 394,863 | $21.92 | $8,654 |
| PSAs | 108,414 | 22.48 | 2,437 |
| Board Awards | 20,266 | 24.18 | 490 |
(1)The Compensation Committee granted annual awards for 2023 in December 2022.
(2)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 datefor 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 years ended December 31, 2023, 2022 and 2021:
| For the Year Ended December 31, 2023 | For the Year Ended December 31, 2022 | For the Year Ended December 31, 2021 | |
|---|---|---|---|
| Risk-free interest rate | 4.08% | 3.91% | 0.60% |
| Expected stock price volatility | 26.44% | 52.90% | 52.42% |
| Expected service period | 3.04 years | 3.04 years | 2.93 years |
| Expected dividend yield (assuming full reinvestment) | —% | —% | —% |
| Fair value per share at date of grant | $27.41 | $26.53 | $29.10 |
The total fair value of the TSR Units granted during the years ended December 31, 2023, 2022 and 2021 was $2.9 million, $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, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Stock-based compensation expense | $5,153 | $5,758 | $10,832 |
As of December 31, 2023, there was$10.4 million of unamortized stock-based compensation expense related to the unvested RSAs, PSAs, Board Awards, and TSR Units.
- EARNINGS (LOSS) PER COMMON SHARE
The following table presents the calculation of basic and diluted earnings (loss) per common share attributable to CareTrust REIT, Inc. (“EPS”) for the Company’s common stock for the years ended December 31, 2023, 2022 and 2021, 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, 2023, 2022 and 2021 (amounts in thousands, except per share amounts):
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Numerator: | |||
| Net income (loss) attributable to CareTrust REIT, Inc. | $53,735 | $(7,506) | $71,982 |
| Less: Net income allocated to participating securities | (400) | (440) | (507) |
| Numerator for basic and diluted earnings available to common stockholders | $53,335 | $(7,946) | $71,475 |
| Denominator: | |||
| Weighted-average basic common shares outstanding | 105,956 | 96,703 | 96,017 |
| Dilutive potential common shares - performance stock awards | 164 | — | 75 |
| Dilutive potential common shares - forward equity agreements | 32 | — | — |
| Weighted-average diluted common shares outstanding | 106,152 | 96,703 | 96,092 |
| Earnings (loss) per common share attributable to CareTrust REIT, Inc., basic | $0.50 | $(0.08) | $0.74 |
| Earnings (loss) per common share attributable to CareTrust REIT, Inc., diluted | $0.50 | $(0.08) | $0.74 |
| Antidilutive unvested restricted stock awards, total shareholder units, performance awards, and forward equity shares excluded from the computation | 475 | 744 | 591 |
- VARIABLE INTEREST ENTITIES
Noncontrolling Interests—The Company has entered into ventures with unrelated third parties to own real estate and has concluded that such ventures are VIEs. As the Company exercises power over and receives economic benefits from the VIEs, the Company is considered the primary beneficiary and consolidates the VIEs.
In August 2023, the Company entered into a joint venture (“JV”), pursuant to which the Company contributed $2.4 million into the JV, that was used to satisfy a deposit on a potential real estate acquisition.
In September 2023, the Company entered into a JV, pursuant to which the Company contributed $25.5 million into the JV that purchasedone SNF located in California for $26.1 million. The JV partner contributed the remaining $0.6 million of equity.
In October 2023, the Company entered into a JV, pursuant to which the Company contributed $34.3 million into the JV that purchasedtwo SNFs located in California for $35.1 million. The JV partner contributed the remaining $0.8 million of equity.
Pursuant to the Company’s JVs, the Company typically contributes 97.5% of the JVs total investment amount and the Company receives 100% of the preferred equity interest in the JV in exchange for 95% of that total investment and a 50% common equity interest in the JV in exchange for the remaining 2.5% of that investment. The JV partner contributes the remaining 2.5% of the JVs total investment amount in exchange for a 50% common ownership interest in the JV.
Total assets and total liabilities on the Company’s consolidated balance sheets include VIE assets and liabilities as follows (in thousands):
| December 31, 2023 | |
|---|---|
| Assets: | |
| Real estate investments, net | $68,106 |
| Prepaid and other assets | 2,800 |
| Total assets | 70,906 |
| Liabilities: | |
| Accounts payable, accrued liabilities and deferred rent liabilities | 7,239 |
| Total liabilities | $7,239 |
- COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of business, which are not individually or in the aggregate anticipated to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Claims and lawsuits may include matters involving general or professional liability asserted against the Company’s tenants, which are the responsibility of the Company’s tenants and for which the Company is entitled to be indemnified by its tenants under the insurance and indemnification provisions in the applicable leases.
In the normal course of business, the Company enters into various commitments, typically consisting of funding of capital expenditures and short-term working capital loans to existing tenants while they await licensure and certification or are conducting turnaround work in one or more of the Company’s properties.
Capital expenditures for each property leased under the Company’s triple-net leases are generally the responsibility of the tenant, except for the facilities leased under certain master lease agreements, with certain subsidiaries of Ensign and Pennant, under which the tenant will have an option to require the Company to finance certain capital expenditures up to an aggregate of 20% of the Company’s initial investment in such property, subject to a corresponding rent increase at the time of funding. For the Company’s other triple-net master leases, the tenants also have the option to request capital expenditure funding that would generally be subject to a corresponding rent increase at the time of funding, which are subject to tenant compliance with the conditions to the Company’s approval and funding of their requests. The Company has also provided select tenants with strategic capital for facility upkeep and modernization. The Company’s Tenant Code of Conduct and Corporate Responsibility policy (the “Tenant ESG Program”) provides eligible triple-net tenants of the Company with monetary inducements to make sustainable improvements to the Company’s properties. Incentive options include a wide variety of opportunities for tenants to upgrade everything from energy and environmental systems to water-saving landscaping and more. The Company’s board of directors has authorized annual allocations of up to $500,000 to fund the Tenant ESG Program.
The table below summarizes the Company’s existing, known commitments and contingencies as of December 31, 2023 (in thousands):
| Remaining Commitment | |
|---|---|
| Capital expenditures(1) | $9,206 |
| Mortgage loans(2) | 4,700 |
| $13,906 |
(1)As of December 31, 2023, the Company had committed to fund expansions, construction, capital improvements and ESG incentives at certain triple-net leased facilities totaling $9.2 million, of which $2.4 million is subject to rent increase at the time of funding.
(2)One mortgage loan includes an earnout advance upon satisfaction of certain conditions.
- CONCENTRATION OF RISK
Concentrations of credit risk arise when one or more tenants, operators, or obligors related to the Company’s investments are engaged in similar business activities or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions.
Major operator concentration – The Company has operators from which it derived 10% or more of its revenue for the years ended December 31, 2023, 2022 and 2021. The following table sets forth information regarding the Company’s major operators as of December 31, 2023, 2022 and 2021:
| Number of Facilities · Number of Beds/Units · Percentage of Total Revenue | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Operator(1) · SNF · Campus · ALF/ILF · SNF · Campus · ALF/ILF | |||||||||
| December 31, 2023(2) | |||||||||
| Ensign | 83 | 8 | 7 | 8,738 | 997 | 661 | 32% | ||
| PMG | 13 | 2 | — | 1,742 | 402 | — | 14% | ||
| December 31, 2022(3) | |||||||||
| Ensign | 83 | 8 | 7 | 8,741 | 997 | 661 | 35% | ||
| PMG | 13 | 2 | — | 1,742 | 402 | — | 16% | ||
| December 31, 2021(3) | |||||||||
| Ensign | 83 | 8 | 4 | 8,756 | 997 | 395 | 32% | ||
| PMG | 13 | 2 | — | 1,742 | 402 | — | 15% | ||
(1)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.
(2)The Company’s rental income and interest income on other real estate related investments, exclusive of operating expense reimbursements and adjustments for collectibility.
(3)The Company’s rental income, exclusive of operating expense reimbursements and adjustments for collectibility.
Major geographic concentration – The following table provides information regarding the Company’s concentrations with respect to certain states, from which the Company derived 10% or more of its revenue for the year ended December 31, 2023, 2022 and 2021:
| Number of Facilities · Number of Beds/Units · Percentage of Total Revenue | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| State · SNF · Campus · ALF/ILF · SNF · Campus · ALF/ILF | |||||||||
| December 31, 2023(1) | |||||||||
| CA | 40 | 9 | 8 | 4,615 | 1,527 | 656 | 28% | ||
| TX | 40 | 3 | 2 | 5,123 | 536 | 212 | 21% | ||
| December 31, 2022(2) | |||||||||
| CA | 27 | 8 | 5 | 3,048 | 1,359 | 437 | 26% | ||
| TX | 38 | 3 | 3 | 4,849 | 536 | 242 | 22% | ||
| December 31, 2021(2) | |||||||||
| CA | 27 | 8 | 5 | 3,048 | 1,359 | 449 | 25% | ||
| TX | 37 | 3 | 3 | 4,694 | 536 | 242 | 20% | ||
(1)Based on the Company’s rental income and interest income on other real estate related investments, exclusive of operating expense reimbursements and adjustments for collectibility.
(2)Based on the Company’s rental income, exclusive of operating expense reimbursements and adjustments for collectibility.
- SUBSEQUENT EVENTS
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 and Investments
On January 3, 2024, the Company contributed $10.7 million into a JV that purchasedone ALF located in California for $11.0 million. In exchange, the Company holds 100% of the preferred equity interests in the JV and 50% of the common equity interest in the JV. The JV partner contributed the remaining $0.3 million of the total investment in exchange for 50% of the common equity interest in the JV. The new lease has an initial term of approximately 10 years, with four five-year renewal options and 2% fixed rent escalators beginning in year 3. Annual cash rent under the lease is approximately $1.0 million.
On January 25, 2024, the Company extended a $9.8 million mezzanine loan to a skilled nursing real estate owner in connection with a portfolio often SNFs located in Missouri. The mezzanine loan is secured by a pledge of membership interests in an affiliate of the borrower. The loan bears interest at term SOFR plus 8.75%, with a term SOFR floor of 6%, payable monthly and net of a 0.75% subservicing fee. Commencing on February 1, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on July 25, 2027, withtwo six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 1% to 2% of the loan plus unpaid interest payments equal to 24 months (less the amount of monthly interest payments made by the borrower through the date of prepayment).
On February 1, 2024, the Company extended a $7.4 million mezzanine loan to a skilled nursing real estate owner forone SNF located in California. The mezzanine loan is secured by a pledge of membership interests in an affiliate of the borrower. The loan bears interest at 11.5%, payable monthly. The mezzanine loan is set to mature on January 31, 2029 and may (subject to certain limited exceptions) not be prepaid prior to the date that is 18 months following the loan closing.
On February 2, 2024, the Company extended a $35.0 million mezzanine loan to a skilled nursing real estate owner in connection with 15 SNFs located in Virginia. The mezzanine loan is secured by a pledge of membership interests in an affiliate of the borrower. The loan bears interest at term SOFR plus 8.75%, with a term SOFR floor of 6%, payable monthly and net of a 0.75% subservicing fee. Commencing on February 2, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on August 1, 2027, withtwo six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 1% to 2% of the loan plus unpaid interest payments equal to 18 months (less the amount of monthly interest payments made by the borrower through the date of prepayment).
New Lease Agreement
Effective January 1, 2024, in connection with the December 31, 2023 Hillstone lease termination, one multi-service campus was removed from the Hillstone master lease. In connection with the lease termination, the Company entered into a new lease with Embassy Healthcare Holdings, Inc. (“Embassy”) with respect to theone multi-service campus. The Embassy lease had an initial term at the date of the lease of approximately 10 years withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the lease is approximately $0.6 million and the master lease provides Embassy with a partial rent abatement until required authorizations with respect to the ALF portion of the facility are obtained and occupancy levels reach a certain percentage.
Asset Sales
Subsequent to December 31, 2023, the Company closed on the sale ofone SNF andone ALF with an aggregate carrying value of $1.0 million, which approximated the net sales proceeds received.
| Initial Cost to Company · Costs Capitalized Since Acquisition · Gross Carrying Value | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Description | Facility | Location | Encum. | Land | BuildingImprovs. | Improvs. | Land | BuildingImprovs. | 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 | $(1,549) | 2013 | 2000 |
| Meadowbrook Health Associates LLC | Sabino Canyon | Tucson, AZ | — | 425 | 3,716 | 1,940 | 425 | 5,656 | 6,081 | (3,700) | 2012 | 2000 |
| Terrace Holdings AZ LLC | Desert Terrace | Phoenix, AZ | — | 113 | 504 | 971 | 113 | 1,475 | 1,588 | (1,103) | 2004 | 2002 |
| Rillito Holdings LLC | Catalina | Tucson, AZ | — | 471 | 2,041 | 3,055 | 471 | 5,096 | 5,567 | (3,826) | 2013 | 2003 |
| Valley Health Holdings LLC | North Mountain | Phoenix, AZ | — | 629 | 5,154 | 1,519 | 629 | 6,673 | 7,302 | (4,630) | 2009 | 2004 |
| Cedar Avenue Holdings LLC | Upland | Upland, CA | — | 2,812 | 3,919 | 1,994 | 2,812 | 5,913 | 8,725 | (4,054) | 2011 | 2005 |
| Granada Investments LLC | Camarillo | Camarillo, CA | — | 3,526 | 2,827 | 1,522 | 3,526 | 4,349 | 7,875 | (3,150) | 2010 | 2005 |
| Plaza Health Holdings LLC | Park Manor | Walla Walla, WA | — | 450 | 5,566 | 1,055 | 450 | 6,621 | 7,071 | (4,660) | 2009 | 2006 |
| Mountainview Communitycare LLC | Park View Gardens | Santa Rosa, CA | — | 931 | 2,612 | 653 | 931 | 3,265 | 4,196 | (2,434) | 1963 | 2006 |
| CM Health Holdings LLC | Carmel Mountain | San Diego, CA | — | 3,028 | 3,119 | 2,071 | 3,028 | 5,190 | 8,218 | (3,571) | 2012 | 2006 |
| Polk Health Holdings LLC | Timberwood | Livingston, TX | — | 60 | 4,391 | 1,167 | 60 | 5,558 | 5,618 | (3,722) | 2009 | 2006 |
| Snohomish Health Holdings LLC | Emerald Hills | Lynnwood, WA | — | 741 | 1,663 | 1,998 | 741 | 3,661 | 4,402 | (2,986) | 2009 | 2006 |
| Cherry Health Holdings LLC | Pacific Care | Hoquiam, WA | — | 171 | 1,828 | 2,038 | 171 | 3,866 | 4,037 | (3,163) | 2010 | 2006 |
| Golfview Holdings LLC | Cambridge SNF | Richmond, TX | — | 1,105 | 3,110 | 1,067 | 1,105 | 4,177 | 5,282 | (2,704) | 2007 | 2006 |
| Tenth East Holdings LLC | Arlington Hills | Salt Lake City, UT | — | 332 | 2,426 | 2,507 | 332 | 4,933 | 5,265 | (3,872) | 2013 | 2006 |
| Trinity Mill Holdings LLC | Carrollton | Carrollton, TX | — | 664 | 2,294 | 902 | 664 | 3,196 | 3,860 | (2,670) | 2007 | 2006 |
| Cottonwood Health Holdings LLC | Holladay | Salt Lake City, UT | — | 965 | 2,070 | 958 | 965 | 3,028 | 3,993 | (2,706) | 2008 | 2007 |
| Verde Villa Holdings LLC | Lake Village | Lewisville, TX | — | 600 | 1,890 | 470 | 600 | 2,360 | 2,960 | (1,745) | 2011 | 2007 |
| Mesquite Health Holdings LLC | Willow Bend | Mesquite, TX | — | 470 | 1,715 | 8,632 | 441 | 10,376 | 10,817 | (8,813) | 2012 | 2007 |
| Arrow Tree Health Holdings LLC | Arbor Glen | Glendora, CA | — | 2,165 | 1,105 | 324 | 2,165 | 1,429 | 3,594 | (1,214) | 1965 | 2007 |
| Fort Street Health Holdings LLC | Draper | Draper, UT | — | 443 | 2,394 | 759 | 443 | 3,153 | 3,596 | (1,945) | 2008 | 2007 |
| Trousdale Health Holdings LLC | Brookfield | Downey, CA | — | 1,415 | 1,841 | 1,861 | 1,415 | 3,702 | 5,117 | (2,554) | 2013 | 2007 |
| Ensign Bellflower LLC | Rose Villa | Bellflower, CA | — | 937 | 1,168 | 357 | 937 | 1,525 | 2,462 | (1,096) | 2009 | 2007 |
| RB Heights Health Holdings LLC | Osborn | Scottsdale, AZ | — | 2,007 | 2,793 | 1,762 | 2,007 | 4,555 | 6,562 | (3,036) | 2009 | 2008 |
| San Corrine Health Holdings LLC | Salado Creek | San Antonio, TX | — | 310 | 2,090 | 719 | 310 | 2,809 | 3,119 | (1,648) | 2005 | 2008 |
| Temple Health Holdings LLC | Wellington | Temple, TX | — | 529 | 2,207 | 1,163 | 529 | 3,370 | 3,899 | (2,181) | 2008 | 2008 |
| Anson Health Holdings LLC | Northern Oaks | Abilene, TX | — | 369 | 3,220 | 1,725 | 369 | 4,945 | 5,314 | (3,108) | 2012 | 2008 |
| Willits Health Holdings LLC | Northbrook | Willits, CA | — | 490 | 1,231 | 500 | 490 | 1,731 | 2,221 | (1,078) | 2011 | 2008 |
| Lufkin Health Holdings LLC | Southland | Lufkin, TX | — | 467 | 4,644 | 782 | 467 | 5,426 | 5,893 | (2,063) | 1988 | 2009 |
| Lowell Health Holdings LLC | Littleton | Littleton, CO | — | 217 | 856 | 1,735 | 217 | 2,591 | 2,808 | (1,815) | 2012 | 2009 |
| Jefferson Ralston Holdings LLC | Arvada | Arvada, CO | — | 280 | 1,230 | 834 | 280 | 2,064 | 2,344 | (1,159) | 2012 | 2009 |
| Lafayette Health Holdings LLC | Julia Temple | Englewood, CO | — | 1,607 | 4,222 | 6,195 | 1,607 | 10,417 | 12,024 | (6,529) | 2012 | 2009 |
| Hillendahl Health Holdings LLC | Golden Acres | Dallas, TX | — | 2,133 | 11,977 | 1,421 | 2,133 | 13,398 | 15,531 | (7,046) | 1984 | 2009 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Price Health Holdings LLC | Pinnacle | Price, UT | — | 193 | 2,209 | 849 | 193 | 3,058 | 3,251 | (1,418) | 2012 | 2009 |
| Silver Lake Health Holdings LLC | Provo | Provo, UT | — | 2,051 | 8,362 | 2,011 | 2,051 | 10,373 | 12,424 | (4,037) | 2011 | 2009 |
| Jordan Health Properties LLC | Copper Ridge | West Jordan, UT | — | 2,671 | 4,244 | 1,507 | 2,671 | 5,751 | 8,422 | (2,353) | 2013 | 2009 |
| Regal Road Health Holdings LLC | Sunview | Youngstown, AZ | — | 767 | 4,648 | 155 | 193 | 5,377 | 5,570 | (2,587) | 2012 | 2009 |
| Paredes Health Holdings LLC | Alta Vista | Brownsville, TX | — | 373 | 1,354 | 190 | 373 | 1,544 | 1,917 | (589) | 1969 | 2009 |
| Expressway Health Holdings LLC | Veranda | Harlingen, TX | — | 90 | 675 | 430 | 90 | 1,105 | 1,195 | (594) | 2011 | 2009 |
| Rio Grande Health Holdings LLC | Grand Terrace | McAllen, TX | — | 642 | 1,085 | 870 | 642 | 1,955 | 2,597 | (1,214) | 2012 | 2009 |
| Fifth East Holdings LLC | Paramount | Salt Lake City, UT | — | 345 | 2,464 | 1,065 | 345 | 3,529 | 3,874 | (1,720) | 2011 | 2009 |
| Emmett Healthcare Holdings LLC | River's Edge | Emmet, ID | — | 591 | 2,383 | 69 | 591 | 2,452 | 3,043 | (1,018) | 1972 | 2010 |
| Burley Healthcare Holdings LLC | Parke View | Burley, ID | — | 250 | 4,004 | 424 | 250 | 4,428 | 4,678 | (1,986) | 2011 | 2010 |
| Josey Ranch Healthcare Holdings LLC | Heritage Gardens | Carrollton, TX | — | 1,382 | 2,293 | 478 | 1,382 | 2,771 | 4,153 | (1,206) | 1996 | 2010 |
| Everglades Health Holdings LLC | Victoria Ventura | Ventura, CA | — | 1,847 | 5,377 | 682 | 1,847 | 6,059 | 7,906 | (2,033) | 1990 | 2011 |
| Irving Health Holdings LLC | Beatrice Manor | Beatrice, NE | — | 60 | 2,931 | 245 | 60 | 3,176 | 3,236 | (1,374) | 2011 | 2011 |
| Falls City Health Holdings LLC | Careage Estates of Falls City | Falls City, NE | — | 170 | 2,141 | 82 | 170 | 2,223 | 2,393 | (895) | 1972 | 2011 |
| Gillette Park Health Holdings LLC | Careage of Cherokee | Cherokee, IA | — | 163 | 1,491 | 12 | 163 | 1,503 | 1,666 | (757) | 1967 | 2011 |
| Gazebo Park Health Holdings LLC | Careage of Clarion | Clarion, IA | — | 80 | 2,541 | 97 | 80 | 2,638 | 2,718 | (1,366) | 1978 | 2011 |
| Oleson Park Health Holdings LLC | Careage of Ft. Dodge | Ft. Dodge, IA | — | 90 | 2,341 | 759 | 90 | 3,100 | 3,190 | (2,025) | 2012 | 2011 |
| Arapahoe Health Holdings LLC | Oceanview | Texas City, TX | — | 158 | 4,810 | 759 | 128 | 5,599 | 5,727 | (2,659) | 2012 | 2011 |
| Dixie Health Holdings LLC | Hurricane | Hurricane, UT | — | 487 | 1,978 | 98 | 487 | 2,076 | 2,563 | (696) | 1978 | 2011 |
| Memorial Health Holdings LLC | Pocatello | Pocatello, ID | — | 537 | 2,138 | 698 | 537 | 2,836 | 3,373 | (1,398) | 2007 | 2011 |
| Bogardus Health Holdings LLC | Whittier East | Whittier, CA | — | 1,425 | 5,307 | 1,079 | 1,425 | 6,386 | 7,811 | (2,879) | 2011 | 2011 |
| South Dora Health Holdings LLC | Ukiah | Ukiah, CA | — | 297 | 2,087 | 1,621 | 297 | 3,708 | 4,005 | (2,334) | 2013 | 2011 |
| Silverada Health Holdings LLC | Rosewood | Reno, NV | — | 1,012 | 3,282 | 103 | 1,012 | 3,385 | 4,397 | (1,070) | 1970 | 2011 |
| Orem Health Holdings LLC | Orem | Orem, UT | — | 1,689 | 3,896 | 3,235 | 1,689 | 7,131 | 8,820 | (3,791) | 2011 | 2011 |
| Wisteria Health Holdings | Wisteria | Abilene, TX | — | 746 | 9,903 | 290 | 746 | 10,193 | 10,939 | (2,826) | 2008 | 2011 |
| Renee Avenue Health Holdings LLC | Monte Vista | Pocatello, ID | — | 180 | 2,481 | 966 | 180 | 3,447 | 3,627 | (1,664) | 2013 | 2012 |
| Stillhouse Health Holdings LLC | Stillhouse | Paris, TX | — | 129 | 7,139 | 6 | 129 | 7,145 | 7,274 | (1,456) | 2009 | 2012 |
| Fig Street Health Holdings LLC | Palomar Vista | Escondido, CA | — | 329 | 2,653 | 1,094 | 329 | 3,747 | 4,076 | (1,914) | 2007 | 2012 |
| Lowell Lake Health Holdings LLC | Owyhee | Owyhee, ID | — | 49 | 1,554 | 29 | 49 | 1,583 | 1,632 | (423) | 1990 | 2012 |
| Queensway Health Holdings LLC | Atlantic Memorial | Long Beach, CA | — | 999 | 4,237 | 2,331 | 999 | 6,568 | 7,567 | (3,211) | 2008 | 2012 |
| Long Beach Health Associates LLC | Shoreline | Long Beach, CA | — | 1,285 | 2,343 | 2,172 | 1,285 | 4,515 | 5,800 | (2,415) | 2013 | 2012 |
| Kings Court Health Holdings LLC | Richland Hills | Ft. Worth, TX | — | 193 | 2,311 | 318 | 193 | 2,629 | 2,822 | (866) | 1965 | 2012 |
| 51st Avenue Health Holdings LLC | Legacy | Amarillo, TX | — | 340 | 3,925 | 32 | 340 | 3,957 | 4,297 | (1,238) | 1970 | 2013 |
| Ives Health Holdings LLC | San Marcos | San Marcos, TX | — | 371 | 2,951 | 274 | 371 | 3,225 | 3,596 | (974) | 1972 | 2013 |
| Guadalupe Health Holdings LLC | The Courtyard (Victoria East) | Victoria, TX | — | 80 | 2,391 | 15 | 80 | 2,406 | 2,486 | (587) | 2013 | 2013 |
| 49th Street Health Holdings LLC | Omaha | Omaha, NE | — | 129 | 2,418 | 24 | 129 | 2,442 | 2,571 | (875) | 1960 | 2013 |
| Willows Health Holdings LLC | Cascade Vista | Redmond, WA | — | 1,388 | 2,982 | 202 | 1,388 | 3,184 | 4,572 | (1,244) | 1970 | 2013 |
| Tulalip Bay Health Holdings LLC | Mountain View | Marysville, WA | — | 1,722 | 2,642 | (980) | 742 | 2,642 | 3,384 | (925) | 1966 | 2013 |
| Sky Holdings AZ LLC | Bella Vita Health and Rehabilitation Center | Glendale, AZ | — | 228 | 1,124 | 1,380 | 228 | 2,504 | 2,732 | (2,021) | 2004 | 2002 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Lemon River Holdings LLC | Plymouth Tower | Riverside, CA | — | 152 | 357 | 1,493 | 152 | 1,850 | 2,002 | (1,510) | 2012 | 2009 |
| CTR Partnership, L.P. | Bethany Rehabilitation Center | Lakewood, CO | — | 1,668 | 15,375 | 61 | 1,668 | 15,436 | 17,104 | (3,445) | 1989 | 2015 |
| CTR Partnership, L.P. | Mira Vista Care Center | Mount Vernon, WA | — | 1,601 | 7,425 | — | 1,601 | 7,425 | 9,026 | (1,624) | 1989 | 2015 |
| CTR Partnership, L.P. | Shoreline Health and Rehabilitation Center | Shoreline, WA | — | 1,462 | 5,034 | — | 1,462 | 5,034 | 6,496 | (1,080) | 1987 | 2015 |
| CTR Partnership, L.P. | Premier Estates of Cincinnati-Riverview | Cincinnati, OH | — | 833 | 18,086 | 792 | 833 | 18,878 | 19,711 | (3,936) | 1992 | 2015 |
| CTR Partnership, L.P. | West Cove Care & Rehabilitation Center | Toledo, OH | — | 93 | 10,365 | 811 | 6 | 1,185 | 1,191 | — | 2007 | 2015 |
| CTR Partnership, L.P. | Shaw Mountain at Cascadia | Boise, ID | — | 1,801 | 6,572 | 395 | 1,801 | 6,967 | 8,768 | (1,520) | 1989 | 2016 |
| CTR Partnership, L.P. | Arbor Nursing Center | Lodi, CA | — | 768 | 10,712 | — | 768 | 10,712 | 11,480 | (1,986) | 1982 | 2016 |
| CTR Partnership, L.P. | Broadmoor Medical Lodge | Rockwall, TX | — | 1,232 | 22,152 | — | 1,232 | 22,152 | 23,384 | (3,924) | 1984 | 2016 |
| CTR Partnership, L.P. | Decatur Medical Lodge | Decatur, TX | — | 990 | 24,909 | — | 990 | 24,909 | 25,899 | (4,411) | 2013 | 2016 |
| CTR Partnership, L.P. | Royse City Medical Lodge | Royse City, TX | — | 606 | 14,660 | — | 606 | 14,660 | 15,266 | (2,596) | 2009 | 2016 |
| CTR Partnership, L.P. | Saline Care Nursing & Rehabilitation Center | Harrisburg, IL | — | 1,022 | 5,713 | — | 1,022 | 5,713 | 6,735 | (976) | 2009 | 2017 |
| CTR Partnership, L.P. | Carrier Mills Nursing & Rehabilitation Center | Carrier Mills, IL | — | 775 | 8,377 | — | 775 | 8,377 | 9,152 | (1,431) | 1968 | 2017 |
| CTR Partnership, L.P. | StoneBridge Nursing & Rehabilitation Center | Benton, IL | — | 439 | 3,475 | — | 439 | 3,475 | 3,914 | (594) | 2014 | 2017 |
| CTR Partnership, L.P. | DuQuoin Nursing & Rehabilitation Center | DuQuoin, IL | — | 511 | 3,662 | — | 511 | 3,662 | 4,173 | (626) | 2014 | 2017 |
| CTR Partnership, L.P. | Pinckneyville Nursing & Rehabilitation Center | Pinckneyville, IL | — | 406 | 3,411 | — | 406 | 3,411 | 3,817 | (583) | 2014 | 2017 |
| CTR Partnership, L.P. | Wellspring Health and Rehabilitation of Cascadia | Nampa, ID | — | 775 | 5,044 | 336 | 775 | 5,380 | 6,155 | (869) | 2011 | 2017 |
| CTR Partnership, L.P. | The Rio at Fox Hollow | Brownsville, TX | — | 1,178 | 12,059 | — | 1,178 | 12,059 | 13,237 | (1,985) | 2016 | 2017 |
| CTR Partnership, L.P. | The Rio at Cabezon | Albuquerque, NM | — | 2,055 | 9,749 | — | 2,055 | 9,749 | 11,804 | (1,605) | 2016 | 2017 |
| CTR Partnership, L.P. | Eldorado Rehab & Healthcare | Eldorado, IL | — | 940 | 2,093 | — | 940 | 2,093 | 3,033 | (340) | 1993 | 2017 |
| CTR Partnership, L.P. | Secora Health and Rehabilitation of Cascadia | Portland, OR | — | 1,481 | 2,216 | 110 | 1,481 | 2,326 | 3,807 | (369) | 2012 | 2017 |
| CTR Partnership, L.P. | Mountain Valley | Kellogg, ID | — | 916 | 7,874 | — | 916 | 7,874 | 8,790 | (1,247) | 1971 | 2017 |
| CTR Partnership, L.P. | Caldwell Care | Caldwell, ID | — | 906 | 7,020 | 516 | 906 | 7,536 | 8,442 | (1,155) | 1947 | 2017 |
| CTR Partnership, L.P. | Canyon West | Caldwell, ID | — | 312 | 10,410 | 461 | 312 | 10,871 | 11,183 | (1,687) | 1969 | 2017 |
| CTR Partnership, L.P. | Lewiston Health and Rehabilitation | Lewiston, ID | — | 625 | 12,087 | 215 | 625 | 12,302 | 12,927 | (1,907) | 1964 | 2017 |
| CTR Partnership, L.P. | The Orchards | Nampa, ID | — | 785 | 8,923 | 272 | 785 | 9,195 | 9,980 | (1,417) | 1958 | 2017 |
| CTR Partnership, L.P. | Weiser Care | Weiser, ID | — | 80 | 4,419 | 389 | 80 | 4,808 | 4,888 | (723) | 1964 | 2017 |
| CTR Partnership, L.P. | Aspen Park | Moscow, ID | — | 698 | 5,092 | 274 | 698 | 5,366 | 6,064 | (875) | 1965 | 2017 |
| CTR Partnership, L.P. | Ridgmar Medical Lodge | Fort Worth, TX | — | 681 | 6,587 | 1,256 | 681 | 7,843 | 8,524 | (1,447) | 2006 | 2017 |
| CTR Partnership, L.P. | Mansfield Medical Lodge | Mansfield, TX | — | 607 | 4,801 | 1,073 | 607 | 5,874 | 6,481 | (1,077) | 2006 | 2017 |
| CTR Partnership, L.P. | Grapevine Medical Lodge | Grapevine, TX | — | 1,602 | 4,536 | 891 | 1,602 | 5,427 | 7,029 | (1,004) | 2006 | 2017 |
| CTR Partnership, L.P. | The Oaks at Lakewood | Tacoma, WA | — | 1,001 | 1,779 | — | 1,001 | 1,779 | 2,780 | (278) | 1989 | 2017 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CTR Partnership, L.P. | The Oaks at Timberline | Vancouver, WA | — | 446 | 869 | — | 446 | 869 | 1,315 | (136) | 1972 | 2017 |
| CTR Partnership, L.P. | Providence Waterman Nursing Center | San Bernardino, CA | — | 3,831 | 19,791 | — | 3,831 | 19,791 | 23,622 | (3,092) | 1967 | 2017 |
| CTR Partnership, L.P. | Providence Orange Tree | Riverside, CA | — | 2,897 | 14,700 | 345 | 2,897 | 15,045 | 17,942 | (2,366) | 1969 | 2017 |
| CTR Partnership, L.P. | Providence Ontario | Ontario, CA | — | 4,204 | 21,880 | — | 4,204 | 21,880 | 26,084 | (3,419) | 1980 | 2017 |
| CTR Partnership, L.P. | Greenville Nursing & Rehabilitation Center | Greenville, IL | — | 188 | 3,972 | — | 188 | 3,972 | 4,160 | (721) | 1973 | 2017 |
| CTR Partnership, L.P. | Copper Ridge Health and Rehabilitation Center | Butte, MT | — | 220 | 4,974 | 39 | 220 | 5,013 | 5,233 | (814) | 2010 | 2018 |
| CTR Partnership, L.P. | Prairie Heights Healthcare Center | Aberdeen, SD | — | 1,372 | 7,491 | — | 1,372 | 7,491 | 8,863 | (1,133) | 1965 | 2018 |
| CTR Partnership, L.P. | The Meadows on University | Fargo, ND | — | 989 | 3,275 | — | 989 | 3,275 | 4,264 | (468) | 1966 | 2018 |
| CTR Partnership, L.P. | The Suites - Parker | Parker, CO | — | 1,178 | 17,857 | — | 1,178 | 17,857 | 19,035 | (2,322) | 2012 | 2018 |
| CTR Partnership, L.P. | Huntington Park Nursing Center | Huntington Park, CA | — | 3,131 | 8,876 | 299 | 3,131 | 9,175 | 12,306 | (1,232) | 1955 | 2019 |
| CTR Partnership, L.P. | Shoreline Care Center | Oxnard, CA | — | 1,699 | 9,004 | — | 1,699 | 9,004 | 10,703 | (1,136) | 1962 | 2019 |
| CTR Partnership, L.P. | Downey Care Center | Downey, CA | — | 2,502 | 6,141 | — | 2,502 | 6,141 | 8,643 | (776) | 1967 | 2019 |
| CTR Partnership, L.P. | Courtyard Healthcare Center | Davis, CA | — | 2,351 | 9,256 | — | 2,351 | 9,256 | 11,607 | (1,191) | 1969 | 2019 |
| Gulf Coast Buyer 1 LLC | Alpine Skilled Nursing and Rehabilitation | Ruston, LA | — | 2,688 | 23,825 | — | 2,688 | 23,825 | 26,513 | (2,985) | 2014 | 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 | (2,694) | 1980 | 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 | (2,591) | 2013 | 2019 |
| 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 | (2,992) | 2006 | 2019 |
| Gulf Coast Buyer 1 LLC | Pilgrim Manor Skilled Nursing and Rehabilitation | Bossier City, LA | — | 2,979 | 24,617 | 1,978 | 2,979 | 26,595 | 29,574 | (3,082) | 2008 | 2019 |
| Gulf Coast Buyer 1 LLC | Shreveport Manor Skilled Nursing and Rehabilitation | Shreveport, LA | — | 676 | 10,238 | 602 | 676 | 10,840 | 11,516 | (1,350) | 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 | (1,221) | 2013 | 2019 |
| Gulf Coast Buyer 1 LLC | Legacy West Rehabilitation and Healthcare | Corsicana, TX | — | 120 | 6,682 | 436 | 120 | 7,118 | 7,238 | (1,004) | 2002 | 2019 |
| Gulf Coast Buyer 1 LLC | Legacy at Jacksonville | Jacksonville, TX | — | 173 | 7,481 | 127 | 173 | 7,608 | 7,781 | (1,025) | 2006 | 2019 |
| Gulf Coast Buyer 1 LLC | Pecan Tree Rehabilitation and Healthcare | Gainesville, TX | — | 219 | 10,097 | 255 | 219 | 10,352 | 10,571 | (1,356) | 1990 | 2019 |
| Lakewest SNF Realty, LLC | Lakewest Rehabilitation and Skilled Care | Dallas, TX | — | — | 6,905 | — | — | 6,905 | 6,905 | (901) | 2011 | 2019 |
| CTR Partnership, L.P. | Cascadia of Nampa | Nampa, ID | — | 880 | 14,117 | — | 880 | 14,117 | 14,997 | (1,719) | 2017 | 2019 |
| CTR Partnership, L.P. | Valley Skilled Nursing | Modesto, CA | — | 798 | 7,671 | — | 798 | 7,671 | 8,469 | (845) | 2016 | 2019 |
| CTR Partnership, L.P. | Cascadia of Boise | Boise, ID | — | 1,597 | 15,692 | — | 1,597 | 15,692 | 17,289 | (1,647) | 2018 | 2020 |
| CTR Partnership, L.P. | Cooney Healthcare and Rehabilitation | Helena, MT | — | 867 | 7,431 | 20 | 867 | 7,451 | 8,318 | (656) | 1984 | 2020 |
| CTR Partnership, L.P. | Elkhorn Healthcare and Rehabilitation | Clancy, MT | — | 183 | 7,380 | 504 | 183 | 7,884 | 8,067 | (700) | 1960 | 2020 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CTR Partnership, L.P. | Beacon Harbor Healthcare and Rehabilitation | Rockwall, TX | — | 1,295 | 17,069 | — | 1,295 | 17,069 | 18,364 | (1,446) | 1996 | 2020 |
| CTR Partnership, L.P. | Pleasant Manor Healthcare and Rehabilitation | Waxahachie, TX | — | 629 | 7,433 | — | 629 | 7,433 | 8,062 | (635) | 1972 | 2020 |
| CTR Partnership, L.P. | Rowlett Health and Rehabilitation Center | Rowlett, TX | — | 1,036 | 10,516 | — | 1,036 | 10,516 | 11,552 | (886) | 1990 | 2020 |
| 160 North Patterson Avenue, LLC | Buena Vista Care Center | Goleta, CA | — | 7,987 | 7,237 | — | 7,987 | 7,237 | 15,224 | (543) | 1967 | 2021 |
| CTR Partnership, L.P. | El Centro Post-Acute Care | El Centro, CA | — | 1,283 | 8,133 | 135 | 1,283 | 8,268 | 9,551 | (594) | 1962 | 2021 |
| CTR Partnership, L.P. | Sedona Trace Health and Wellness | Austin, TX | — | 3,282 | 12,763 | — | 3,282 | 12,763 | 16,045 | (865) | 2017 | 2021 |
| CTR Partnership, L.P. | Cedar Pointe Health and Wellness Suites | Cedar Park, TX | — | 3,325 | 11,738 | — | 3,325 | 11,738 | 15,063 | (786) | 2017 | 2021 |
| CTR Partnership, L.P. | Ennis Care Center | Ennis,TX | — | 568 | 8,055 | — | 568 | 8,055 | 8,623 | (421) | 1982 | 2022 |
| CTR Partnership, L.P. | Park Bend Rehabilitation and Healthcare Center | Burleson, TX | — | 1,877 | 6,616 | 717 | 1,877 | 7,333 | 9,210 | (148) | 1988 | 2023 |
| CTR Partnership, L.P. | Prairie Ridge Health and Rehabiliation | Overland Park , KS | — | 1,301 | 5,025 | — | 1,301 | 5,025 | 6,326 | (104) | 1987 | 2023 |
| CTR Partnership, L.P. | Spalding Post Acute | Griffin , GA | — | 680 | 11,044 | — | 680 | 11,044 | 11,724 | (209) | 2022 | 2023 |
| CTR Partnership, L.P. | Casa Azul Skilled Nursing and Rehabilitation | Katy , TX | — | 3,413 | 10,451 | — | 3,413 | 10,451 | 13,864 | (165) | 2005 | 2023 |
| 8665 La Mesa Boulevard, LLC | Community Convalescent Hospital of La Mesa | La Mesa , CA | — | 5,346 | 21,528 | — | 5,346 | 21,528 | 26,874 | (321) | 1968 | 2023 |
| 7039 Alonda Boulevard, LLC | Paramount Meadows Nursing Center | Paramount , CA | — | 3,640 | 15,380 | — | 3,640 | 15,380 | 19,020 | (230) | 1969 | 2023 |
| 10625 Leffingwell Road, LLC | Norwalk Meadows Nursing Center | Norwalk , CA | — | 4,932 | 14,229 | — | 4,932 | 14,229 | 19,161 | (216) | 1964 | 2023 |
| 247 E. Bobier Drive, LLC | La Fuente Post Acute | Vista , CA | — | 4,882 | 20,793 | — | 4,882 | 20,793 | 25,675 | (187) | 1990 | 2023 |
| Capitola 1935 Realty LLC | Pacific Coast Manor | Capitola , CA | — | 5,231 | 16,321 | — | 5,231 | 16,321 | 21,552 | (70) | 1964 | 2023 |
| Morgan Hills Realty LLC | Pacific Hills Manor | Morgan Hill , CA | — | 3,239 | 14,418 | — | 3,239 | 14,418 | 17,657 | (64) | 2014 | 2023 |
| — | 187,074 | 1,044,381 | 99,030 | 185,374 | 1,135,033 | 1,320,407 | (267,859) | |||||
| Multi-Service Campus Properties: | ||||||||||||
| Ensign Southland LLC | Southland Care | Norwalk, CA | — | 966 | 5,082 | 2,213 | 966 | 7,295 | 8,261 | (6,116) | 2011 | 1999 |
| Mission CCRC LLC | St. Joseph's Villa | Salt Lake City, UT | — | 1,962 | 11,035 | 464 | 1,962 | 11,499 | 13,461 | (4,221) | 1994 | 2011 |
| Wayne Health Holdings LLC | Careage of Wayne | Wayne, NE | — | 130 | 3,061 | 122 | 130 | 3,183 | 3,313 | (1,302) | 1978 | 2011 |
| 4th Street Holdings LLC | West Bend Care Center | West Bend, IA | — | 180 | 3,352 | — | 180 | 3,352 | 3,532 | (1,304) | 2006 | 2011 |
| Big Sioux River Health Holdings LLC | Hillcrest Health | Hawarden, IA | — | 110 | 3,522 | 75 | 110 | 3,597 | 3,707 | (1,317) | 1974 | 2011 |
| Prairie Health Holdings LLC | Colonial Manor of Randolph | Randolph, NE | — | 130 | 1,571 | 22 | 130 | 1,593 | 1,723 | (998) | 2011 | 2011 |
| Salmon River Health Holdings LLC | Discovery Care Center | Salmon, ID | — | 168 | 2,496 | — | 168 | 2,496 | 2,664 | (712) | 2012 | 2012 |
| CTR Partnership, L.P. | Liberty Nursing Center of Willard | Willard, OH | — | 144 | 11,097 | 50 | 144 | 11,147 | 11,291 | (2,324) | 1985 | 2015 |
| CTR Partnership, L.P. | Premier Estates of Middletown/Premier Retirement Estates of Middletown | Middletown, OH | — | 990 | 7,484 | 380 | 990 | 7,864 | 8,854 | (1,676) | 1985 | 2015 |
| 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 | (2,216) | 1991 | 2016 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CTR Partnership, L.P. | Turlock Nursing and Rehabilitation Center | Turlock, CA | — | 1,258 | 16,526 | — | 1,258 | 16,526 | 17,784 | (3,064) | 1986 | 2016 |
| CTR Partnership, L.P. | Bridgeport Medical Lodge | Bridgeport, TX | — | 980 | 27,917 | — | 980 | 27,917 | 28,897 | (4,944) | 2014 | 2016 |
| CTR Partnership, L.P. | The Villas at Saratoga | Saratoga, CA | — | 8,709 | 9,736 | 1,397 | 8,709 | 11,133 | 19,842 | (1,789) | 2004 | 2018 |
| CTR Partnership, L.P. | Madison Park Healthcare | Huntington, WV | — | 601 | 6,385 | — | 601 | 6,385 | 6,986 | (856) | 1924 | 2018 |
| CTR Partnership, L.P. | Oakview Heights Nursing & Rehabilitation Center | Mt. Carmel, IL | — | 298 | 8,393 | — | 298 | 8,393 | 8,691 | (1,167) | 2004 | 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 | (3,313) | 2008 | 2019 |
| Gulf Coast Buyer 1 LLC | The Village at Heritage Oaks | Corsicana, TX | — | 143 | 11,429 | 482 | 143 | 11,911 | 12,054 | (1,619) | 2007 | 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 | (1,494) | 1990 | 2019 |
| CTR Partnership, L.P. | Crestwood Health and Rehabilitation Center | Wills Point, TX | — | 143 | 6,075 | — | 143 | 6,075 | 6,218 | (538) | 1980 | 2020 |
| Northshore Healthcare Holdings LLC | San Juan Capistrano Senior Living | San Juan Capistrano, CA | — | 11,176 | 25,298 | 350 | 11,176 | 25,648 | 36,824 | (1,923) | 1999 | 2021 |
| Northshore Healthcare Holdings LLC | Camarillo Senior Living | Camarillo, CA | — | 7,516 | 30,552 | — | 7,516 | 30,552 | 38,068 | (2,227) | 2000 | 2021 |
| Northshore Healthcare Holdings LLC | Bayshire Carlsbad | Carlsbad, CA | — | 7,398 | 19,714 | — | 7,398 | 19,714 | 27,112 | (1,459) | 1999 | 2021 |
| Northshore Healthcare Holdings LLC | Bayshire Rancho Mirage | Rancho Mirage, CA | — | 4,024 | 16,790 | — | 4,024 | 16,790 | 20,814 | (1,267) | 2000 | 2021 |
| CTR Partnership, L.P. | Imboden Creek Living Center | Decatur, IL | — | 131 | 12,499 | 91 | 131 | 12,590 | 12,721 | (644) | 2003 | 2022 |
| 4075 54th Street, LLC | Jacob Healthcare Center | San Diego , CA | — | 4,949 | 20,227 | — | 4,949 | 20,227 | 25,176 | (308) | 1994 | 2023 |
| — | 60,619 | 301,613 | 10,884 | 60,619 | 312,497 | 373,116 | (48,798) | |||||
| Assisted and Independent Living Properties: | ||||||||||||
| Avenue N Holdings LLC | Cambridge ALF | Rosenburg, TX | — | 124 | 2,301 | 392 | 124 | 2,693 | 2,817 | (1,613) | 2007 | 2006 |
| Moenium Holdings LLC | Grand Court | Mesa, AZ | — | 1,893 | 5,268 | 1,210 | 1,893 | 6,478 | 8,371 | (4,100) | 1986 | 2007 |
| Lafayette Health Holdings LLC | Chateau Des Mons | Englewood, CO | — | 420 | 1,160 | 189 | 420 | 1,349 | 1,769 | (546) | 2011 | 2009 |
| Expo Park Health Holdings LLC | Canterbury Gardens | Aurora, CO | — | 570 | 1,692 | 248 | 570 | 1,940 | 2,510 | (1,102) | 1986 | 2010 |
| Wisteria Health Holdings LLC | Wisteria IND | Abilene, TX | — | 244 | 3,241 | 81 | 244 | 3,322 | 3,566 | (2,045) | 2008 | 2011 |
| Everglades Health Holdings LLC | Lexington | Ventura, CA | — | 1,542 | 4,012 | 113 | 1,542 | 4,125 | 5,667 | (1,141) | 1990 | 2011 |
| Flamingo Health Holdings LLC | Desert Springs ALF | Las Vegas, NV | — | 908 | 4,767 | 281 | 908 | 5,048 | 5,956 | (3,267) | 1986 | 2011 |
| 18th Place Health Holdings LLC | Rose Court | Phoenix, AZ | — | 1,011 | 2,053 | 490 | 1,011 | 2,543 | 3,554 | (1,238) | 1974 | 2011 |
| Boardwalk Health Holdings LLC | Park Place | Reno, NV | — | 367 | 1,633 | 52 | 367 | 1,685 | 2,052 | (679) | 1993 | 2012 |
| Willows Health Holdings LLC | Cascade Plaza | Redmond, WA | — | 2,835 | 3,784 | 395 | 2,835 | 4,179 | 7,014 | (1,648) | 2013 | 2013 |
| Lockwood Health Holdings LLC | Santa Maria | Santa Maria, CA | — | 1,792 | 2,253 | 585 | 1,792 | 2,838 | 4,630 | (1,707) | 1967 | 2013 |
| Saratoga Health Holdings LLC | Lake Ridge | Orem, UT | — | 444 | 2,265 | 176 | 444 | 2,441 | 2,885 | (630) | 1995 | 2013 |
| Sky Holdings AZ LLC | Desert Sky Assisted Living | Glendale, AZ | — | 61 | 304 | 372 | 61 | 676 | 737 | (546) | 2004 | 2002 |
| Lemon River Holdings LLC | The Grove Assisted Living | Riverside, CA | — | 342 | 802 | 3,360 | 342 | 4,162 | 4,504 | (3,397) | 2012 | 2009 |
| Mission CCRC LLC | St. Joseph's Villa IND | Salt Lake City, UT | — | 411 | 2,312 | 258 | 411 | 2,570 | 2,981 | (1,947) | 1994 | 2011 |
| CTR Partnership, L.P. | Prelude Cottages of Woodbury | Woodbury, MN | — | 430 | 6,714 | 289 | 430 | 7,003 | 7,433 | (1,539) | 2011 | 2014 |
| CTR Partnership, L.P. | Fort Myers Assisted Living | Fort Myers, FL | — | 1,489 | 3,531 | 5,864 | 1,489 | 9,395 | 10,884 | (869) | 2023 | 2016 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CTR Partnership, L.P. | Croatan Village | New Bern, NC | — | 312 | 6,919 | 155 | 299 | 5,820 | 6,119 | (172) | 2010 | 2016 |
| CTR Partnership, L.P. | Countryside Village | Pikeville, NC | — | 131 | 4,157 | — | 125 | 3,404 | 3,529 | (102) | 2011 | 2016 |
| CTR Partnership, L.P. | The Pines of Clarkston | Village of Clarkston, MI | — | 603 | 9,326 | 6 | 523 | 5,334 | 5,857 | (160) | 2010 | 2016 |
| CTR Partnership, L.P. | The Pines of Goodrich | Goodrich, MI | — | 241 | 4,112 | 923 | 207 | 4,327 | 4,534 | (122) | 2014 | 2016 |
| CTR Partnership, L.P. | The Pines of Burton | Burton, MI | — | 492 | 9,199 | 93 | 426 | 7,843 | 8,269 | (237) | 2014 | 2016 |
| CTR Partnership, L.P. | The Pines of Lapeer | Lapeer, MI | — | 302 | 5,773 | — | 261 | 4,066 | 4,327 | (122) | 2008 | 2016 |
| CTR Partnership, L.P. | Arbor Place | Lodi, CA | — | 392 | 3,605 | — | 392 | 3,605 | 3,997 | (668) | 1984 | 2016 |
| CTR Partnership, L.P. | Applewood of Brookfield | Brookfield, WI | — | 493 | 14,002 | 44 | 242 | 6,030 | 6,272 | (178) | 2013 | 2017 |
| CTR Partnership, L.P. | Applewood of New Berlin | New Berlin, WI | — | 356 | 10,812 | 50 | 189 | 5,083 | 5,272 | (148) | 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 | (915) | 2016 | 2017 |
| CTR Partnership, L.P. | Vista Del Lago | Escondido, CA | — | 4,362 | 7,997 | — | 4,362 | 7,997 | 12,359 | (908) | 2015 | 2019 |
| CTR Partnership, L.P. | Inn at Barton Creek | Bountiful, UT | — | 2,480 | 4,804 | 15 | 2,480 | 4,819 | 7,299 | (510) | 1999 | 2020 |
| CTR Partnership, L.P. | Bridgeton Essentia Neighborhood | Bridgeton, NJ | — | 245 | 5,795 | — | 190 | 4,509 | 4,699 | (166) | 2021 | 2021 |
| CTR Partnership, L.P. | Rio Grande Essentia Neighborhood | Rio Grande, NJ | — | 224 | 5,652 | — | 224 | 5,652 | 5,876 | (325) | 2021 | 2021 |
| CTR Partnership, L.P. | Chapters Living of Northwest Chicago | Bartlett , IL | — | 1,964 | 5,650 | — | 1,964 | 5,650 | 7,614 | (106) | 2017 | 2023 |
| CTR Partnership, L.P. | Chapters Living of Elmhurst | Elmhurst , IL | — | 2,852 | 7,348 | — | 2,852 | 7,348 | 10,200 | (135) | 2017 | 2023 |
| CTR Partnership, L.P. | The Ridge at Lansing | Lansing , MI | — | 888 | 9,871 | — | 888 | 9,871 | 10,759 | (163) | 2018 | 2023 |
| CTR Partnership, L.P. | The Ridge at Beavercreek | Beavercreek , OH | — | 1,165 | 8,616 | — | 1,165 | 8,616 | 9,781 | (140) | 2018 | 2023 |
| — | 33,996 | 181,060 | 16,374 | 33,283 | 172,484 | 205,767 | (34,075) | |||||
| — | $281,689 | $1,527,054 | $126,288 | $279,276 | $1,620,014 | $1,899,290 | $(350,732) | |||||
(1) The aggregate cost of real estate for federal income tax purposes was$1.9 billion.
| Year Ended December 31, | |||
|---|---|---|---|
| Real estate: | 2023 | 2022 | 2021 |
| Balance at the beginning of the period | $1,721,871 | $1,873,806 | $1,683,205 |
| Acquisitions | 233,876 | 21,252 | 190,133 |
| Improvements | 8,878 | 5,896 | 4,521 |
| Impairment | (10,078) | (29,803) | — |
| Sales and/or transfers to assets held for sale, net | (55,257) | (149,280) | (4,053) |
| Balance at the end of the period | $1,899,290 | $1,721,871 | $1,873,806 |
| Accumulated depreciation: | |||
| Balance at the beginning of the period | $(315,914) | $(304,785) | $(259,803) |
| Depreciation expense | (45,275) | (42,131) | (45,498) |
| Impairment | 2,076 | 10,232 | — |
| Sales and/or transfers to assets held for sale, net | 8,381 | 20,770 | 516 |
| Balance at the end of the period | $(350,732) | $(315,914) | $(304,785) |
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
| 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 | $68,913 | N/A | |
| California (4 SNF facilities) | 10.7% | (2) | 2025 | (3) | 28,112 | (5) | 11,713 | 11,501 | N/A |
| Georgia (4 SNF facilities) | 9.0% | (2) | 2025 | (3) | 72,700 | (5) | 24,900 | 22,962 | N/A |
| Florida (2 SNF facilities) | 9.0% | 2028 | (3) | — | 15,727 | 15,399 | N/A | ||
| California (3 SNF facilities) | 12.0% | 2026 | (3) | 30,294 | (6) | 3,564 | 3,439 | N/A | |
| Indiana (1 ALF facility) | 9.0% | 2024 | (3) | — | 2,000 | 2,016 | N/A | ||
| California (2 SNF Campus & ILF facility) | 9.0% | 2033 | (3) | — | 25,993 | 26,194 | N/A | ||
| California (1 ALF facility) | 9.9% | 2026 | (3) | — | 6,300 | 6,345 | N/A | ||
| Mezzanine Loans: | |||||||||
| West Virginia (18 SNF facilities) | 11.0% | 2032 | (3) | 557,000 | (4) | 25,000 | 21,799 | N/A | |
| $1,170,106 | $190,197 | $178,568 | |||||||
(1)The aggregate cost for federal income tax purposes was $190.2 million as of December 31, 2023.
(2)Interest rates are variable and represent the rate in effect as of December 31, 2023.
(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, 2023 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, 2023 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, 2023 are estimated.
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
Changes in mortgage secured and mezzanine loans are summarized as follows (in thousands):
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Balance at beginning of period | $156,368 | $15,155 | $15,000 |
| Additions during period: | |||
| New mortgage and mezzanine loans | 53,834 | 147,150 | — |
| Interest income added to principal | 388 | 1,165 | 155 |
| Deductions during period: | |||
| Paydowns/Repayments | (25,537) | — | — |
| Unrealized losses, net | (6,485) | (7,102) | — |
| Balance at end of period | $178,568 | $156,368 | $15,155 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.