CareTrust REIT Inc
For the period ended Mar 31, 2025. Filed May 1, 2025.
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Mar 31, 2025 · Filed May 1, 2025
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Notes to Condensed Consolidated Financial Statements
- 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 March 31, 2025, the Company owned, directly or through joint ventures, and leased to independent operators 255 skilled nursing facilities (“SNFs”), multi-service campuses, assisted living facilities (“ALFs”) and independent living facilities (“ILFs”) consisting of 27,672 operational beds and units located in 32 states with the highest concentration of properties by rental income located in California, Texas and Tennessee. As of March 31, 2025, the Company also had other real estate related investments consisting ofthree preferred equity investments,15 real estate secured loans receivable, andfive mezzanine loans receivable with a carrying value of $799.8 million andone financing receivable with a carrying value of $96.6 million.
Planned Acquisition—On March 11, 2025, the Company announced (the “Rule 2.7 Announcement”) pursuant to Rule 2.7 of the United Kingdom City Code on Takeovers and Mergers (the “Code”) a firm intention to make a cash offer (the “Offer”) to acquire (the “Acquisition”), through its wholly-owned direct subsidiary, CR United Bidco Limited (“Bidco”), the entire issued and to be issued ordinary share capital (other than Scheme Restricted Shares (as defined in the Rule 2.7 Announcement)) of Care REIT plc (“Target”) for 108 pence in cash per ordinary share of Target. Target is a UK-based real estate investment trust listed on the Main Market of the London Stock Exchange focused on investing in care homes throughout the United Kingdom. The Acquisition is intended to be effected by means of a scheme of arrangement (the “Scheme”) under Part 26 of the United Kingdom Companies Act 2006, meaning it is subject to court approval and the satisfaction or waiver of other ordinary conditions to closing, following approval by Target’s shareholders.
- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation—The accompanying condensed consolidated financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In the opinion of management, all adjustments which are of a normal and recurring nature and considered necessary for a fair presentation of the results of the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year. The accompanying consolidated financial statements of the Company include the accounts of CareTrust REIT, its wholly-owned subsidiaries, and variable interest entities (“VIEs”) over which the Company exercises control. All intercompany transactions and account balances within the Company have been eliminated, and net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.
Restricted cash—The Company presents cash and cash equivalents separately from restricted cash within the Company’s condensed consolidated balance sheets. The Company includes restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the condensed consolidated statements of cash flows. The Company provides a reconciliation between the balance sheets and statements of cash flows, as required when the balance includes more than one line item for cash, cash equivalents and restricted cash. The Company also provides a disclosure of the nature of the restrictions related to material restricted cash balances.
As of March 31, 2025, the Company had $606.0 million in restricted cash related to the cash deposited with the trustee for the planned acquisition of Care REIT plc.
Cash, cash equivalents and restricted cash consisted of the following as of March 31, 2025 and December 31, 2024 (dollars in thousands):
| March 31, 2025 | December 31, 2024 | |
|---|---|---|
| Cash and cash equivalents | $26,510 | $213,822 |
| Restricted cash | 606,000 | — |
| Cash, cash equivalents and restricted cash | $632,510 | $213,822 |
- REAL ESTATE INVESTMENTS, NET
The following table summarizes the Company’s investment in owned properties, and properties held in consolidated joint ventures, held for use as of March 31, 2025 and December 31, 2024 (dollars in thousands):
| March 31, 2025 | December 31, 2024 | |
|---|---|---|
| Land | $377,669 | $367,044 |
| Buildings and improvements | 2,253,424 | 2,220,287 |
| Integral equipment, furniture and fixtures | 113,402 | 113,803 |
| Identified intangible assets | 4,083 | 4,388 |
| Real estate investments | 2,748,578 | 2,705,522 |
| Accumulated depreciation and amortization | (496,299) | (478,782) |
| Real estate investments, net | $2,252,279 | $2,226,740 |
As of March 31, 2025, all of the Company’s owned facilities held for investment were leased to various operators under triple-net leases. All of the triple-net leases contain annual escalators based on the percentage change in the Consumer Price Index (“CPI”) (but not less than zero), some of which are subject to a cap, or fixed rent escalators. As of March 31, 2025, six facilities were held for sale. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales, for additional information.
As of March 31, 2025, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements and assets held for sale, was as follows (dollars in thousands):
| Year | Amount |
|---|---|
| 2025 (nine months) | $210,437 |
| 2026 | 283,552 |
| 2027 | 281,850 |
| 2028 | 280,536 |
| 2029 | 276,512 |
| 2030 | 271,031 |
| Thereafter | 1,367,365 |
| Total | $2,971,283 |
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 · Properties · Lease Expiration · Option Period Open Date(1) · Option Type(2) · Current Cash Rent(3) | ||||||||
|---|---|---|---|---|---|---|---|---|
| SNF | 1 | March 2029 | 04/01/2022 | (4) | A / B | (8) | $858 | |
| SNF | 1 | January 2030 | 02/01/2026 | (4) | A | 1,200 | (9) | |
| SNF / Campus | 2 | October 2032 | 03/05/2027 | (5) | B | 3,367 | (10) | |
| SNF / Campus | 2 | May 2034 | 06/01/2026 | (6) | B | 2,714 | (11) | |
| SNF | 1 | November 2034 | 12/01/2027 | (4) | A | 1,100 | ||
| SNF | 6 | November 2039 | 12/01/2027 | (7) | B | 10,160 | ||
(1) The Company has not received notice of exercise for the option periods that are currently open.
(2) Option type includes:
A - Fixed base price.
B - Fixed capitalization rate on lease revenue.
(3) Based on annualized cash revenue for contracts in place as of March 31, 2025.
(4) Option window is open until the expiration of the lease term.
(5) Option window is open forsix months from the option period open date.
(6) Option window is open fornine months from the option period open date.
(7) Lease agreement provides for the purchase ofone totwo facilities in each window over four option windows, for a total ofsix facilities. Each option window opens at the beginning of each of lease years four, five, six, and seven beginning December 1, 2027 and is open forone year.
(8) Option reflectstwo option types.
(9) Lease provides for abatement in the first three months. Annual rent beginning in month four is $1.2 million.
(10) Option provides for purchase of anytwo of thethree facilities. The current cash rent shown is an average of the range of $3.2 million to $3.5 million.
(11) Option provides for purchase of anyone offive facilities in the first option window and anotherone offive facilities in the second option window beginning June 1, 2027. The current cash rent shown is an average of the range of $2.4 million to $3.1 million. Provided the operator exercises its option to extend the term of the master lease, beginning on June 1, 2035 and ending nine months thereafter, the operator will have an option for all facilities then remaining in the master lease.
Rental Income
The following table summarizes components of the Company’s rental income (dollars in thousands):
| For the Three Months Ended March 31, | ||
|---|---|---|
| Rental Income | 2025 | 2024 |
| Contractual rent due(1) | $70,776 | $52,934 |
| Straight-line rent | (7) | (7) |
| Amortization of lease incentives | (49) | — |
| Amortization of below-market lease intangibles | 926 | 575 |
| Total | $71,646 | $53,502 |
(1) Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company. For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received. Tenant operating expense reimbursements for the three months ended March 31, 2025 and 2024 were $2.3 million and $1.5 million, respectively.
Recent Real Estate Acquisitions
The following table summarizes the Company’s acquisitions for the three months ended March 31, 2025 (dollars in thousands):
| Type of Property | Purchase Price(1) | Initial Annual Cash Rent(2) | Number of Properties | Number of Beds/Units(3) |
|---|---|---|---|---|
| Skilled nursing(4) | $20,448 | $2,000 | 1 | 124 |
| Assisted living | 20,637 | 1,896 | 1 | 160 |
| Total | $41,085 | $3,896 | 2 | 284 |
(1) Purchase price includes capitalized acquisition costs.
(2) Initial annual cash rent represents initial cash rent for the first twelve months.
(3) The number of beds/units includes operating beds at the acquisition date.
(4) Includesone SNF held through a joint venture. See Note 12, Variable Interest Entities, for additional information.
Lease Amendments and Terminations
Amended Kalesta Lease. Effective February 28, 2025, the Company acquired one ALF. In connection with the acquisition, the Company amended its existing triple-net master lease with affiliates of Kalesta Healthcare, LLC (“Kalesta”) to include the one ALF and extended the initial lease term. The Kalesta master lease, as amended, had a remaining term at the date of amendment of approximately 15 years. Annual cash rent under the amended Kalesta master lease increased by approximately $1.9 million.
Ridgeline Lease Termination and NC Jaybird Lease. Effective December 31, 2024, the Company terminated its master lease with affiliates of Ridgeline Properties, LLC (“Ridgeline”). The Company entered into a new master lease (the “NC Jaybird Lease”) with affiliates of Jaybird Senior Living, Inc. (“Jaybird”) with respect totwo ALFs in North Carolina previously leased to Ridgeline. The NC Jaybird Lease commenced on January 1, 2025 with an initial term of approximately 12 years, featuringtwo five-year renewal options and CPI-based rent escalators. Under the NC Jaybird Lease, Jaybird will receive three months of abated rent, followed by 15 months of rent calculated as a percentage of the tenants’ gross revenue. Subsequently, the next twelve months will have a fixed annual cash rent amount of $0.8 million increasing annually based on CPI. Annual cash rent under the terminated master lease for thetwo ALFs in North Carolina was $0.8 million. Four facilities which were under the Ridgeline master lease are currently held for sale andtwo facilities are in the process of transferring operations.
Amended Eduro Lease and Amended Ensign Lease. On March 1, 2024, operations oftwo SNFs in Colorado operated by affiliates of Eduro Healthcare, LLC (“Eduro”) were transferred to subsidiaries of The Ensign Group, Inc. (“Ensign”). In connection with the transfer, the Company partially terminated the Eduro master lease and amendedone existing triple-net master lease with Ensign to include thetwo SNFs and extended the initial lease term by 15 years. The applicable Ensign master lease, as amended, had a remaining term at the date of amendment of approximately 20 years withtwo five-year renewal options and CPI-based rent escalators. Annual cash rent under the applicable Ensign master lease, as amended, increased by approximately $2.1 million and annual cash rent under the Eduro master lease, as amended, decreased by the same amount.
New Embassy Lease and Hillstone Lease Termination. On December 31, 2023, the Company terminated its master lease with affiliates of Hillstone Healthcare, Inc. (“Hillstone”). Effective January 1, 2024, in connection with the December 31, 2023 lease termination, one SNF was removed from the Hillstone master lease, was classified as held for sale as of March 31, 2024 and was sold during the three months ended June 30, 2024. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales, for additional information. In connection with the lease termination, the Company entered into a new triple-net master lease with a subsidiary of Embassy Healthcare Holdings, Inc. (“Embassy”) with respect toone multi-service campus. The Embassy lease has an initial term of approximately 10 years withtwo five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the lease is approximately $0.6 million and the master lease provides Embassy with a partial rent abatement until required authorizations with respect to the ALF portion of the facility are obtained and occupancy levels reach a certain percentage.
- IMPAIRMENT OF REAL ESTATE INVESTMENTS, ASSETS HELD FOR SALE AND ASSET SALES
Impairment of Real Estate Investments Held for Sale
The Company didnot recognize any impairment during the three months ended March 31, 2025. During the three months ended March 31, 2024, the Company recognized aggregate impairment charges of $2.7 million related to properties held for sale, which is reported in impairment of real estate investments in the condensed consolidated income statements.
As of March 31, 2025, there weresix facilities classified as held for sale, all of which have been recorded at the lesser of their carrying value or 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 (as defined below) measurements within the fair value hierarchy. Estimated sales prices were determined using a market approach (comparable sales model), which relies on certain assumptions by management, including: (i) comparable market transactions, (ii) estimated prices per unit, and (iii) binding agreements for sales and non-binding offers to purchase from unrelated third-parties. There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations during the three months ended March 31, 2024, the Company’s fair value estimates primarily relied on a market approach and utilized prices per unit ranging from $12,000 to $36,000, with a weighted average price per unit of $16,000.
Asset Sales and Held for Sale Reclassifications
The following table summarizes the Company’s dispositions for the three months ended March 31, 2025 and 2024 (dollars in thousands):
| Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Number of facilities(1) | 5 | 2 |
| Net sales proceeds(2) | $44,401 | $1,046 |
| Net carrying value | 40,525 | 1,035 |
| Net gain on sale | $3,876 | $11 |
(1) One non-operational previously impaired facility sold during the three months ended March 31, 2025 was not classified as held for sale as of December 31, 2024.
(2) Net sales proceeds for the three months ended March 31, 2024 includes $1.0 million of seller financing in connection with the sale ofone ALF in January 2024.
The following table summarizes the Company’s assets held for sale activity for the periods presented (dollars in thousands):
| Net Carrying Value | Number of Facilities | |
|---|---|---|
| December 31, 2024 | $57,261 | 10 |
| Assets sold | (40,525) | (4) |
| March 31, 2025 | $16,736 | 6 |
| December 31, 2023 | $15,011 | 14 |
| Additions to assets held for sale | 1,251 | 1 |
| Assets sold | (1,035) | (2) |
| Impairment of real estate held for sale | (2,744) | — |
| March 31, 2024 | $12,483 | 13 |
- OTHER REAL ESTATE RELATED AND OTHER INVESTMENTS
As of March 31, 2025 and December 31, 2024, the Company’s other real estate related investments, inclusive of accrued interest, consisted of the following (dollars in thousands):
| Facility Count and Type · As of March 31, 2025 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans Receivable, at Fair Value: · SNF · Campus · ALF · ILF · Principal Balance as of March 31, 2025 · Fair Value as of March 31, 2025(1) · Fair Value as of December 31, 2024(1) · Weighted Average Contractual Interest Rate(2), (3) · Maturity Date | |||||||||||||||||
| Mortgage secured loans receivable(4) | 61 | 4 | 19 | 2 | $654,040 | $658,427 | $660,392 | 8.8% | 5/31/2025 - 9/30/2039 | ||||||||
| Mezzanine loans receivable(4) | 41 | 4 | 2 | — | 88,676 | 87,173 | 80,612 | 12.8% | 7/25/2027 - 12/31/2034 | ||||||||
| Total | $742,716 | $745,600 | $741,004 | ||||||||||||||
| Principal Balance as of March 31, 2025 · Book Value as of March 31, 2025 · Book Value as of December 31, 2024 · Weighted Average Contractual Interest Rate · Maturity Date | |||||||||||||||||
| Preferred equity | $53,782 | $54,199 | $54,199 | 11.1% | N/A | ||||||||||||
| Total | $53,782 | $54,199 | $54,199 | ||||||||||||||
| Facility Count and Type · As of March 31, 2025 | |||||||||||||||||
| Financing Receivable, at Fair Value: | SNF | Campus | ALF | ILF | Principal Balance as of March 31, 2025 | Fair Value as of March 31, 2025(5) | Fair Value as of December 31, 2024(5) | Weighted Average Effective Interest Rate(6) | Maturity Date | ||||||||
| Financing Receivable | 39 | — | 5 | 2 | $95,723 | $96,628 | $96,004 | 12.0% | 11/30/2039 | ||||||||
| Total | $95,723 | $96,628 | $96,004 | ||||||||||||||
(1)Fair value of mortgage secured loans receivable includes $4.6 million and $3.4 million of accrued interest as of March 31, 2025 and December 31, 2024, respectively. Fair value of mezzanine loans receivable includes $1.0 million and $0.9 million of accrued interest as of March 31, 2025 and December 31, 2024, respectively.
(2)Rates are net of subservicing fee, if applicable.
(3)Three mortgage secured loans receivable andtwo mezzanine loans receivable use term secured overnight financing rate (“SOFR”), which are subject to a floor for certain of the loans. Term SOFR used as of March 31, 2025 was 4.32%.
(4)If the Company also has extended mezzanine financing to an affiliate of the borrower under a mortgage loan receivable, the applicable facility counts are included in both respective totals.
(5)Fair value of financing receivable includes $0.9 million and $0.3 million of accrued interest as of March 31, 2025 and December 31, 2024, respectively.
(6)The Company leased these facilities back to the seller under a 15-year contract, withtwo five-year renewal options. The agreement provides for an initial contractual cash yield of 11.0% for the first three years, with annual CPI-based escalators beginning in year four, subject to a 3% cap. The agreement provides for deferred payments equal to 2.0% of the contractual cash yield in the first year and 0.5% of the contractual cash yield in the second year. The agreement also provides for purchase options. At the time the seller-lessee exercises its purchase options, option proceeds will be used to repay any outstanding deferred payments as well as additional payments such that the Company receives a contractual cash yield of 12.5% on its gross investment in the applicable properties through the option exercise date. If any deferred amounts remain unpaid, beginning in year eight, the deferred amounts are to be repaid in 24 equal monthly payments. The Company has not received notice of exercise for the purchase option period currently open.
The following table summarizes the Company’s other real estate related investments activity for the three months ended March 31, 2025 and 2024 (dollars in thousands):
| Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Origination of other real estate related investments | $6,389 | $53,165 |
| Accrued interest, net | 1,280 | 425 |
| Unrealized gain (loss) on other real estate related investments, net | 1,287 | (612) |
| Prepayments of other real estate related investments | (4,360) | — |
| Net change in other real estate related investments | $4,596 | $52,978 |
2025 Other Real Estate Related Investment Transactions
On January 10, 2025, the Company advanced the second installment of a mezzanine loan forone SNF secured by a pledge of membership interests in an up-tier holding company of the borrower group for $6.4 million. The loan bears interest at a rate of 13%, with annual CPI-based escalators. The mezzanine loan is set to mature on December 31, 2034. The mezzanine loan may not be prepaid in whole or in part prior to maturity. The Company elected the fair value option for the mezzanine loan.
In February 2025, the Company received a partial prepayment on one mortgage loan in the amount of $4.4 million in connection with the borrower’s election to release one skilled nursing facility from the loan. The remaining outstanding balance of $2.9 million was subsequently paid off, see Note 15, Subsequent Events, for additional information.
2024 Other Real Estate Related Investment Transactions
On January 1, 2024, the Company closed on the sale ofone ALF. In connection with the sale, the Company provided affiliates of the purchaser of the property with a $1.0 million mortgage loan which bears interest at a rate of 9.0%. The mortgage loan is secured by the ALF and is set to mature on January 1, 2027. The mortgage loan may be prepaid in whole before the maturity date. The Company elected the fair value option for the mortgage loan.
On January 25, 2024, the Company extended a $9.8 million mezzanine loan for a portfolio often SNFs located in Missouri secured by a pledge of membership interests in an up-tier holding company of the borrower group. The Company participated in the loan alongside a co-lender pursuant to a participation agreement entered into between the Company and the co-lender. Pursuant to such agreement, the Company provided $9.8 million in mezzanine loan proceeds and the co-lender provided the remaining $10.2 million of loan proceeds. As a participant in the loan, and subject to limited exceptions, the Company is entitled to receive its proportionate share of loan payments made by the borrower with each co-lender’s proportionate share being given equal weight. The loan bears interest at term SOFR plus 8.75%, with a term SOFR floor of 6%, payable monthly and net of a 0.75% subservicing fee. Commencing on February 1, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on July 25, 2027, 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). The Company elected the fair value option for the mezzanine loan.
On February 1, 2024, the Company extended a $7.4 million mezzanine loan forone SNF located in California secured by a pledge of membership interests in an up-tier holding company of the borrower group. The loan bears interest at 11.5%, payable monthly. The mezzanine loan is set to mature on January 31, 2029, and may not (subject to certain limited exceptions) be prepaid prior to the date that is 18 months following the loan closing. The Company elected the fair value option for the mezzanine loan.
On February 2, 2024, the Company extended a $35.0 million mezzanine loan for a portfolio of 15 SNFs located in Virginia secured by a pledge of membership interests in an up-tier holding company of the borrower group. The Company participated in the loan alongside a co-lender pursuant to a participation agreement entered into between the Company and the co-lender. Pursuant to such agreement, the Company provided $35.0 million in mezzanine loan proceeds and the co-lender provided the remaining $50.0 million of loan proceeds. As a participant in the loan, and subject to limited exceptions, the Company is entitled to receive its proportionate share of loan payments made by the borrower with each co-lender’s proportionate share being given equal weight. The loan bears interest at term SOFR plus 8.75%, with a term SOFR floor of 6%, payable monthly and net of a 0.75% subservicing fee. Commencing on February 2, 2026, monthly principal payments shall be due. The mezzanine loan is set to mature on August 1, 2027, 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). The Company elected the fair value option for the mezzanine loan.
Financing Receivable
On December 5, 2024, the Company invested $95.7 million, exclusive of transaction costs, to acquire a portfolio of 46 properties in Illinois in a sale and leaseback transaction with affiliates of Cascade Capital Partners, LLC (“Cascade”). In connection with the transaction, the Company entered into a new triple-net master lease with Cascade and provided Cascade with options to repurchase the properties, structured over multiple tranches, with various option window start dates, beginning December 1, 2024, and open through the remainder of the 15-year term. As such, the Company determined that the sale and leaseback transaction met the accounting criteria to be presented as a financing receivable on its consolidated balance sheets and recorded interest income from financing receivable on its consolidated statements of operations. Interest income is based on an imputed interest rate over the term of the applicable financing arrangement and as a result the interest recognized in any particular period will not equal the cash payments from the agreement in that period. Cash received from the financing receivable was $2.2 million during the three months ended March 31, 2025. The Company elected the fair value option for the financing receivable.
Other Loans Receivables
As of March 31, 2025 and December 31, 2024, the Company’s other loans receivable, included in prepaid expenses and other assets, net on the Company’s condensed consolidated balance sheets, consisted of the following (dollars in thousands):
| Investment | Principal Balance as of March 31, 2025 | Book Value as of March 31, 2025 | Book Value as of December 31, 2024 | Weighted Average Contractual Interest Rate | Maturity Date |
|---|---|---|---|---|---|
| Other loans receivable | $21,757 | $21,820 | $22,010 | 9.0% | 9/30/2025 - 12/31/2027 |
| Expected credit loss | — | (6,994) | (6,994) | ||
| Total | $21,757 | $14,826 | $15,016 | ||
The following table summarizes the Company’s other loans receivable activity for the three months ended March 31, 2025 and 2024 (dollars in thousands):
| Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Principal payments | $(222) | $— |
| Accrued interest, net | 32 | — |
| Net change in other loans receivable | $(190) | $— |
Expected credit losses and recoveries are recorded in provision for loan losses, net in the condensed consolidated income statements. During both the three months ended March 31, 2025 and 2024, 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 three months ended March 31, 2025 and 2024 (dollars in thousands):
| For the Three Months Ended March 31, | ||
|---|---|---|
| Investment | 2025 | 2024 |
| Mortgage secured loans receivable | $14,388 | $3,772 |
| Mezzanine loans receivable | 2,821 | 1,895 |
| Preferred equity investment | 1,497 | 68 |
| Other loans receivable | 334 | 331 |
| Financing receivable | 2,807 | — |
| Other(1) | 3,128 | 3,502 |
| Total | $24,975 | $9,568 |
(1) Other income is comprised of interest income on money market funds and escrow deposits.
- 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 March 31, 2025 and December 31, 2024, 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 March 31, 2025 | |
|---|---|---|---|---|
| Assets: | ||||
| Mortgage secured loans receivable | $— | $— | $658,427 | $658,427 |
| Mezzanine loans receivable | — | — | 87,173 | 87,173 |
| Financing receivable | — | — | 96,628 | 96,628 |
| Total | $— | $— | $842,228 | $842,228 |
| Level 1 | Level 2 | Level 3 | Balance as of December 31, 2024 | |
|---|---|---|---|---|
| Assets: | ||||
| Mortgage secured loans receivable | $— | $— | $660,392 | $660,392 |
| Mezzanine loans receivable | — | — | 80,612 | 80,612 |
| Financing receivable | — | — | 96,004 | 96,004 |
| Total | $— | $— | $837,008 | $837,008 |
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 | Investment in Financing Receivable | |
|---|---|---|---|
| Balance at December 31, 2024 | $660,392 | $80,612 | $96,004 |
| Originations | — | 6,389 | — |
| Accrued interest, net | 1,173 | 107 | 624 |
| Unrealized gain, net | 1,222 | 65 | — |
| Payments | (4,360) | — | — |
| Balance as of March 31, 2025 | $658,427 | $87,173 | $96,628 |
Real estate secured and mezzanine loans receivable: The fair value of the secured and mezzanine loans receivables were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. As such, the Company classifies each instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms. During the three months ended March 31, 2025, the Company recorded a net unrealized gain of $1.3 million on its secured and mezzanine loans receivable, to bring the interest rates in line with market rates. During the three months ended March 31, 2024, the Company recorded an unrealized loss of $0.8 million on the Company’s secured and mezzanine loans receivable due to rising interest rates, partially offset by unrealized gains of $0.2 million due to increases in expected cash flows on floating rate loans. Future changes in market interest rates or collateral value could materially impact the estimated discounted cash flows that are used to determine the fair value of the secured and mezzanine loans receivable. As of March 31, 2025 and December 31, 2024, the Company didnot 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 March 31, 2025:
| Type | Book Value as of March 31, 2025 | Valuation Technique | Unobservable Inputs | Range |
|---|---|---|---|---|
| Mortgage secured loans receivable | $658,427 | Discounted cash flow | Discount Rate | 8% - 14% |
| Mezzanine loans receivable | 87,173 | Discounted cash flow | Discount Rate | 12% - 14% |
Financing receivable: The fair value was determined using a widely accepted valuation technique, discounted cash flow analysis, on the expected cash flows. The discount rate used to value the future cash inflows of the financing receivable at March 31, 2025 was 12%.
For the three months ended March 31, 2025, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.
Items Disclosed at Fair Value
Considerable judgment is necessary to estimate the fair value disclosure of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the face value, carrying amount and fair value of the Company’s preferred equity investments and the Notes (as defined in Note 7, Debt, below) as of March 31, 2025 and December 31, 2024 is as follows (dollars in thousands):
| March 31, 2025 · December 31, 2024 | |||||||
|---|---|---|---|---|---|---|---|
| Level | FaceValue | CarryingAmount | FairValue | FaceValue | CarryingAmount | FairValue | |
| Financial assets: | |||||||
| Preferred equity investments | 3 | $53,782 | $54,199 | $54,199 | $53,782 | $54,199 | $54,199 |
| Financial liabilities: | |||||||
| Senior unsecured notes payable | 2 | $400,000 | $397,149 | $374,880 | $400,000 | $396,927 | $381,812 |
Cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable, and accrued liabilities: The carrying values for these instruments approximate their fair values due to the short-term nature of these instruments.
Preferred equity investments: The fair value of the preferred equity investments was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. The Company utilized discount rates of 11% to 15% in its fair value calculation. As such, the Company classifies these instruments as Level 3.
Senior unsecured notes payable: The fair value of the Notes was determined using third-party quotes derived from orderly trades.
Unsecured revolving credit facility: The fair value approximates the carrying value as the interest rates are variable and approximate prevailing market interest rates and spreads for similar debt arrangements.
- DEBT
The following table summarizes the balance of the Company’s indebtedness as of March 31, 2025 and December 31, 2024 (dollars in thousands):
| March 31, 2025 | December 31, 2024 | |||||
|---|---|---|---|---|---|---|
| Principal Amount | Deferred Loan Fees | Carrying Amount | Principal Amount | Deferred Loan Fees | Carrying Amount | |
| Senior unsecured notes payable | $400,000 | $(2,851) | $397,149 | $400,000 | $(3,073) | $396,927 |
| Unsecured revolving credit facility(1) | 425,000 | — | 425,000 | — | — | — |
| $825,000 | $(2,851) | $822,149 | $400,000 | $(3,073) | $396,927 | |
(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. 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 March 31, 2025, the Company was in compliance with all applicable financial covenants under the indenture governing the Notes.
Unsecured Revolving Credit Facility
On December 18, 2024, 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 third 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 “Third Amended Credit Agreement”). The Third Amended Credit Agreement, which amends and restates the Second Amended Credit Agreement (as defined below) provides for an upsized unsecured revolving credit facility (the “Third Amended Revolving Facility”) with revolving commitments in an aggregate principal amount of $1.2 billion, 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. Future borrowings under the Third Amended Revolving Facility will be used for working capital purposes, for capital expenditures, to fund acquisitions and for general corporate purposes.
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”) provided 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.
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 Third Amended Revolving Facility are, at the Operating Partnership’s option, equal to either a base rate plus a margin ranging from 0.05% to 0.55% per annum or Adjusted Term SOFR or Adjusted Daily Simple SOFR (each as defined in the Third Amended Credit Agreement) plus a margin ranging from 1.05% 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). In addition, the Operating Partnership will pay a facility fee on the revolving commitments under the Third Amended 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 March 31, 2025, the Operating Partnership had borrowings outstanding of $425.0 million under the Third Amended Revolving Facility.
The Third Amended Revolving Facility has a maturity date of February 9, 2029, and includes, at the sole discretion of the Operating Partnership, two six-month extension options.
The Third Amended Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Third Amended Credit Agreement (other than the Operating Partnership). The Third 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 Third 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 secured debt to asset value ratio, a maximum unsecured debt to unencumbered properties asset value ratio and a minimum unsecured interest coverage ratio. The Third Amended Credit Agreement also contains certain customary events of default, including the failure to make timely payments under the Third 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 March 31, 2025, the Company was in compliance with all applicable financial covenants under the Third Amended Credit Agreement.
- EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
Common Stock
At-The-Market Offering—On January 21, 2025, the Company entered into a new equity distribution agreement to issue and sell, from time to time, up to $750.0 million in aggregate offering price of its common stock through an “at-the-market” equity offering program (the “New ATM Program”) and terminated its previous $750.0 million “at-the-market” equity offering program (together, with all previous at-the-market equity offering programs, the “Previous ATM Programs” and together with the New ATM Program, the “ATM Program”). In addition to the issuance and sale of shares of its common stock, the ATM Program also provides for the ability to enter into one or more forward sales agreements (each, an “ATM forward contract”) with sales agents for the sale of the Company’s shares of common stock under the ATM Program.
In the event the Company enters into an ATM forward contract to sell shares of common stock pursuant to the ATM Program, the Company would expect to fully physically settle forward equity sales by delivery of shares of common stock to the forward purchaser and receive cash proceeds upon one or more settlement dates, which are typically aone-year term, at the Company’s discretion, prior to the final settlement date, at which time the Company would expect to receive aggregate net cash proceeds at settlement equal to the number of shares sold on a forward basis multiplied by the relevant forward price per share. The weighted average forward sale price that the Company would expect to receive upon physical settlement would be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchaser’s stock borrowing costs and (iii) scheduled dividends through the settlement.
The following table summarizes the ATM Program activity (or activity under any predecessor at-the-market equity offering programs) for the three months ended March 31, 2025 and 2024 (in thousands, except per share amounts):
| For the Three Months Ended | ||
|---|---|---|
| March 31, 2025 | March 31, 2024 | |
| Number of shares | 553 | 11,600 |
| Average sales price per share | $28.87 | $23.55 |
| Gross proceeds(1) | $15,964 | $273,233 |
(1) Total gross proceeds is before $0.2 million and $3.4 million of commissions paid to the sales agents during the three months ended March 31, 2025 and 2024, respectively, under the ATM Program.
As of March 31, 2025, the Company had $734.0 million available for future issuances under the New 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 the first three months of 2025 (dollars in thousands, except per share amounts):
| For the Three Months Ended | |
|---|---|
| March 31, 2025 | |
| Dividends declared per share | $0.335 |
| Dividends payment date | April 15, 2025 |
| Dividends payable as of record date | $63,053 |
| Dividends record date | March 31, 2025 |
Redeemable Noncontrolling Interest
Arrangements with noncontrolling interest holders are assessed for appropriate balance sheet classification based on the redemption and other rights held by the noncontrolling interest holder. One of the Company’s noncontrolling interest holders has the ability to put its equity interest to the Company during specified option exercise periods, subject to certain conditions. The put option is payable in cash and subject to changes in redemption value. Accordingly, the Company records the redeemable noncontrolling interest outside of permanent equity. The redeemable noncontrolling interest is adjusted for additional contributions and distributions and the proportionate share of the net earnings or losses. When the redemption of the noncontrolling interest becomes probable, the Company will record the redeemable noncontrolling interest at the greater of its carrying amount or redemption value at the end of each reporting period by making an election either to accrete changes in the redemption value of the redeemable noncontrolling interest over the period from the date it is probable of exercise to the earliest redemption date or to recognize the entire adjustment on the date redemption becomes probable. In addition to the rights of the redeemable noncontrolling interest holder, the Company has the ability to call the interest of the noncontrolling interest holder during specified option exercise periods.
As of March 31, 2025, the redeemable noncontrolling interest did not meet the conditions for redemption.
- 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”) typically vest in equal annual installments over athree year period. The board of directors granted certain RSAs in 2025 (“2025 RSAs”) which vest in one installment overone year. 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. 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 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 activity for the three months ended March 31, 2025:
| Shares | Weighted Average Share Price | |
|---|---|---|
| Unvested balance at December 31, 2024 | 552,999 | $23.86 |
| Granted: | ||
| RSAs | 137,920 | 27.17 |
| Vested | (145,951) | 21.16 |
| Unvested balance at March 31, 2025 | 544,968 | $25.42 |
As of March 31, 2025, the weighted-average remaining vesting period of such awards was 2.0 years.
The following table summarizes the stock-based compensation expense recognized for the periods presented (dollars in thousands):
| For the Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Stock-based compensation expense | $3,909 | $2,120 |
As of March 31, 2025, there was $15.8 million of unamortized stock-based compensation expense related to the unvested RSAs and TSR Units.
- EARNINGS PER COMMON SHARE
The following table presents the calculation of basic and diluted earnings per common share attributable to CareTrust REIT, Inc. (“EPS”) for the Company’s common stock for the three months ended March 31, 2025 and 2024, 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 (dollars and shares in thousands, except per share amounts):
| For the Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Numerator: | ||
| Net income attributable to CareTrust REIT, Inc. | $65,802 | $28,746 |
| Less: Net income allocated to participating securities | (183) | (96) |
| Numerator for basic and diluted earnings available to common stockholders | $65,619 | $28,650 |
| Denominator: | ||
| Weighted-average basic common shares outstanding | 187,152 | 132,836 |
| Dilutive potential common shares - TSR Units | 264 | 366 |
| Weighted-average diluted common shares outstanding | 187,416 | 133,202 |
| Earnings per common share attributable to CareTrust REIT, Inc., basic | $0.35 | $0.22 |
| Earnings per common share attributable to CareTrust REIT, Inc., diluted | $0.35 | $0.22 |
| Antidilutive unvested RSAs excluded from the computation(1) | 545 | 330 |
(1)For the three months ended March 31, 2025 and 2024, RSAs are antidilutive.
- SEGMENT REPORTING
The Company represents a single reportable segment, based on how its chief operating decision maker (“CODM”) evaluates the businesses and allocates resources. The CODM assesses performance for the Company and decides how to allocate resources based on consolidated net income that is also reported on the condensed consolidated income statements. The CODM does not review segment assets at a different asset level or category than the amounts disclosed in the condensed consolidated balance sheets. The CODM uses net income to evaluate the performance of the Company in deciding whether to reinvest profits into the Company.
The CODM evaluates performance based on net income, as follows (in thousands):
| For the Three Months Ended March 31, | ||
|---|---|---|
| 2025 | 2024 | |
| Revenues: | ||
| Rental income | $71,646 | $53,502 |
| Interest income from financing receivable | 2,807 | — |
| Interest income from other real estate related investments and other income | 22,168 | 9,568 |
| Total revenues | 96,621 | 63,070 |
| Expenses: | ||
| Depreciation and amortization | 17,841 | 13,448 |
| Interest expense | 6,669 | 8,228 |
| Property taxes | 2,065 | 1,801 |
| Impairment of real estate investments | — | 2,744 |
| Transaction costs | 888 | — |
| Property operating expenses | 105 | 660 |
| General and administrative | ||
| Cash compensation | 2,090 | 1,765 |
| Incentive compensation | 1,225 | 1,500 |
| Share-based compensation | 3,909 | 2,120 |
| Professional services | 876 | 738 |
| Taxes and insurance | 218 | 205 |
| Other expenses(1) | 705 | 510 |
| Total general and administrative | 9,023 | 6,838 |
| Total expenses | 36,591 | 33,719 |
| Other income (loss): | ||
| Gain on sale of real estate, net | 3,876 | 11 |
| Unrealized gain (loss) on other real estate related investments, net | 1,287 | (612) |
| Total other income (loss) | 5,163 | (601) |
| Net income | 65,193 | 28,750 |
| Net (loss) income attributable to noncontrolling interests | (609) | 4 |
| Net income attributable to CareTrust REIT, Inc. | $65,802 | $28,746 |
(1)Other expenses include certain overhead expenses.
- 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.
The following table summarizes the contributions to joint ventures that are consolidated variable interest entities through March 31, 2025 (dollars in thousands):
| Gross Investment | ||||||||
|---|---|---|---|---|---|---|---|---|
| Investment Year · State · Facility Type · Number of Facilities · CTRE · Noncontrolling Interests · Total | ||||||||
| 2023 | CA | SNF | 1 | $25,459 | $653 | $26,112 | ||
| 2023 | CA | SNF | 2 | 34,269 | 879 | 35,148 | ||
| 2024 | CA | ALF | 1 | 10,760 | 276 | 11,036 | ||
| 2024 | CA | Multi-service campuses | 2 | 28,076 | 720 | 28,796 | ||
| 2024 | CA | SNF | 1 | 24,503 | 628 | 25,131 | ||
| 2024 / 2025 | (1) | TN, AL | SNF | 28 | 442,327 | 19,156 | 461,483 | |
| 2024 / 2025 | (2) | - | - | - | 33,663 | 867 | 34,530 | |
| Total | 35 | $599,057 | $23,179 | $622,236 | ||||
(1) The noncontrolling interest is classified as a redeemable noncontrolling interest on the consolidated balance sheets.
(2) The Company entered into a joint venture to acquire real estate. The gross investment amounts represent a deposit. See Note 15, Subsequent Events, for additional information.
Pursuant to the Company’s joint ventures (“JVs”), the Company typically contributes at least 90% of the JV’s total investment amount and receives 100% of the preferred equity interest in the JV and a 50% common equity interest in the JV. The Company’s JV partner contributes the remaining total investment amount in exchange for a 50% common equity interest in the JV.
Total assets and total liabilities include VIE assets and liabilities as follows (dollars in thousands):
| March 31, 2025 | December 31, 2024 | |
|---|---|---|
| Assets: | ||
| Real estate investments, net | $581,959 | $565,959 |
| Cash and cash equivalents | 6,762 | 6,506 |
| Accounts and other receivables | 32 | — |
| Prepaid and other assets | 41,078 | 8,317 |
| Total assets | 629,831 | 580,782 |
| Liabilities: | ||
| Accounts payable, accrued liabilities and deferred rent liabilities | 7,847 | 10,332 |
| Total liabilities | $7,847 | $10,332 |
- 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 March 31, 2025 (in thousands):
| Remaining Commitment | |
|---|---|
| Capital expenditures(1) | $7,163 |
| Mortgage loans(2) | 9,066 |
| Other loans receivable(3) | 12,166 |
| Earn-out obligation(4) | 10,000 |
| $38,395 |
(1)As of March 31, 2025, the Company had committed to fund expansions, construction, capital improvements and ESG incentives at certain triple-net leased facilities totaling $7.2 million, of which $6.3 million is subject to rent increase at the time of funding.
(2)Includes an earn-out advance of $9.0 million related to one mortgage loan, upon satisfaction of certain conditions.
(3)Represents non-real estate secured loan commitments.
(4)Includes an earn-out obligation of up to $10.0 million under a purchase and sale agreement forone SNF in Virginia, which was acquired during 2024. The earn-out is available, contingent on the operator achieving certain thresholds per the agreement, beginning in October 2025 through October 2026.
- 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 three months ended March 31, 2025 and 2024. The following table sets forth information regarding the Company’s major operators as of March 31, 2025 and 2024:
| Number of Facilities · Number of Beds/Units · Percentage of Total Revenue | |||||||
|---|---|---|---|---|---|---|---|
| Operator/Borrower | SNF | Campus | ALF/ILF | SNF | Campus | ALF/ILF | Three Months Ended |
| March 31, 2025(1) | |||||||
| Ensign(2) | 89 | 7 | 7 | 9,288 | 843 | 661 | 21% |
| PACS(2) | 23 | 3 | — | 2,809 | 322 | — | 11% |
| March 31, 2024(1) | |||||||
| Ensign(2) | 85 | 8 | 7 | 9,024 | 997 | 661 | 30% |
| Priority Management Group | 13 | 2 | — | 1,742 | 402 | — | 13% |
(1) The Company’s rental income and interest income on other real estate related investments, exclusive of operating expense reimbursements.
(2) Ensign and the PACS Group, Inc. (“PACS”) are subject to the registration and reporting requirements of the SEC and are required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. Ensign and PACS’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.
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 three months ended March 31, 2025 and 2024:
| Number of Facilities · Number of Beds/Units · Percentage of Total Revenue | |||||||
|---|---|---|---|---|---|---|---|
| State | SNF | Campus | ALF/ILF | SNF | Campus | ALF/ILF | Three Months Ended |
| March 31, 2025(1) | |||||||
| CA | 42 | 12 | 11 | 4,979 | 2,004 | 1,032 | 23% |
| TX | 38 | 3 | 2 | 4,772 | 476 | 212 | 12% |
| TN | 29 | — | — | 3,098 | — | — | 12% |
| March 31, 2024(1) | |||||||
| CA | 42 | 9 | 9 | 5,000 | 1,527 | 723 | 31% |
| TX | 41 | 4 | 2 | 5,193 | 630 | 212 | 20% |
(1) Based on the Company’s rental income and interest income on other real estate related investments, exclusive of operating expense reimbursements.
- SUBSEQUENT EVENTS
The Company evaluates subsequent events in accordance with ASC 855, Subsequent Events. The Company evaluates subsequent events up until the date the condensed consolidated financial statements are issued.
Recent Acquisitions
On April 1, 2025, the Company purchasedone multi-service campus in California for $34.7 million, inclusive of transaction costs, through a JV. The Company contributed $33.8 million to the JV. 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 $0.9 million of the total investment in exchange for 50% of the common equity interest in the JV. In connection with the acquisition of the facility, subsidiaries of the JV entered into a new master lease with affiliates of Ensign. The master lease has an initial term of approximately 15 years, withtwo five-year renewal options. Annual cash rent under the lease is $3.5 million, with annual CPI-based escalators. See Note 12, Variable Interest Entities, for additional information.
Mortgage Loan Prepayment
In April 2025, one mortgage loan with a principal balance of $2.9 million was fully prepaid, including all unpaid accrued interest.
At-The-Market Offering of Common Stock
In April 2025, the Company sold 3.4 million shares under the ATM Program for gross proceeds of $99.5 million at an average sales price per share of $28.90.
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