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DATE

Friday, Aug. 7, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• Chief Accounting Officer - Lauren Beale
• President and Chief Executive Officer - David Sedgwick
• Chief Financial Officer - Derek Bunker
• Chief Investment Officer - James Callister

TAKEAWAYS

• Investment Activity -- $899.6 million closed during the second quarter, representing the largest investment quarter in company history excluding mergers and acquisitions.
• Blended Yield -- 8.9% on second quarter investments, reflecting a mix of skilled nursing sale-leasebacks, care home expansions, and real estate loans.
• Year-to-Date Investments -- $1.5 billion deployed through Aug. 7, 2026, at an average blended stabilized yield of approximately 8.7%.
• Post-Quarter Activity -- $307.9 million in investments closed since June 30, 2026, including a 16-property United Kingdom Care Homes portfolio and a $65 million addition to the Seniors Housing Operating Portfolio (SHOP).
• Post-Quarter Yield -- 7.8% on activity closed after the second quarter, primarily reflecting the acquisition of a large-scale care home portfolio.
• Investment Pipeline -- $540 million as of Aug. 7, 2026, consisting of approximately two-thirds skilled nursing and one-third loans and care homes.
• Normalized FFO -- $119.7 million, or $0.51 per share, representing a 19% increase compared to the prior year quarter.
• Normalized FAD -- $118.5 million, or $0.51 per share, an increase of 19% versus the same period last year.
• 2026 Normalized FFO Guidance -- $2.03 to $2.06 per share, representing 16.2% growth at the midpoint compared to full year 2025 results.
• 2026 Normalized FAD Guidance -- $2.01 to $2.04 per share, representing 15.1% growth at the midpoint over the prior year.
• Dividend -- $0.39 per share for the quarter, representing a payout ratio of 76% of Normalized FAD.
• Liquidity -- $1.4 billion available as of Aug. 7, 2026, comprised of $90 million in cash, $605 million in revolver capacity, and $671 million in unsettled equity forward contracts.
• Net Debt to Annualized Normalized Run Rate EBITDA -- 1.01x at quarter end, remaining well below the long-term target range.
• Equity Forwards -- 16.6 million shares remained unsettled as of early August, representing $671.4 million in gross proceeds available for future investments.
• ATM Program -- $785.8 million of capacity remains available under the current at-the-market equity program.
• Loan Repayments -- $147 million in total loans expected to be repaid in 2026, with $104 million already received to date.
• Rent Collections -- 100% of contractual rent and interest collected during the second quarter.
• Rent Escalators -- 2.5% inflation-based escalators assumed for long-term triple-net leases in the updated full year guidance.
• Debt Maturity -- Zero scheduled debt maturities for the company prior to 2028.
• Share Count -- 233 million weighted average diluted shares assumed for the full year 2026 guidance.

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RISKS

• James Callister stated, "SHOP is pretty well out there. There's a lot more private market entrants right now. Cap rates are compressing as a result," noting increased competition for senior housing assets which may impact future yields in that segment.
• James Callister noted that for the 16-property United Kingdom Care Homes investment, "the scale did impact the pricing a little bit," acknowledging that a premium was paid for the ability to acquire a portfolio of that size.

SUMMARY

Management reported record investment activity for the second quarter of 2026, deploying nearly $900 million at an average yield of 8.9%. The company indicated it is on pace for a third consecutive year of record volume, supported by a multi-engine growth strategy targeting skilled nursing, seniors housing, and international assets in the United Kingdom. Financial results were driven by strong operator performance, with management citing record lease coverage and quality care measures that exceed industry averages. The company raised its full year 2026 guidance for Normalized FFO and Normalized FAD while maintaining a conservative balance sheet with a leverage ratio of 1.01x Net Debt to EBITDA.

• CEO Sedgwick attributed operator success to a mission-driven culture, stating, "A quality operator is one who is driven by a mission, focuses their resources first on becoming the employer of choice and through that, becomes the quality care provider of choice in their market."
• James Callister explained the absence of SHOP deals in the immediate $540 million pipeline as a result of timing and discipline, noting the team would "stretch to try to go get" the right opportunities without overpaying in a competitive environment.
• CFO Bunker highlighted the company's significant liquidity and equity forward strategy, noting that the $671 million in unsettled forwards provides a dedicated "runway to maneuver" for upcoming pipeline execution.
• James Callister noted that the "loan to own" structure used in the United Kingdom is a strategic tool to facilitate closings while waiting for licensure, with such loans typically converting to real estate within six to 12 months.
• CEO Sedgwick characterized the current skilled nursing environment as "stable" regarding regulation and reimbursement, expressing confidence in the asset class due to demographic tailwinds over the next 25 years.
• Management confirmed that senior housing lease coverage remains high enough that there is little motivation to convert existing triple-net leases to SHOP structures defensively.
• The company continues to prioritize operator quality over market geography, with Sedgwick stating, "We'd much rather take an A operator in a B market than settle for a mediocre operator in a great market."

INDUSTRY GLOSSARY

• ATM Program: At-the-market program, a method for publicly traded companies to raise capital by selling shares into the secondary market at prevailing prices.
• FAD (Funds Available for Distribution): A non-GAAP financial measure that adjusts FFO by subtracting recurring capital expenditures and non-cash income/expenses to show cash available for dividends.
• FFO (Funds From Operations): A standard performance measure for REITs that excludes depreciation and gains or losses from real estate sales.
• Forward Equity Contract: An agreement to sell shares at a future date at a price set today, allowing a company to lock in capital while delaying share issuance until the cash is needed for investments.
• RIDEA: An acronym for the REIT Investment Diversification and Empowerment Act, which allows REITs to participate in the operations of a property rather than just receiving passive rent.
• SHOP (Seniors Housing Operating Portfolio): Properties where the REIT participates in the operating profit and loss, typically managed by a third party for a fee.
• SNF (Skilled Nursing Facility): A clinical healthcare environment that provides 24-hour nursing care and rehabilitation services.
• Triple-Net Lease: A lease agreement where the tenant is responsible for all property expenses, including taxes, insurance, and maintenance, in addition to rent.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the CareTrust Second Quarter Earnings Call. [Operator Instructions] I will now hand the conference over to Lauren Beale, Chief Accounting Officer. Lauren, please go ahead.

Lauren Beale: Thank you, and welcome to CareTrust REIT's Second Quarter 2026 Earnings Call. Today, we will make forward-looking statements based on management's current expectations, including statements regarding future financial performance, dividends, acquisitions, investments, financing plans, business strategies and growth prospects. These forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from our expectations. These risks are discussed in CareTrust REIT's most recent Form 10-Q filing with the SEC. We do not undertake a duty to update or revise these statements, except as required by law. During the call, the company will reference non-GAAP metrics such as EBITDA, FFO and FAD.

A reconciliation of these measures to the most comparable GAAP financial measures is available in our earnings press release and Q2 2026 financial supplement, which are available on the Investor Relations section of CareTrust's website at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period. On the call this morning are David Sedgwick, President and Chief Executive Officer; Derek Bunker, Chief Financial Officer; and James Callister, Chief Investment Officer. I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?

David Sedgwick: Thank you, Lauren, and good morning, everybody. Thank you for joining us. The CareTrust flywheel cranked up a few years ago when we hit around 7x our lifetime annual average of investments in 2024 and again in 2025. The team shows no signs of slowing. In fact, the opposite is true. After 2 back-to-back record-setting years, we are again on pace to deliver in a big way for our operators and shareholders. Last quarter was the single largest investment quarter in our company's history, excluding M&A activity, with approximately $900 million of investments at a blended yield of 8.9%.

James, Kyle, Joe, Tri, Josh, JP, Nick, Martin, and Killian, that's the dream team right there responsible for a year's worth of investments in 1 quarter. I'm so proud of them and proud of the entire CareTrust team across the board: accounting, asset management, finance, tax, legal, data, operations. Everyone is rowing hard together to make this year a three-peat of record performance. Q2 results achieved record investments in the quarter, record revenues, record FFO per share and a healthy raise to guidance, built on a foundation of record operator lease coverage and operator quality care measures. Let me expand on that foundation just a little bit.

We are stoked to see our operator quality care measures exceed the industry averages for overall star ratings, health inspections, quality measures, successful discharges and readmission rates. Let me repeat that. Our operators outperform industry averages for overall star ratings, health inspections, quality measures, successful discharges and readmission rates after they've had a chance to manage these buildings for at least 4 years. In my 2025 annual report letter, I discussed how mission-critical it is for us to lease our properties to high-quality operators and how we view the relationship between them and the value of our real estate investments.

A quality operator is one who is driven by a mission, focuses their resources first on becoming the employer of choice and through that, becomes the quality care provider of choice in their market. Only after achieving sustained quality care outcomes can a provider and the real estate they operate achieve sustainable financial stability. We have seen this formula for success prove out over the last 25 years. A CareTrust operator is one who harmonizes mission-driven culture with the clinical and financial sophistication to adapt to an ever-changing environment. We apply those first principles to skilled nursing and senior housing alike. We invest for the long term.

The price we pay and the operator we choose are intended to result in long-term quality care and, as a result, compounding value creation. That solid operator foundation and orientation allows us to grow in a sustainable and accelerated way across our 3 growth engines. Year-to-date, we have already closed on approximately $1.5 billion. And looking forward, the pipeline continues to reload and deal flow continues to be active and interesting across skilled nursing, care homes and SHOP, both in the U.S. and the U.K.

With the balance sheet as strong as it is, the team is stronger than ever before and the opportunity set expanded and great relationships with partners and new and existing high-quality operators, there has simply never been a more exciting time for CareTrust. With that, I'll hand it off to James for a report on investment activity and the acquisition landscape. James?

James Callister: Thanks, Dave. Good morning, everyone. During the second quarter, we closed on investments totaling approximately $900 million at a blended stabilized yield of 8.9%. That capital was deployed across the full breadth of the platform, U.S. skilled nursing sale leasebacks with quality operators in multiple geographies, the continued expansion of our U.K. Care Homes platform, sourced and executed by our London-based team, further growth in our SHOP portfolio and relationship-driven real estate loans, primarily as skilled nursing operators closed either alongside asset acquisitions or in anticipation of them. And as Dave noted, we haven't slowed down since the quarter ended. Since June 30, we've closed on an additional approximately $308 million at a blended stabilized yield of approximately 7.8%.

Headlining that activity was a 16-property U.K. Care Homes portfolio net leased to a new operator relationship for CareTrust, joined by a two-community $65 million addition to our SHOP platform. Taken together, our 2026 investments now stand at approximately $1.5 billion year-to-date. Breaking that down, roughly $735 million in U.S. triple net skilled nursing and seniors housing, approximately $397 million in U.K. Care Homes, approximately $240 million in loans, and approximately $81 million in SHOP. Turning to what's ahead. The pipeline sits at approximately $540 million, roughly 2/3 skilled nursing and 1/3 loans to strategic partners plus U.K. Care Homes. It's a healthy mix, some singles and doubles alongside mid- to large portfolio opportunities.

You'll note the immediate pipe doesn't include SHOP. That's really just a function of timing and discipline. The team continues to deepen relationships, including with high-performing operators, and we are confident these relationships will drive attractive on- and off-market opportunities that we expect to convert in future quarters and give us a long runway to scale that portfolio in both the U.S. and the U.K. And, our usual reminder on methodology, the quoted pipe includes only deals we have a reasonable level of confidence we can lock up and close within the next 12 months, and it typically excludes larger portfolios still under review.

Stepping back for a moment, what gives us real confidence is that all 3 of our growth engines are producing. In skilled nursing, deal flow remains deep and steady with proprietary opportunities generated through long-standing relationships. In SHOP, even amid stiff competition and compressing cap rates, we're pursuing the right assets with the right operators and see a long runway to scale that portfolio in the quarters and years ahead. And in the U.K., our London-based team has widened our aperture considerably, new operators, new sources of deal flow and a pipeline that keeps building. Across all 3, the team continues to surface attractive opportunities to deploy capital, and we like our position in each of these markets.

That growth will stay grounded in the same fundamentals that have served us well, disciplined underwriting, durable operator partnerships, and a creative collaborative approach to structuring. With that, I'll hand it to Derek to walk through the quarter's financial results.

Derek Bunker: Thank you, James. For the quarter, normalized FFO increased 44% over the prior year quarter to $119.7 million, and normalized FAD increased 43% to $118.5 million. On a per share basis, normalized FFO was $0.51, an increase of approximately 19% over the prior year quarter. And normalized FAD was also $0.51, an increase of approximately 19% over the same period. In the second quarter, we raised approximately $364 million of gross proceeds from the settlement of outstanding equity forward contracts to fund investment activity in the quarter. Also in the quarter, we sold 14.4 million shares under forward equity contracts, raising $580.5 million of gross proceeds at a weighted average price of $40.23.

And since quarter end, we sold another 2.2 million shares on a forward basis for gross proceeds of $90.6 million at a weighted average price per share of $41.46. As of today, we have approximately 16.6 million shares remaining unsettled under forward sale agreements, representing approximately $671.4 million in gross proceeds available to fund future investment activity. In yesterday's earnings press release, we raised our full year 2026 guidance, reflecting our year-to-date investment activity, including the volume we've closed since quarter end. We're now projecting normalized FFO per share of $2.03 to $2.06 and normalized FAD per share of $2.01 to $2.04.

At the midpoint, that represents growth of 16.2% in normalized FFO per share and approximately 15.1% in normalized FAD per share compared to full year 2025 results. Our updated guidance is based on a weighted average diluted share count of 233 million shares and includes the following key assumptions: First, no new investments, loans, or dispositions beyond those made year-to-date; second, no new debt or equity issuances beyond those made year-to-date; third, 2.5% inflation-based rent escalators under our long-term triple net leases; fourth, $147 million of loans to be repaid throughout the year, of which approximately $104 million has been received so far to date; and fifth, no material change in the GBP to USD spot exchange rate.

Additional guidance measures are detailed in the press release yesterday. Lastly, our liquidity continues to remain strong at approximately $1.4 billion as of today, including approximately $90 million of cash on hand, $605 million of availability under our $1.2 billion revolving credit facility and approximately $671 million of unsettled equity forward contracts. In addition, we have roughly $785.8 million of capacity available under our ATM program. Net debt to annualized normalized run rate EBITDA was 1.0x at quarter end, well below our long-term target range, and our fixed charge coverage ratio was 9.9x. We continue to have no scheduled debt maturities prior to 2028.

With continued momentum and a reloaded investment pipeline, we have ample dry powder and multiple levers across our capital toolkit to keep funding our recent pace of investment activity. And with that, I'll turn it back to Dave.

David Sedgwick: Thank you, Derek, and thank you, James, and thank you, everybody. We're really grateful for everybody's interest and support. As I hope you can tell, we are super bullish on the CareTrust story and not just what we've achieved, but where we are headed. And with that, I would be happy to answer any of the questions that you might have at this time.

Operator: [Operator Instructions] Your first question comes from John Kilichowski with Wells Fargo.

William John Kilichowski: James, maybe if I could start with you. You gave some helpful color in the opening remarks, especially about building out the SHOP pipeline and it not being mentioned in the -- or SHOP not being mentioned in the current pipeline. Could you talk a little bit more about building those relationships with operators and how that will eventually translate into volumes and how we should think about the cadence of that?

James Callister: Yes, sure. I mean, I think that it's hard to predict the cadence, John. You're never really sure what's going to hit the market or what off-market is going to come. But I think that building relationships with these operators and managers, finding the ones you can use in different regions of the country or have proven track records there that have maybe experiences with other publics and their reporting and back office just really allows you to more quickly pursue transactions that come up. It opens up the off-market pipeline as you develop relationships with them.

And really, as you really start to develop frameworks with them of what your deal with them would look like, the terms on which you do it. And you get really all that kind of prebaked so you can react quickly when the right deal in the right area comes up for you to work with that particular operator or manager. And I think the team has done a great job of developing a lot of those relationships and being ready really to continue and ramp up pursuing acquisitions in different parts of the country.

William John Kilichowski: And then would you also mind talking about the portfolio deals outside of the quoted pipeline? Maybe you don't want to speak to specific deals, but can you talk about the composition of where you're seeing those opportunities? Or is it more SNF tilted? Are there SHOP portfolios out there that you're currently evaluating? I'm just kind of curious what the composition looks like more than anything.

James Callister: Yes. I mean there's a few portfolios tinkering around out there. I would say there's 1 or 2 SHOP portfolios that are larger out there that we're reviewing to see how attractive they are and whether we want to pursue them. There's also, I'd say, the same for SNF and 1 or 2 in the U.K. as well. So there's always seemingly a couple of them floating around, but there are a couple of shops out there that we're looking at, but we'll see if they're really worth us pursuing or if we think that there's traction there.

Operator: Your next question comes from Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: With respect to the Care Home portfolio investment in August, I think this might be one of the largest purchases you've done in the U.K. since acquiring Care REIT. But what I'm wondering is how much of the scale impact pricing? And do you view this deal to open the door to potential future deals given the new relationship there with the operator?

James Callister: Yes. I mean the scale did impact the pricing a little bit, Austin. I would say that 16 facilities, it doesn't -- deals that size in the U.K. don't come around all the time. So there's definitely a teeny bit of a premium there. We definitely see it as a launching point with this operator. We feel like they've demonstrated in the past their ability to operate at scale and to operate well at scale. And this is really their first jump back in after selling their portfolio last year. So we definitely see it as a launching pad to grow with them in the future.

Austin Wurschmidt: And then, Dave, as you think about tenant and geographic concentration and kind of ensuring that you do have the right diversification balanced with partnering with the highest quality operators consistent with the above-average metrics that you highlighted in your opening remarks. I mean, how do you think about striking that right balance moving forward?

David Sedgwick: Well, I think one of our first principles as we started the company was that the underwriting always starts and ends with who is the operator going to be. And if we do not have what we think is a quality operator to match with a great opportunity, we're simply going to pass on that deal. We'd much rather take an A operator in a B market than settle for a mediocre operator in a great market. So that's just in our DNA. That's the discipline we have.

And if we do have -- which we do have great operators, we don't mind concentration building with one or another because over time, the diversification and concentration sort of takes care of itself.

Operator: Your next question comes from Juan Sanabria with BMO Capital Markets.

Robin Haneland: This is Robin Haneland sitting in for Juan. I was curious if there are any opportunities to convert existing senior housing tenants to either SHOP in the U.S. or U.K.?

David Sedgwick: We've certainly thought about that. The challenge that we have in doing that is that our senior housing portfolio here in the U.S. and in the U.K. covers rent really well. And so there's very little motivation for the operators to walk away from that type of lease coverage. I think a lot of those conversions that have happened in our space have been kind of from a defensive posture where maybe things haven't been performing super well or there hasn't been really strong coverage. And so it was more of a defensive play to convert to SHOP. So because ours covers so well, there's less opportunity to do that.

And however, as we look forward, everything is on the table. But I think more likely for us, SHOP will be coming from being on offense and identifying great assets that we really want to own and have operations responsibility for with great partners.

Robin Haneland: And as a follow-up, I wanted to ask on where things stand with PACS today? What's the willingness to move forward? What have the discussions been sort of year-to-date?

David Sedgwick: Yes. So we're really pleased to see PACS' performance this year, happy to see them back to normal filing cadence. Really happy to see their investments in compliance and happy to see them back on the growth path. We haven't done anything with PACS for a while, but that's not for lack of trying. We have looked at some deals with them, and we'd be happy to grow with them again if the opportunity presents itself.

Operator: Your next question comes from Michael Goldsmith with UBS.

Michael Goldsmith: James, in your prepared remarks when talking about the U.K., I think you talked about widening the aperture. So maybe you can provide a little bit more color of what you meant specifically by that?

James Callister: Sure. I think what I mean by that is that I think the team there has done a great job of going beyond just seeing marketed deals, but also using operator relationships and other relationships they have or that we've formed to bring more pipeline or sources of deals than just the traditionally marketed deals. I think also that as you start to look at maybe structures beyond just the triple net, they've done a great job starting to form relationships for us to start looking at deals like that, that might work in other structures like a SHOP if something presented itself. So I think, Michael, that's pretty much what I mean.

Just opening the way in which deals come to us beyond just traditionally marketed deals and thus really increasing the chance as we get more opportunities.

Michael Goldsmith: Got it. And maybe just to follow up on John's question earlier about the SHOP in the pipeline. I think you cited timing and discipline. So like obviously, like how do you -- like you can only take advantage of the opportunities that you see. At the same time, you are trying to maintain a certain level of discipline around what you're seeing, but then also you know like the underlying strength of the business is so strong and it feels like everyone is outperforming their own underwriting.

So how do you kind of manage that across the portfolio and your opportunities that you're seeing and making sure that you're in on the right deals and then also -- and making sure you're not missing out on things, but also not just acquiring just for the sake of acquiring?

James Callister: Yes. I mean it's a tough balance, I would say. But I think what we try to do is we try to really look at deals and pick our spots, right? And we try to find those opportunities where we feel like there's real confidence that we have that this can get to an IRR that we really want to pursue, and we'll stretch to try to go get it. But on the other hand, we don't feel a huge compulsion to have to stretch to do a deal that doesn't make sense for us. We're finding opportunities to put money to work in really good deals on the SNF side and in the U.K. Care Home side.

And so when it comes to SHOP, we're going to continue developing relationships, continue to look at and underwrite a lot of deals. We're going to continue to pick our spots with the right partners, operators and stretch to try to go get those opportunities, but not go beyond what we feel is wise or prudent just in the name of growth. So I think we work really hard to try to pick those spots knowing that we don't have to do a deal to grow when we've got opportunities with SNFs and care homes.

Operator: Your next question comes from Michael Carroll with RBC Capital Markets.

Michael Carroll: James, just with the increased private market interest in the health care real estate space in general, I mean, how has that impacted acquisition cap rates? I mean have you seen cap rates just broadly drift lower? And is there any one property type where you've seen that more apparent? I know I think in the past, you highlighted there's probably the most competition in the SHOP space. But what have you seen on the SNF space and maybe the U.K. Care Home space?

James Callister: I mean, yes, SHOP is pretty well out there. There's a lot more private market entrants right now. Cap rates are compressing as a result. You've got more competitive processes. I think in the SNF world, we don't see too much of that really at all. I think you see the same players that there's been over the past several years, same buyer pool, I think, really competing for the deals. And so portfolio deals in SNFs, larger deals, you maybe see a little teeny bit of compression in cap rates. But overall, you still see the same where they've been.

It's just really having relationships that help you source more off-market because there is more off-market than listed in the SNF world. And in the U.K., I think you do see a slow influx of additional players on the private entrant side for sure. I don't think we've seen it impact dramatically the competitive process. But I would say you see an uptick in buyer entrants, but I haven't seen it really have that much of an impact at all on cap rates or bidding up processes.

Michael Carroll: Okay. Great. And then, I guess, Derek or Dave, could you talk about the purchase options? I know that you have a few meaning your tenants can potentially acquire one of your current assets. I know there was a window that opened up for one specific smaller purchase option, and there's a few that's coming up here over the next few quarters or so. I mean how should we think about that? Or do you think that those could potentially be executed on? Or is that just an option out there that will just kind of expire eventually?

Derek Bunker: Mike, we do expect and kind of bake in that there's a high likelihood that those will be exercised. Of course, until we get the notices of exercise, it's always uncertain and people's capital needs and plans change all the time. But I think we're constantly in discussion with those tenants that have options. It's a good relationship. It's collaborative. And it's not the end of the world that they exercise. We always look to do deals down the road with them in the future. But as of right now, we put a high likelihood that those would be exercised.

Operator: Your next question comes from Farrell Granath with Bank of America.

Farrell Granath: My first one is on the composition of your financing receivables. I know that, that can also refer to your sales leaseback. So curious if -- what percentage of that is potentially SNFs, given that SNFs has been a smaller proportion of your acquisition pipeline as outright purchases?

Derek Bunker: Yes. Farrell, it's Derek. It's almost 100% SNFs. These are really exciting, compelling sale-leaseback opportunities. The bulk of the financing receivables have purchase options that are 8, 9 years out. And there's a lot of uncertainty in the meantime about those exercise. We view them more in substance as owned triple net. But for accounting purposes, it falls within the financing receivable bucket. But these are really quality -- high-quality assets in the skilled nursing space.

Farrell Granath: Okay. And then also just given the growing debate around the path of Fed policy, I'm curious how you're thinking about your cost of capital and especially being able to leverage either your balance sheet or also continue to lean into your equity, if there's any updated thoughts.

Derek Bunker: Yes. We prepare for all uncertainties, and I think it's a benefit of having relatively low leverage. It gives us the optionality depending upon Fed policy and other macro factors. So we really like carrying a little balance on the revolver. It's competitive for us. We really like the price of our equity right now. We've got the optionality to do something longer term or a term loan. All those are on the table. We're looking at the full toolkit. And for right now, looking at the pipeline, we've got earmarked probably the settlement of our equity forwards and then some.

And so I think we've given ourselves some runway to maneuver and be flexible depending upon how those macro conditions continue to unfold. But right now, we're really just pricing it out and watching those rates daily and trying to be opportunistic about it.

Operator: Your next question comes from Rich Anderson with Cantor Fitzgerald.

Richard Anderson: So there's one pretty clear disconnect going on in your world, and that is you guys are not finding many in the way of SHOP transactions, and I know you're working hard at it, but some of your peers are -- it's raining SHOP. And so you're not going to talk about their process, but -- and you're the one with the best cost of capital in the group. So I guess it all doesn't sort of ring clear to me, except for the fact that you're going to be very disciplined in all of that.

But when you're on the ground looking at deals that you're competing with, I mean, how far off are you missing from the ultimate winner? Is it coming down to pricing? What is it that's causing yours to be such a slow out-of-the-gate process in SHOP, whereas others are really moving quite fast?

David Sedgwick: Maybe James can give a little bit of more vibrant color to the specific question on how far off are we versus the competition. But I would say one of the main differences between us and some of our peers is we have not -- we view SHOP as a long-term complementary growth engine to the CareTrust story. I think some of our peers have really pivoted and gone all in on SHOP. And with that type of publicized strategic change, there's quite a bit of motivation on their side to put money to work and show that's -- that they're executing on that new strategy. Whereas we have, I think, the luxury of being opportunistic across all 3.

And if we have the ability to put double-digit FFO per share growth by maintaining that discipline and being opportunistic across all 3, we really prefer that approach than kind of putting ourselves in a corner per se to have to do a ton of SHOP to show that we're executing on a particular strategy. I think that's high level why it appears that we've been more measured in our deployment of SHOP capital. But I wouldn't be surprised either, Rich, if we did do a large SHOP portfolio deal in the future. For us, that can happen because there are portfolios out there that I think will eventually check all the boxes for us.

Richard Anderson: Okay. And James, any comment on the -- where you're missing?

James Callister: Yes. I mean, look, it's no -- if you're missing, you're almost always missing on price, right, Rich? And so when we look at it and we look at a deal and we say, look, what do we feel like the projections are here? What's the IRR going to be? What's the return? What's the risk-adjusted return?

And you start getting facilities that are portfolios that are in the mid-90s occupancy that are stable, where the pricing is going to a mid- to low 5 cap, and you start looking at that versus a plethora of SNF and other opportunities that are going to be in the 9s or high 8s and you start looking at the risk-adjusted return and you think maybe it's wiser to put some allocated capital to where we have the most opportunities with a better risk-adjusted return for us if the pricing is just going to be too risky for us and not get the returns that we're looking for. So that's really what the process that you go through.

Richard Anderson: Yes. Okay. And then last quickly for me. Dave, maybe for you, like what do you like about the skilled nursing business? And I asked that question a little tongue in cheek, but you're obviously making a spread on your investments. But if for some reason, the acquisition environment suddenly screeched to a halt, you'd be stuck with a 2% growth platform in skilled -- U.S. skilled nursing. So assuming I'm right about that, like what is the draw to skilled nursing as an industry for you? And I'm not suggesting it's right or wrong. I'm just asking the question, your perspective on it.

David Sedgwick: We've got a long -- as you know me, I personally and we as a company, have a long relationship and history in skilled nursing. That's where we come from back in the Ensign days in 1999 when Ensign started. So we know and love this business. We view it as a vital part of the health care continuum in the country. We see it as too important to fail. We saw that during the pandemic. And we see as the demographics continue to blow up over the next 25 years that it will continue to be a really important part of the health care continuum.

Not only that, because our history is so deep with skilled nursing, I think we do -- as our lease coverage track record demonstrates, I think we do a really good job of identifying the best operators out there who can do it the right way, providing high-quality care. And to James' earlier point, what it does is it produces really high risk-adjusted returns for us compared to just about any other asset class.

Richard Anderson: I do like that too important to fail comment.

Operator: Your next question comes from Alec Feygin with Baird.

Alec Feygin: Are there any portfolio initiatives that you're working on with SNF operators, large or small?

David Sedgwick: What do you -- I'm not sure what you're asking. What do you mean portfolio initiatives?

Alec Feygin: So there's been some other of your peers working on some pretty large portfolio initiatives, either replacing operators, doing changes to leases, extending leases. Is there any of that going on in your portfolio?

David Sedgwick: No. I mean there's always some -- there's always scrutiny, right, on the portfolio. But as you look in the SHOP, you see just really, really healthy lease coverage. But even with that, there's -- the asset management, portfolio management team here is always looking to improve and take assets from maybe weakening hands to stronger hands. But there's nothing that's currently underway that would impact guidance or our results at all, nothing of significance.

Operator: Your next question comes from [ Eddie ] Rodgers with Raymond James.

David Rodgers: It's Dave. I know, Dave, that there's always headlines and risk from a regulatory standpoint out there. But I'm wondering maybe to ask that question in a different way. Are you seeing anything in the acquisition pipeline that either the operators are bringing you or you're increasingly turning down where there's more risk and vice versa, are there asset types or areas where you're now feeling there's less risk that are opening up opportunities? And I don't know if that's more rehab, less skilled, whatever the case might be. Are you seeing any shift within the mix in kind of the skilled nursing business that's given you this opportunity to continue to acquire so well?

David Sedgwick: No. Dave, I'd characterize the skilled nursing environment right now as stable. I think from a regulatory standpoint, from a reimbursement standpoint, there have definitely been previous periods of time that have been more choppy. But right now, I'd say it's really stable. I think the operators and we feel comfortable with it. And there's quite an appetite to grow in today's environment.

David Rodgers: And then maybe one follow-up. It's pretty small, but the loan to own that closed in the third quarter. One, any details about that small asset? And then maybe a bigger question around that, is that instructive or could that be instructive of any way where you might get more assets back that you'd want to own more quickly?

James Callister: David, are you talking about Q3?

David Rodgers: Yes.

James Callister: Yes. I mean that's really a function of, I think, what you're talking about is the -- in the U.K., sometimes some of the parts of the transactions have to be structured a little differently as kind of a loan to own to facilitate closing while licensure is being received. So we anticipate that would turn into real estate in the next 6 to 12 months. For instance, we closed a transaction last fall that was under this loan to own. And just recently, they got the licensure and converted into the real estate. So that's really what that is. It's just a function to help facilitate closing earlier while you're waiting for licensure.

Operator: Your next question comes from Michael Stroyeck with Green Street.

Michael Stroyeck: It sounds like loans are a decent chunk of the pipeline. Can you just talk about the strategic rationale of these particular loans and if we should expect loans to continue to be a meaningful part of external growth moving forward?

James Callister: Yes. I mean there's always a purpose behind the loans, Michael, really. It's that they're either going to be done alongside asset acquisitions or in contemplation of. So whether it's a purchase option or an agreement that real estate deals will follow. It's really a way for us to unlock the door to future real estate acquisitions with that particular borrower or operator. And so those relationships, that cycle has been a very virtuous one for us.

It's been very successful for us in the past and been a driver of a lot of the growth that's happened over the last couple of years in a cycle that with the right operators and the right properties that will continue to feed. It's never going to become anywhere close to the primary business, but it will be fluctuate quarter-to-quarter. But when those opportunities arise and we see real estate in the future, it's a cycle we'll feed.

Michael Stroyeck: Understood. And maybe one on the most recent SHOP deal. I guess where do you ultimately see that mid-6% yield stabilizing at? And what's the time frame that you guys are assuming there?

James Callister: Yes. I mean I think it's -- those 2 are pretty stable assets. I think that we see a lot of opportunity for -- they're well positioned for rate growth. They're well positioned for some OpEx savings. One of the facilities has some expansion potential that we're actively looking at. So we definitely see a low double-digit IRR return there. And I think really, we would look at margin expansion from the low 30s to the high 30s in the next 2 to 3 years.

Operator: Your next question comes from Jyoti Yadav with Mizuho.

Jyoti Yadav: This is Jyoti on for Vikram. So you guys mentioned record coverage. Can you talk about perhaps like potential for rent resets like over time or at expirations?

David Sedgwick: Yes. I think in the supplemental, we show the maturity of our rents starting, I think, in 2031. So that's when the conversation kind of begins. The lease coverage is so strong overall that as we get there in 2031 and beyond, there will certainly be opportunities to reset those rents to more market rates, but it's a few years off.

Operator: There are no further questions at this time. I will now turn the call back to Dave Sedgwick with closing remarks.

David Sedgwick: Well, thank you, everybody, for your time and interest. Really just want to take a second to again acknowledge the amazing team here at CareTrust and thank them for their hard work. Thank you for our operators as well as setting the high standard of quality care out there that allows us to continue to expand our and their missions. Hope everybody has a great weekend.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.