CARETRUST REIT, INC., 10-Q filed on 11/5/2015
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2015
Nov. 4, 2015
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q3 
 
Trading Symbol
CTRE 
 
Entity Registrant Name
CareTrust REIT, Inc. 
 
Entity Central Index Key
0001590717 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Non-accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
48,148,269 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Assets:
 
 
Real estate investments, net
$ 651,554 
$ 436,215 
Other real estate investments
8,229 
7,532 
Cash and cash equivalents
12,098 
25,320 
Accounts receivable (related party receivables of $0 at September 30, 2015 and $2,275 at December 31, 2014)
2,961 
2,291 
Prepaid expenses and other assets
337 
809 
Deferred financing costs, net
9,793 
10,405 
Total assets
684,972 
482,572 
Liabilities and Equity:
 
 
Senior unsecured notes payable
260,000 
260,000 
Unsecured revolving credit facility
45,000 
0 
Mortgage notes payable
95,696 
98,205 
Accounts payable and accrued liabilities
12,010 
6,959 
Dividends payable
7,704 
3,946 
Total liabilities
420,410 
369,110 
Commitments and contingencies
   
   
Equity:
 
 
Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2015 and December 31, 2014
0 
0 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 and 31,251,157 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
477 
313 
Additional paid-in capital
409,790 
246,041 
Cumulative distributions in excess of earnings
(145,705)
(132,892)
Total equity
264,562 
113,462 
Total liabilities and equity
$ 684,972 
$ 482,572 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]
 
 
Related party receivables
$ 0 
$ 2,275 
Preferred stock, Par Value (in usd per share)
$ 0.01 
$ 0.01 
Preferred stock, Shares Authorized
100,000,000 
100,000,000 
Preferred stock, Shares Issued
0 
0 
Preferred stock, Shares Outstanding
0 
0 
Common Stock, Par Value (in usd per share)
$ 0.01 
$ 0.01 
Common Stock, Shares authorized
500,000,000 
500,000,000 
Common Stock, Shares Issued
47,650,952 
31,251,157 
Common Stock, Shares Outstanding
47,650,952 
31,251,157 
Condensed Consolidated and Combined Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Revenues:
 
 
 
 
 
 
 
Rental income (related party rental income of $0 and $14,000 for the three months ended September 30, 2015 and 2014, respectively and $16,308 and $18,667 for the nine months ended September 30, 2015 and 2014, respectively – Note 6)
$ 15,778 
 
 
$ 14,000 
$ 45,869 
$ 37,228 
 
Tenant reimbursements (related party tenant reimbursements of $0 and $1,228 for the three months ended September 30, 2015 and 2014, respectively and $1,406 and $1,624 for the nine months ended September 30, 2015 and 2014, respectively – Note 6)
1,320 
 
 
1,228 
3,866 
3,726 
 
Independent living facilities
626 
 
 
646 
1,868 
1,856 
 
Interest and other income
261 
 
 
10 
716 
10 
 
Total revenues
17,985 
 
 
15,884 
52,319 
42,820 
 
Expenses:
 
 
 
 
 
 
 
Depreciation and amortization
5,815 
 
 
5,362 
17,093 
17,631 
 
Interest expense
7,221 
 
 
5,943 
19,111 
15,722 
 
Loss on extinguishment of debt
0 
 
 
0 
0 
4,067 
 
Property taxes
1,320 
 
 
1,228 
3,866 
3,726 
 
Independent living facilities
610 
 
 
586 
1,778 
1,684 
 
General and administrative
2,292 
 
 
798 
5,440 
8,710 
 
Total expenses
17,258 
 
 
13,917 
47,288 
51,540 
 
Income (loss) before provision for income taxes
727 
 
 
1,967 
5,031 
(8,720)
 
Provision for income taxes
0 
 
 
0 
0 
53 
 
Net income (loss)
$ 727 
 
 
$ 1,967 
$ 5,031 
$ (8,773)
$ (8,143)
Earnings (loss) per common share:
 
 
 
 
 
 
 
Basic (in usd per share)
$ 0.02 
 
 
$ 0.09 
$ 0.14 
$ (0.39)
 
Diluted (in usd per share)
$ 0.02 
 
 
$ 0.09 
$ 0.14 
$ (0.39)
 
Weighted-average number of common shares:
 
 
 
 
 
 
 
Basic (in shares)
39,125 
 
 
22,255 
33,916 
22,238 
 
Diluted (in shares)
39,125 
 
 
22,436 
33,916 
22,238 
 
Dividends declared per common share (in usd per share)
$ 0.16 
$ 0.16 
$ 0.16 
$ 0 
$ 0.48 
$ 0 
$ 0.125 
Condensed Consolidated and Combined Statements of Operations (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Income Statement [Abstract]
 
 
 
 
Related party rental income
$ 0 
$ 14,000 
$ 16,308 
$ 18,667 
Related party tenant reimbursements
$ 0 
$ 1,228 
$ 1,406 
$ 1,624 
Condensed Consolidated and Combined Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
 
 
Net income (loss)
$ 727 
$ 1,967 
$ 5,031 
$ (8,773)
$ (8,143)
Other comprehensive income:
 
 
 
 
 
Unrealized gain on interest rate swap
0 
0 
0 
167 
167 
Reclassification adjustment on interest rate swap
0 
0 
0 
1,661 
1,661 
Comprehensive income (loss)
$ 727 
$ 1,967 
$ 5,031 
$ (6,945)
 
Condensed Consolidated and Combined Statements of Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Cumulative Distributions in Excess of Earnings [Member]
Invested Equity [Member]
Accumulated Other Comprehensive Loss [Member]
Beginning balance at Dec. 31, 2013
$ 162,689 
 
 
 
$ 164,517 
$ (1,828)
Beginning balance, shares at Dec. 31, 2013
 
1,000 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Net capital contribution from Ensign
4,356 
 
 
 
4,356 
 
Unrealized gain on interest rate swap
167 
 
 
 
 
167 
Reclassification adjustment on interest rate swap
1,661 
 
 
 
 
1,661 
Net capital distribution to Ensign
(10,475)
 
 
 
(10,475)
 
Reclassification of invested equity to common stock and additional paid-in capital in conjunction with the Spin-Off
0 
222 
146,980 
 
(147,202)
 
Reclassification of invested equity to common stock and additional paid in capital in conjunction with the Spin-Off, shares
 
22,227,358 
 
 
 
 
Vesting of restricted common stock
0 
1 
(1)
 
 
 
Vesting of restricted common stock, shares
 
48,550 
 
 
 
 
Amortization of stock-based compensation
154 
 
154 
 
 
 
Special dividend at $5.88 per share
(33,001)
90 
98,908 
(131,999)
 
 
Special dividend, shares
 
8,974,249 
 
 
 
 
Common dividend ($0.125 and $0.48 per share for the twelve months ended 12/31/2014 and nine months ended 9/30/2015, respectively)
(3,946)
 
 
(3,946)
 
 
Net income (loss)
(8,143)
 
 
3,053 
(11,196)
 
Ending balance at Dec. 31, 2014
113,462 
313 
246,041 
(132,892)
 
 
Ending balance, shares at Dec. 31, 2014
 
31,251,157 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Issuance of common stock, net
162,963 
163 
162,800 
 
 
 
Vesting of restricted common stock, net of shares withheld for employee taxes
(145)
1 
(146)
 
 
 
Vesting of restricted common stock, net of shares withheld for employee taxes, shares
 
69,795 
 
 
 
 
Issuance of common stock, net, shares
 
16,330,000 
 
 
 
 
Unrealized gain on interest rate swap
0 
 
 
 
 
 
Reclassification adjustment on interest rate swap
0 
 
 
 
 
 
Amortization of stock-based compensation
1,095 
 
1,095 
 
 
 
Common dividend ($0.125 and $0.48 per share for the twelve months ended 12/31/2014 and nine months ended 9/30/2015, respectively)
(17,844)
 
 
(17,844)
 
 
Net income (loss)
5,031 
 
 
5,031 
 
 
Ending balance at Sep. 30, 2015
$ 264,562 
$ 477 
$ 409,790 
$ (145,705)
 
 
Ending balance, shares at Sep. 30, 2015
 
47,650,952 
 
 
 
 
Condensed Consolidated and Combined Statements of Equity (Parenthetical)
12 Months Ended
Dec. 31, 2014
Statement of Stockholders' Equity [Abstract]
 
Special dividend per share
$ 5.88 
Common dividend (in usd per share)
$ 0.125 
Condensed Consolidated and Combined Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities:
 
 
Net income (loss)
$ 5,031 
$ (8,773)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
Depreciation and amortization
17,093 
17,631 
Amortization of deferred financing costs and debt discount
1,649 
1,050 
Write-off of deferred financing costs
1,208 
0 
Amortization of stock-based compensation
1,095 
0 
Noncash interest income adjustments
(697)
0 
Loss on extinguishment of debt
0 
1,998 
Loss on settlement of interest rate swap
0 
1,661 
Change in operating assets and liabilities:
 
 
Accounts receivable
(2,945)
(10)
Accounts receivable due from related party
2,275 
(2,876)
Prepaid expenses and other assets
(90)
387 
Interest rate swap
0 
(1,661)
Accounts payable and accrued liabilities
4,416 
7,944 
Net cash provided by operating activities
29,035 
17,351 
Cash flows from investing activities:
 
 
Acquisition of real estate
(231,501)
0 
Improvements to real estate
(143)
(254)
Purchases of equipment, furniture and fixtures
(256)
(19,079)
Net proceeds from the sale of vacant land
30 
0 
Net cash used in investing activities
(231,870)
(19,333)
Cash flows from financing activities:
 
 
Proceeds from the issuance of common stock, net
163,466 
0 
Proceeds from the issuance of senior unsecured notes payable
0 
260,000 
Borrowings under unsecured credit facility
45,000 
0 
Borrowings under senior secured revolving credit facility
35,000 
10,000 
Proceeds from the issuance of mortgage notes payable
0 
50,676 
Repayments of borrowings under senior secured revolving credit facility
(35,000)
(88,701)
Payments on the mortgage notes payable
(2,509)
(67,493)
Payments on senior secured term loan
0 
(65,624)
Payments of deferred financing costs
(2,113)
(13,282)
Net-settle adjustment on restricted stock
(145)
0 
Dividends paid on common stock
(14,086)
0 
Net contribution from Ensign
0 
4,356 
Net cash provided by financing activities
189,613 
89,932 
Net (decrease) increase in cash and cash equivalents
(13,222)
87,950 
Cash and cash equivalents beginning of period
25,320 
895 
Cash and cash equivalents end of period
12,098 
88,845 
Supplemental disclosures of cash flow information:
 
 
Interest paid
12,338 
8,004 
Income taxes paid
0 
104 
Supplemental schedule of noncash operating, investing and financing activities:
 
 
Increase in dividends payable
3,758 
0 
Increase in offering costs payable
503 
0 
Application of escrow deposit to acquisition of real estate
500 
0 
Operating assets and liabilities that were not transferred to CareTrust
0 
1,042 
Equipment, furniture and fixtures that were not transferred to CareTrust
0 
(11,684)
Net capital distribution to Ensign
$ 0 
$ 10,475 
Organization
Organization
ORGANIZATION
Separation from Ensign—Prior to June 1, 2014, CareTrust REIT, Inc. (“CareTrust” or the “Company”) was a wholly owned subsidiary of The Ensign Group, Inc. (“Ensign”). On June 1, 2014, Ensign completed the separation of its healthcare business and its real estate business into two separate and independent publicly traded companies through the distribution of all of the outstanding shares of common stock of CareTrust to Ensign stockholders on a pro rata basis (the “Spin-Off”). Ensign stockholders received one share of CareTrust common stock for each share of Ensign common stock held at the close of business on May 22, 2014, the record date for the Spin-Off. The Spin-Off was effective from and after June 1, 2014, with shares of CareTrust common stock distributed by Ensign on June 2, 2014. The Company was formed on October 29, 2013 and had minimal activity prior to the Spin-Off.
Prior to the Spin-Off, the Company and Ensign entered into a Separation and Distribution Agreement, setting forth the mechanics of the Spin-Off, certain organizational matters and other ongoing obligations of the Company and Ensign. The Company and Ensign or their respective subsidiaries, as applicable, also entered into a number of other agreements to govern the relationship between Ensign and the Company after the Spin-Off, including eight long-term leases (the “Ensign Master Leases”), under which Ensign leases 94 healthcare facilities on a triple-net basis.
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 505-60, Equity—Spinoffs and Reverse Spinoffs, the accounting for the separation of the Company follows its legal form, with Ensign as the legal and accounting spinnor and the Company as the legal and accounting spinnee, due to the relative significance of Ensign’s healthcare business, the relative fair values of the respective companies, the retention of all senior management (except Mr. Gregory K. Stapley) by Ensign, and other relevant indicators. The assets and liabilities contributed to the Company from Ensign, or incurred in connection with the Spin-Off in the case of certain debt, were as follows (dollars in thousands):
 
 
 
Real estate investments, net
$
421,846

Cash
78,731

Accounts receivable and prepaid assets and other current assets
1,900

Deferred financing costs, net
11,088

Debt
(359,512
)
Other liabilities
(6,838
)
Net contribution
$
147,215


Description of Business—The Company’s primary business consists of acquiring, financing and owning real property to be leased to third-party tenants in the healthcare sector. As of September 30, 2015, the Company owned and leased to independent operators, including Ensign, 105 skilled nursing, assisted living and independent living facilities which had a total of 10,886 operational beds and units located in Arizona, California, Colorado, Florida, Georgia, Idaho, Iowa, Minnesota, Nebraska, Nevada, Texas, Utah, Virginia and Washington. The Company also owns and operates three independent living facilities which had a total of 264 units located in Texas and Utah. As of September 30, 2015, the Company also had one other real estate investment, consisting of an $8.2 million preferred equity investment.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation—The accompanying condensed consolidated and combined financial statements of the Company reflect, for all periods presented, the historical financial position, results of operations and cash flows of (i) the skilled nursing, assisted living and independent living facilities that Ensign contributed to the Company immediately prior to the Spin-Off and (ii) the operations of the three independent living facilities that the Company operated immediately following the Spin-Off. The condensed consolidated and combined financial statements included in this report also reflect the new investments that the Company has made after the Spin-Off. For the periods prior to the Spin-Off, the Company’s financial statements have been prepared on a “carve-out” basis from Ensign’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities attributable to such skilled nursing, assisted living and independent living facilities (the “Ensign Properties”).
For the periods prior to the Spin-Off, the condensed combined statements of operations reflect allocations of general corporate expenses from Ensign including, but not limited to, executive management, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, procurement, and other shared services. See further discussion in Note 6, Related Party Transactions.
Management believes that the assumptions and estimates used in preparation of the underlying condensed consolidated and combined financial statements are reasonable. However, the condensed consolidated and combined financial statements for the period January 1, 2014 through May 31, 2014 do not necessarily reflect what the Company’s financial position, results of operations or cash flows would have been if the Company had been a stand-alone company during the period presented. The historical financial information is not necessarily indicative of the Company’s future results of operations, financial position or cash flows.
The accompanying condensed consolidated and combined 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 and combined financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. The condensed consolidated and combined financial statements should be read in conjunction with the audited consolidated and combined financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 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. All intercompany transactions and account balances within the Company have been eliminated.
Estimates and Assumptions—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Reclassifications—Certain amounts in the Company’s condensed consolidated and combined financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.
Real Estate Depreciation and Amortization—Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
 
Buildings
 
25-40 years
Building improvements
 
10-25 years
Tenant improvements
 
Shorter of lease term or expected useful life
Integral equipment, furniture and fixtures
 
5 years

 
 
Real Estate Acquisition Valuation— In accordance with ASC 805, Business Combinations, the Company records the acquisition of income-producing real estate as a business combination. If the acquisition does not meet the definition of a business, the Company records the acquisition as an asset acquisition. Under both methods, all assets acquired and liabilities assumed are measured at their acquisition date fair values. For transactions that are business combinations, acquisition costs are expensed as incurred and restructuring costs that do not meet the definition of a liability at the acquisition date are expensed in periods subsequent to the acquisition date. For transactions that are asset acquisitions, acquisition costs are capitalized as incurred.
The Company assesses the acquisition date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers, generally utilizing a discounted cash flow analysis that applies appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.
Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of the Company’s acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of the Company’s net income.
Impairment of Long-Lived Assets—At least annually, management evaluates the Company’s real estate investments for impairment indicators, including the evaluation of our assets’ useful lives. Management also assesses the carrying value of the Company’s real estate investments whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The judgment regarding the existence of impairment indicators is based on factors such as, but not limited to, market conditions, operator performance and legal structure. If indicators of impairment are present, management evaluates the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying facilities. Provisions for impairment losses related to long-lived assets are recognized when expected future undiscounted cash flows are determined to be less than the carrying values of the assets. An adjustment is made to the net carrying value of the real estate investments for the excess of carrying value over fair value. All impairments are taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset.
If the Company decides to sell real estate properties, we evaluate the recoverability of the carrying amounts of the assets. If the evaluation indicates that the carrying value is not recoverable from estimated net sales proceeds, the property is written down to estimated fair value less costs to sell.
In the event of impairment, the fair value of the real estate investment is determined by market research, which includes valuing the property in its current use as well as other alternative uses, and involves significant judgment. The Company’s estimates of cash flows and fair values of the properties are based on current market conditions and consider matters such as rental rates and occupancies for comparable properties, recent sales data for comparable properties, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers. The Company’s ability to accurately estimate future cash flows and estimate and allocate fair values impacts the timing and recognition of impairments. While the Company believes its assumptions are reasonable, changes in these assumptions may have a material impact on financial results.
Other Real Estate Investments — Preferred equity investments are accounted for at unpaid principal balance, plus accrued return, net of reserves. The Company recognizes return income on a quarterly basis based on the outstanding investment including any accrued and unpaid return.
The Company periodically evaluates each of its other real estate investments for indicators of impairment. An investment is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. A reserve is established for the excess of the carrying value of the investment over its fair value.
 
Cash and Cash Equivalents—Cash and cash equivalents consist of bank term deposits and money market funds with original maturities of three months or less at time of purchase and therefore approximate fair value. The fair value of these investments is determined based on “Level 1” inputs, which consist of unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. The Company places its cash and short-term investments with high credit quality financial institutions.
The Company’s cash and cash equivalents balance periodically exceeds federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.
Deferred Financing Costs—External costs incurred from placement of our debt are capitalized and amortized on a straight-line basis over the terms of the related borrowings, which approximates the effective interest method. Amortization of deferred financing costs is classified as interest expense in our condensed consolidated and combined statements of operations. Accumulated amortization of deferred financing costs was $2.8 million and $2.2 million at September 30, 2015 and December 31, 2014, respectively.
When financings are terminated, unamortized deferred financing costs, as well as charges incurred for the termination, are expensed at the time the termination is made. Gains and losses from the extinguishment of debt are presented within income from continuing operations in our condensed consolidated and combined statements of operations.
Revenue Recognition —The Company recognizes rental revenue, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, if any, from tenants under lease arrangements with minimum fixed and determinable increases on a straight-line basis over the non-cancellable term of the related leases when collectability is reasonably assured. Tenant recoveries related to the reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the expenses are incurred and presented gross if the Company is the primary obligor and, with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk. For the three and nine months ended September 30, 2015 and 2014, such tenant reimbursement revenues consist of real estate taxes. Contingent revenue, if any, is not recognized until all possible contingencies have been eliminated.
The Company evaluates the collectability of rents and other receivables on a regular basis based on factors including, among others, payment history, the operations, the asset type and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected. We did not reserve any receivables as of September 30, 2015 or December 31, 2014.
Income Taxes—The Company’s operations prior to the Spin-Off were historically included in Ensign’s U.S. federal and state income tax returns and all income taxes for periods prior to the Spin-Off were paid by Ensign. Income tax expense and other income tax related information contained in these condensed consolidated and combined financial statements are presented on a separate tax return basis as if the Company filed its own tax returns for all periods. Management believes that the assumptions and estimates used to determine these tax amounts are reasonable. However, the condensed consolidated and combined financial statements herein may not necessarily reflect the Company’s income tax expense or tax payments in the future, or what its tax amounts would have been if the Company had been a stand-alone company prior to the Spin-Off.
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), beginning with its taxable year ending December 31, 2014. The Company believes it has been organized and has operated, and the Company intends to continue to operate, in a manner to qualify for taxation as a REIT under the Code. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.
 
 
In connection with the Company’s intention to qualify as a real estate investment trust in 2014, on October 17, 2014, the Company’s board of directors declared a special dividend (the “Special Dividend”) of $132.0 million, or approximately $5.88 per common share, which represents the amount of accumulated earnings and profits, or “E&P,” allocated to the Company as a result of the Spin-Off. The Special Dividend was intended to purge the Company of accumulated E&P attributable to the period prior to the Company’s first taxable year as a REIT. The Special Dividend was paid on December 10, 2014, to stockholders of record on October 31, 2014, in a combination of both cash and stock. The cash portion totaled $33.0 million and the stock portion totaled $99.0 million. The Company issued 8,974,249 shares of common stock in connection with the stock portion of the Special Dividend.
Derivatives and Hedging Activities—The Company evaluates variable and fixed interest rate risk exposure on a routine basis and to the extent the Company believes that it is appropriate, it will offset most of its variable rate risk exposure by entering into interest rate swap agreements. It is the Company’s policy to only utilize derivative instruments for hedging purposes (i.e., not for speculation). The Company formally designates its interest rate swap agreements as hedges and documents all relationships between hedging instruments and hedged items. The Company formally assesses effectiveness of its hedging relationships, both at the hedge inception and on an ongoing basis, then measures and records ineffectiveness. The Company would discontinue hedge accounting prospectively (i) if it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated or exercised, (iii) if it is no longer probable that the forecasted transaction will occur, or (iv) if management determines that designation of the derivative as a hedge instrument is no longer appropriate.
Effective May 30, 2014, the Company de-designated its interest rate swap contract that historically qualified for cash flow hedge accounting. This was due to the termination of the interest rate swap agreement related to the early retirement of the senior credit facility in place prior to the Spin-Off. As a result, the loss previously recorded in accumulated other comprehensive loss related to the interest rate swap was recognized in interest expense in the condensed consolidated and combined statements of operations during the three month period ended June 30, 2014. There was no outstanding interest rate swap contract as of September 30, 2015.
Stock-Based Compensation—The Company accounts for share-based payment awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. ASC 718 requires all entities to apply a fair value-based measurement method in accounting for share-based payment transactions with directors, officers and employees except for equity instruments held by employee share ownership plans. Net income reflects stock-based compensation expense of $0.4 million and $1.1 million for the three and nine months ended September 30, 2015, respectively.
Concentration of Credit Risk—The Company is subject to concentrations of credit risk consisting primarily of operating leases on our owned properties. See Note 12, Concentration of Risk, for a discussion of major operator concentration.
Segment Disclosures —The FASB accounting guidance regarding disclosures about segments of an enterprise and related information establishes standards for the manner in which public business enterprises report information about operating segments. The Company has one reportable segment consisting of investments in healthcare-related real estate assets.
Earnings (Loss) Per Share—The Company calculates earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities. Basic and diluted EPS for the three and nine months ended September 30, 2014 were retroactively restated for the number of basic and diluted shares outstanding immediately following the Spin-Off.
Recently Issued Accounting Standards Update— In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of its new revenue recognition standard by one year. The standard will be effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. The Company is currently assessing the impact of adopting ASU No. 2014-09 but does not believe it will have a material effect on income from operations or the Company’s financial position.
 
 
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU No. 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU No. 2015-02 is effective for fiscal years, and interim periods within these fiscal years, beginning after December 15, 2015. The Company does not expect the adoption of ASU No. 2015-02 to have a significant impact on its consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU No. 2015-03”), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected. Upon adoption, we will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance. ASU No. 2015-03 is effective for fiscal years, and interim periods within these fiscal years, beginning after December 15, 2015. The Company does not expect the adoption of ASU No. 2015-03 to have a significant impact on its consolidated financial statements.
In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update) (“ASU No. 2015-15”). ASU No. 2015-15 was issued by the FASB in response to questions that arose after the issuance of ASU No. 2015-03, to incorporate an SEC staff announcement that the SEC staff will not object to an entity presenting the cost of securing a revolving line of credit as an asset, regardless of whether a balance is outstanding. ASU No. 2015-15 was effective upon announcement.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments (“ASU No. 2015-16”). ASU No. 2015-16 eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment, including the effect on earnings of any amounts it would have recorded in previous periods if the accounting had been completed at the acquisition date. ASU No. 2015-16 is effective for fiscal years, and interim periods within these fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of ASU No. 2015-16 to have a significant impact on its consolidated financial statements.
Real Estate Investments, Net
Real Estate Investments, Net
REAL ESTATE INVESTMENTS, NET
The following tables summarize our investment in owned properties at September 30, 2015, and December 31, 2014 (dollars in thousands):
 
 
September 30,
2015
 
December 31,
2014
Land
$
80,882

 
$
75,072

Buildings and improvements
465,561

 
417,414

Integral equipment, furniture and fixtures
50,048

 
47,134

Escrowed cash for October 1, 2015 acquisition (Note 14)
175,561

 
—

Real estate investments
772,052

 
539,620

Accumulated depreciation
(120,498
)
 
(103,405
)
Real estate investments, net
$
651,554

 
$
436,215


As of September 30, 2015, all but 14 of the Company’s facilities were leased to subsidiaries of Ensign under the Ensign Master Leases which commenced on June 1, 2014. The obligations under the Ensign Master Leases are guaranteed by Ensign. A default by any subsidiary of Ensign with regard to any facility leased pursuant to an Ensign Master Lease will result in a default under all of the Ensign Master Leases. The annual revenues from the Ensign Master Leases are $56.0 million during each of the first two years of the Ensign Master Leases. Commencing on June 1, 2016, the annual revenues from the Ensign Master Leases will be escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero) or 2.5%, and (2) the prior year’s rent. In addition to rent, the subsidiaries of Ensign that are tenants under the Ensign Master Leases are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).
Escrowed cash represents cash in escrow for an asset acquisition that was effective on October 1, 2015 and includes $0.5 million of capitalized acquisition costs. See further discussion in Note 14, Subsequent Events.
As of September 30, 2015, our total future minimum rental revenues for all of our tenants were (dollars in thousands): 
 
 
Year
Amount
Remaining 2015
$
15,854

2016
63,416

2017
63,416

2018
63,416

2019
63,416

Thereafter
651,062

 
$
920,580



 
Recent Real Estate Acquisitions
The following recent real estate acquisitions were accounted for as asset acquisitions:
Bethany Rehabilitation Center
In January 2015, the Company acquired the Bethany Rehabilitation Center, a skilled nursing facility located in Lakewood, Colorado, for $18.1 million, which includes capitalized acquisition costs of $0.1 million.
In connection with the acquisition, the Company entered into a triple-net master lease with Eduro Healthcare LLC. The lease carries an initial term of 15 years with two five-year renewal options and CPI-based rent escalators. The Company anticipates initial annual lease revenues of $1.7 million.

Mira Vista Care Center
In April 2015, the Company acquired the Mira Vista Care Center, a skilled nursing facility located in Mount Vernon, Washington, for $9.3 million, which includes capitalized acquisition costs of $0.2 million.
In connection with the acquisition, the Company entered into a triple-net master lease with Five Oaks Healthcare, LLC (the "Five Oaks Master Lease"). The lease carries an initial term of 15 years with two five-year renewal options and CPI-based rent escalators. The Company anticipates initial annual lease revenues of $0.9 million.
Shoreline Health & Rehabilitation Center

In June 2015, the Company acquired the Shoreline Health & Rehabilitation Center, a skilled nursing facility located in Shoreline, Washington, for $6.8 million, which includes capitalized acquisition costs of $0.2 million.
In connection with the acquisition, the Company amended the Five Oaks Master Lease to include the Shoreline Health & Rehabilitation Center and anticipates additional annual lease revenues of $0.7 million as a result of the amendment.
Bristol Court Assisted Living

In July 2015, the Company acquired Bristol Court Assisted Living, a memory care facility located in St. Petersburg, Florida, for $8.5 million, which includes capitalized acquisition costs of $72,000.
In connection with the acquisition, the Company entered into a triple-net master lease with Better Senior Living Consulting, LLC (the "BSLC Master Lease"). The BSLC Master Lease carries an initial term of 15 years with two five-year renewal options and CPI-based rent escalators. The Company anticipates initial annual lease revenues of $0.7 million.
Shamrock Nursing and Rehabilitation Center

In July 2015, the Company acquired the Shamrock Nursing and Rehabilitation Center, a skilled nursing facility located in Dublin, Georgia, for $8.3 million, which includes capitalized acquisition costs of $49,000.
In connection with the acquisition, the Company entered into a triple-net master lease with Trillium Healthcare Group, LLC. The lease carries an initial term of 15 years with two five-year renewal options and CPI-based rent escalators. The Company anticipates initial annual lease revenues of $0.8 million.
Asbury Place Assisted Living

In September 2015, the Company acquired Asbury Place Assisted Living, an assisted living and memory care facility located in Pensacola, Florida, for $5.4 million, which includes capitalized acquisition costs of $49,000.
In connection with the acquisition, the Company amended the BSLC Master Lease to include Asbury Place Assisted Living and anticipates additional annual lease revenues of $0.5 million as a result of the amendment.
Other Real Estate Investments
Other Real Estate Investments
OTHER REAL ESTATE INVESTMENTS
In December 2014, the Company completed a $7.5 million preferred equity investment with Signature Senior Living, LLC and Milestone Retirement Communities. The preferred equity investment yields 12.0% calculated on a quarterly basis on the outstanding carrying value of the investment. The investment will be used to develop Signature Senior Living at Arvada, a planned 134-unit upscale assisted living and memory care community in Arvada, Colorado that will be constructed on a five-acre site. In connection with its investment, CareTrust obtained an option to purchase the Arvada development at a fixed-formula price upon stabilization, with an initial lease yield of at least 8.0%. The project is expected to be completed in mid 2016.
During the three and nine months ended September 30, 2015, the Company recognized $0.2 million and $0.7 million of interest income and this unpaid amount was added to the outstanding carrying value of the investment.
Fair Value Measurements
Fair Value Measurements
FAIR VALUE MEASUREMENTS
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value of impaired long-lived assets). Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
 
•
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.
Financial Instruments: Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 2015 and December 31, 2014 using Level 2 inputs, for the senior unsecured notes payable, and Level 3 inputs, for all other financial instruments, is as follows (dollars in thousands):
 
 
 
September 30, 2015
 
December 31, 2014
 
Face
Value
 
Carrying
Amount
 
Fair
Value
 
Face
Value
 
Carrying
Amount
 
Fair
Value
Financial assets:
 
 
 
 
 
 
 
 
 
 
 
Preferred equity investment
$
7,500

 
$
8,229

 
$
8,229

 
$
7,500

 
$
7,532

 
$
7,532

Financial liabilities:
 
 
 
 
 
 
 
 
 
 
 
Senior unsecured notes payable
$
260,000

 
$
260,000

 
$
266,500

 
$
260,000

 
$
260,000

 
$
265,200

Mortgage notes payable
$
95,696

 
$
95,696

 
$
98,128

 
$
98,205

 
$
98,205

 
$
101,822


Cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short-term nature of these instruments.
Preferred equity investment: The fair value of the preferred equity investment is estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value and other credit enhancements.
Senior unsecured notes payable: The fair value of the senior unsecured notes payable was determined using third-party quotes derived from orderly trades.
Unsecured revolving credit facility: The fair value approximates its carrying value as the interest rate is variable and approximates prevailing market interest rates for similar debt arrangements.
Mortgage notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.
Related Party Transactions
Related Party Transactions
RELATED PARTY TRANSACTIONS
Allocation of corporate expenses—For the nine months ended September 30, 2014, the condensed consolidated and combined statements of operations of the Company include Ensign revenues and expenses that are specifically identifiable or otherwise attributable to the Company. The specific identification methodology was utilized for all of the items on the condensed statements of operations excluding general corporate expenses. For the periods prior to the Spin-Off, Ensign Properties’ operations were fully integrated with Ensign, including executive management, finance, treasury, corporate income tax, human resources, legal services and other shared services. These costs were allocated to the Company on a systematic basis utilizing a direct usage basis when identifiable, with the remainder allocated on time study, or percentage of the total revenues. The primary allocation method was a time study based on time devoted to Ensign Properties’ activities.
Allocated expenses for these general and administrative services of $7.4 million for the nine months ended September 30, 2014 are reflected in general and administrative expense, in addition to direct expenses which are included in total expenses. There was no allocation for the three and nine months ended September 30, 2015 or the three months ended September 30, 2014. The Company’s financial statements may not be indicative of future performance and do not necessarily reflect what the results of operations, financial position and cash flows would have been had the Company operated as an independent, publicly-traded company during the nine months ended September 30, 2014.
Rental income from Ensign—The Company derives a majority of its rental income through operating lease agreements with Ensign. Ensign is a holding company with no direct operating assets, employees or revenue. All of Ensign’s operations are conducted by separate independent subsidiaries, each of which has its own management, employees and assets. See Note 12, Concentration of Risk, for a discussion of major operator concentration.
Christopher R. Christensen, one of the Company’s directors from June 1, 2014 through April 15, 2015, serves as the chief executive officer of Ensign as well as a member of Ensign’s board of directors. As such, all rental income and tenant reimbursements earned related to the Ensign Master Leases during Mr. Christensen's tenure on our board are considered related party in nature. For the three and nine months ended September 30, 2015, the Company recognized $0 million and $16.3 million in rental income, respectively, from Ensign while Mr. Christensen sat on the Board of the Company as well as $0 million and $1.4 million of tenant reimbursements, respectively. For the three and nine months ended September 30, 2014, the Company recognized $14.0 million and $18.7 million in rental income, respectively, as well as $1.2 million and $1.6 million of tenant reimbursements, respectively, while Mr. Christensen sat on the Board of the Company. As of December 31, 2014, the Company also had accounts receivable totaling $2.3 million due from Ensign for tenant reimbursements. After April 15, 2015, the effective date of Mr. Christensen's resignation from our board of directors, rental income and tenant reimbursements related to the Ensign Master Leases, and any related accounts receivable, are not considered earned or due from a related party.
Centralized cash management system—Prior to the Spin-Off, the Company participated in Ensign’s centralized cash management system. In conjunction therewith, the intercompany transactions between the Company and Ensign had been considered to be effectively settled in cash in these financial statements. The net effect of the settlement of these intercompany transactions, in addition to cash transfers to and from Ensign, are reflected in “Net contribution from Ensign” on the condensed consolidated and combined statements of cash flows. The “Net contribution from Ensign” was $4.4 million for the nine months ended September 30, 2014.
Debt
Debt
DEBT
The Company had debt outstanding of $400.7 million as of September 30, 2015, and $358.2 million as of December 31, 2014.
Senior Unsecured Notes Payable
On May 30, 2014, 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 $260.0 million aggregate principal amount of 5.875% Senior Notes due 2021 (the “Notes”). The Notes were issued at par, resulting in gross proceeds of $260.0 million and net proceeds of approximately $253.0 million after deducting underwriting fees and other offering expenses. We transferred approximately $220.8 million of the net proceeds of the offering of the Notes to Ensign, and used the remaining portion of the net proceeds of the offering to pay the cash portion of the Special Dividend. The Notes mature on June 1, 2021 and bear interest at a rate of 5.875% per year. Interest on the Notes is payable on June 1 and December 1 of each year, beginning on December 1, 2014.
The Issuers may redeem the Notes any time prior to June 1, 2017 at a redemption price of 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest on the Notes, if any, to, but not including, the redemption date, plus a “make whole” premium described in the indenture governing the Notes and, at any time on or after June 1, 2017, at the redemption prices set forth in the indenture. In addition, at any time on or prior to June 1, 2017, up to 35% of the aggregate principal amount of the Notes may be redeemed with the net proceeds of certain equity offerings if at least 65% of the originally issued aggregate principal amount of the Notes remains outstanding. If certain changes of control of the Company occur, holders of the Notes will have the right to require the Issuers to repurchase their Notes at 101% of the 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 certain of the Company’s wholly owned existing and, subject to certain exceptions, future material subsidiaries (other than the Issuers); provided, however, that such guarantees are subject to automatic release under certain customary circumstances, including if the subsidiary guarantor is sold or sells all or substantially all of its assets, the subsidiary guarantor is designated “unrestricted” for covenant purposes under the indenture, the subsidiary guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied. See Note 13, Summarized Condensed Consolidating and Combining Information.
The indenture contains covenants 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 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 also contains customary events of default.
As of September 30, 2015, the Company was in compliance with all applicable financial covenants under the indenture.

Unsecured Revolving Credit Facility
On August 5, 2015, the Company, CareTrust GP, LLC, the Operating Partnership, as the borrower, and certain of its wholly owned subsidiaries entered into a credit and guaranty agreement with KeyBank National Association, as administrative agent, an issuing bank and swingline lender, and the lenders party thereto (the “Credit Agreement”). The Credit Agreement provides for an unsecured asset-based revolving credit facility (the “Credit Facility”) with commitments in an aggregate principal amount of $300.0 million from a syndicate of banks and other financial institutions. A portion of the proceeds of the Credit Facility were used to payoff and terminate the Company’s existing secured asset-based revolving credit facility under a credit agreement dated May 30, 2014, with SunTrust Bank, as administrative agent, and the lenders party thereto (the “Refinancing”). As of September 30, 2015, there was $45.0 million outstanding under the Credit Facility.
The Credit Facility has a maturity date of August 5, 2019, and includes two, six-month extension options.
The Credit Agreement also provides that, subject to customary conditions, including obtaining lender commitments and pro forma compliance with financial maintenance covenants under the Credit Agreement, the Operating Partnership may seek to increase the aggregate principal amount of the revolving commitments and/or establish one or more new tranches of incremental revolving or term loans under the Credit Facility in an aggregate amount not to exceed $200.0 million. The Company does not currently have any commitments for such increased loans.
The interest rates applicable to loans under the Credit Facility are, at the Company’s option, equal to either a base rate plus a margin ranging from 0.75% to 1.40% per annum or applicable LIBOR plus a margin ranging from 1.75% to 2.40% per annum based on the debt to asset value ratio of the Company and its subsidiaries (subject to decrease at the Company’s election if the Company obtains certain specified investment grade ratings on its senior long term unsecured debt). In addition, the Company will pay a commitment fee on the unused portion of the commitments under the Credit Facility of 0.15% or 0.25% per annum, based upon usage of the Credit Facility (unless the Company obtains certain specified investment grade ratings on its senior long term unsecured debt and elects to decrease the applicable margin as described above, in which case the Company will pay a facility fee on the revolving commitments ranging from 0.125% to 0.30% per annum based upon the credit ratings of its senior long term unsecured debt).
The Credit Facility is guaranteed, jointly and severally, by the Company and its wholly owned subsidiaries that are party to the Credit Agreement (other than the Operating Partnership). The 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 certain material agreements and pay certain dividends and other restricted payments. The Credit Agreement requires the Company to comply with financial maintenance covenants to be tested quarterly, consisting of a maximum debt to asset value ratio, a minimum fixed charge coverage ratio, a minimum tangible net worth, a maximum cash distributions to operating income ratio, a maximum secured debt to asset value ratio and a maximum secured recourse debt to asset value ratio. The Credit Agreement also contains certain customary events of default, including that the Company is required to operate in conformity with the requirements for qualification and taxation as a REIT.

Senior Secured Revolving Credit Facility
On May 30, 2014, the Operating Partnership entered into a credit and guaranty agreement (the “Secured Credit Agreement”), which governed our senior secured revolving credit facility (the “Secured Credit Facility”), with several banks and other financial institutions and lenders (the “Lenders”) and Suntrust Bank, in its capacity as administrative agent for the Lenders, as an issuing bank and swingline lender. The Secured Credit Agreement provided for a borrowing capacity of $150.0 million and included an accordion feature that allowed the Operating Partnership to increase the borrowing availability by up to an additional $75.0 million, subject to terms and conditions. The Secured Credit Facility was secured by mortgages on certain of the real properties owned by the Company’s subsidiaries and the amount available to be borrowed under the Secured Credit Agreement was based on a borrowing base calculation relating to the mortgaged properties, determined according to, among other factors, the mortgageability cash flow as such term is defined in the Secured Credit Agreement. The Secured Credit Facility was also secured by certain personal property of the Company’s subsidiaries that have provided mortgages, the Company’s interests in the Operating Partnership and the Company’s and its subsidiaries’ equity interests in the Company’s subsidiaries that have guaranteed the Operating Partnership’s obligations under the Secured Credit Agreement. The Secured Credit Agreement was paid off and terminated as a part of the Refinancing.
GECC Loan
Ten of our properties are subject to secured mortgage indebtedness to General Electric Capital Corporation (the “GECC Loan”), which we assumed in connection with the Spin-Off. The outstanding amount of this mortgage indebtedness was approximately $95.7 million as of September 30, 2015, including an advance of approximately $50.7 million that was made on May 30, 2014. This advance bears interest at a floating rate equal to three-month LIBOR plus 3.35%, reset monthly and subject to a LIBOR floor of 0.50%, with monthly principal and interest payments based on a 25 year amortization. The remaining indebtedness under the GECC Loan bears interest at a blended rate of 7.25% per annum until, but not including, June 29, 2016, and then converts to the floating rate described above. The GECC Loan matures on May 30, 2017, subject to two 12-month extension options, the exercise of which is conditioned, in each case, on the absence of any then-existing default and the payment of an extension fee equal to 0.25% of the then-outstanding principal balance. Provided there is no then-existing default and upon 30 days written notice, the original portion of the GECC Loan, approximately $46.5 million as of September 30, 2015, is prepayable without penalty, in whole but not in part, after January 31, 2016. The new portion of the GECC Loan, approximately $49.2 million as of September 30, 2015, is prepayable without penalty, in whole but not in part, after January 31, 2016.
The GECC Loan is guaranteed by the Company, contains customary affirmative and negative covenants, as well as customary events of default, and requires us to comply with specified financial maintenance covenants. As of September 30, 2015, the Company was in compliance with all applicable financial covenants under the GECC Loan.
 
 
Promissory Notes with Johnson Land Enterprises, LLC
On October 1, 2009, Ensign entered into four separate promissory notes with Johnson Land Enterprises, LLC, for an aggregate of $10.0 million. On May 30, 2014, in connection with the Spin-Off, three of the promissory notes were paid in full and the remaining promissory note was assumed by the Company. This promissory note was paid off in July 2015.
Interest Expense
During the three and nine months ended September 30, 2015, the Company incurred $7.2 million and $19.1 million of interest expense, respectively. Included in interest expense for the three and nine months ended September 30, 2015 was $0.5 million and $1.6 million of amortization of deferred financing costs, respectively, and a $1.2 million write-off of deferred financing fees associated with the Refinancing. During the three and nine months ended September 30, 2014, the Company incurred $5.9 million and $15.7 million of interest expense, respectively. Included in interest expense for the three and nine months ended September 30, 2014 was $0.5 million and $1.0 million of amortization of deferred financing costs, respectively, and $0 and $51,000 of amortization of debt discount, respectively, and a $1.7 million loss on settlement of interest rate swap for both periods. As of September 30, 2015 and December 31, 2014, the Company’s interest payable was $5.7 million and $1.7 million, respectively.
Equity
Equity
EQUITY
Common Stock
Offering of Common Stock - On August 18, 2015, the Company completed an underwritten public offering of 16.33 million newly issued shares of its common stock pursuant to an effective registration statement. The Company received net proceeds, before expenses, of $163.7 million from the offering, after giving effect to the issuance and sale of all 16.33 million shares of common stock (which included 2.13 million shares sold to the underwriters upon exercise of their option to purchase additional shares), at a price to the public of $10.50 per share.

Dividends on Common Stock — During the first quarter of 2015, our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on April 15, 2015 to stockholders of record as of March 31, 2015. During the second quarter of 2015, our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on July 15, 2015 to stockholders of record as of June 30, 2015. During the third quarter of 2015, our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on October 15, 2015 to stockholders of record as of September 30, 2015.
Stock-Based Compensation
Stock-Based Compensation
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 and other incentive awards to officers, employees and directors in connection with their employment with or services provided to the Company.
Restricted Stock Awards — In connection with the Spin-Off, employees of Ensign who had unvested shares of restricted stock were given one share of CareTrust unvested restricted stock totaling 207,580 shares at the Spin-Off. These restricted shares are subject to a time vesting provision only and the Company does not recognize any stock compensation expense associated with these awards. During the nine months ended September 30, 2015, 56,410 shares vested or were forfeited. At September 30, 2015, there were 102,620 unvested restricted stock awards outstanding.
In December 2014, the Compensation Committee of the Company’s Board of Directors granted 12,270 shares of restricted stock to members of the Board of Directors. Each share had a fair market value on the date of grant of $12.23 per share, based on the market price of the Company’s common stock on that date, and the shares vest ratably over three years beginning on May 31, 2015. Additionally, in December 2014, the Compensation Committee granted 142,770 shares of restricted stock to officers and employees. Each share had a fair market value on the date of grant of $12.23 per share, based on the market price of the Company’s common stock on that date, and the shares vest ratably over five years beginning on May 31, 2015.
In June 2015, in separate grants, the Compensation Committee of the Company’s Board of Directors granted 15,680 shares and 13,240 shares of restricted stock to members of the Board of Directors, with each share having a fair market value on the date of grant of $12.76 and $12.67 per share, respectively, based on the market price of the Company’s common stock on those dates. The shares vest over one year. Also in June 2015, the Compensation Committee granted 235,880 shares of restricted stock to officers and employees. Each share had a fair market value on the date of grant of $12.76 per share, based on the market price of the Company’s common stock on that date, and the shares vest ratably over four years beginning on June 30, 2016. In September 2015, the Compensation Committee granted 7,500 shares of stock to an employee. Each share had a fair market value on the date of grant of $10.87 per share, based on the market price of the Company’s common stock on that date, and the shares vest ratably over four years beginning on June 30, 2016.
During the nine months ended September 30, 2015, 32,643 shares vested and none were forfeited. The Company recognized $0.4 million and $1.1 million of compensation expense associated with all grants for the three and nine months ended September 30, 2015, respectively. As of September 30, 2015, there was $4.2 million of unamortized stock-based compensation expense related to these unvested awards and the weighted-average remaining vesting period of such awards was 3.5 years.
Earnings Per Common Share
Earnings Per Common Share
EARNINGS PER COMMON SHARE
The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three and nine months ended September 30, 2015 and 2014, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands, except per share amounts):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Net income (loss)
$
727

 
$
1,967

 
$
5,031

 
$
(8,773
)
Less: Net income allocated to participating securities
(80
)
 
—

 
(209
)
 
—

Numerator for basic and diluted earnings (loss) available to common stockholders
$
647

 
$
1,967

 
$
4,822

 
$
(8,773
)
Denominator:
 
 
 
 
 
 
 
Weighted-average basic common shares outstanding
39,125

 
22,255

 
33,916

 
22,238

Weighted-average diluted common shares outstanding
39,125

 
22,436

 
33,916

 
22,238

 
 
 
 
 
 
 
 
Earnings (loss) per common share, basic
$
0.02

 
$
0.09

 
$
0.14

 
$
(0.39
)
Earnings (loss) per common share, diluted
$
0.02

 
$
0.09

 
$
0.14

 
$
(0.39
)

The Company’s unvested restricted shares associated with its incentive award plan and unvested restricted shares issued to employees of Ensign at the Spin-Off have been excluded from the above calculation of earnings (loss) per share for the three and nine months ended September 30, 2015 and the nine months ended September 30, 2014, as their inclusion would have been anti-dilutive.
Commitments and Contingencies
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES
U.S. Government Settlement—In October 2013, Ensign completed and executed a settlement agreement (the “Settlement Agreement”) with the U.S. Department of Justice (“DOJ”). This settlement agreement fully and finally resolved a DOJ investigation of Ensign related primarily to claims submitted to the Medicare program for rehabilitation services provided at skilled nursing facilities in California and certain ancillary claims. Pursuant to the Settlement Agreement, Ensign made a single lump-sum remittance to the government in the amount of $48.0 million in October 2013. Ensign denied engaging in any illegal conduct and agreed to the settlement amount without any admission of wrongdoing in order to resolve the allegations and avoid the uncertainty and expense of protracted litigation.
In connection with the settlement and effective as of October 1, 2013, Ensign entered into a five-year corporate integrity agreement with the Office of Inspector General-HHS (the “CIA”). The CIA acknowledges the existence of Ensign’s current compliance program, and requires that Ensign continue during the term of the CIA to maintain a compliance program designed to promote compliance with the statutes, regulations, and written directives of Medicare, Medicaid, and all other Federal health care programs. Ensign is also required to maintain several elements of its existing program during the term of the CIA, including maintaining a compliance officer, a compliance committee of the board of directors, and a code of conduct. The CIA requires that Ensign conduct certain additional compliance-related activities during the term of the CIA, including various training and monitoring procedures, and maintaining a disciplinary process for compliance obligations.
 
Participation in federal healthcare programs by Ensign is not affected by the Settlement Agreement or the CIA. In the event of an uncured material breach of the CIA, Ensign could be excluded from participation in federal healthcare programs and/or subject to prosecution. The Company is subject to certain continuing operational obligations as part of Ensign’s compliance program pursuant to the CIA, but otherwise has no liability related to the DOJ investigation.
Legal Matters—None of the Company or any of its subsidiaries is a party to, and none of their respective properties are the subject of, any material legal proceedings.
Concentration of Risk
Concentration of Risk
CONCENTRATION OF RISK
Major operator concentration – The Company has one major tenant, Ensign, from which the Company derived the majority of its overall revenue during the three and nine months ended September 30, 2015 and 2014. As of September 30, 2015, Ensign leased 94 skilled nursing, assisted living and independent living facilities which had a total of 10,121 licensed beds and are located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Texas, Utah and Washington. The four states in which Ensign leases the highest concentration of properties are California, Texas, Utah and Arizona.
Ensign’s financial statements can be found at Ensign’s website http://www.ensigngroup.net.
Summarized Condensed Consolidating and Combining Information
Summarized Condensed Consolidating and Combining Information
SUMMARIZED CONDENSED CONSOLIDATING AND COMBINING INFORMATION
The 5.875% Senior Notes due 2021 issued by the Issuers on May 30, 2014 are jointly and severally, fully and unconditionally, guaranteed by CareTrust REIT, Inc., as the parent guarantor (the “Parent Guarantor”), and certain 100% owned subsidiaries of the Parent Guarantor other than the Issuers (collectively, the “Subsidiary Guarantors” and, together with the Parent Guarantor, the “Guarantors”), subject to automatic release under certain customary circumstances, including if the Subsidiary Guarantor is sold or sells all or substantially all of its assets, the Subsidiary Guarantor is designated “unrestricted” for covenant purposes under the indenture governing the Notes, the Subsidiary Guarantor’s guarantee of other indebtedness which resulted in the creation of the guarantee of the Notes is terminated or released, or the requirements for legal defeasance or covenant defeasance or to discharge the Indenture have been satisfied.
The following provides information regarding the entity structure of the Parent Guarantor, the Issuers and the Subsidiary Guarantors:
CareTrust REIT, Inc. – The Parent Guarantor was formed on October 29, 2013 in anticipation of the Spin-Off and the related transactions and was a wholly owned subsidiary of Ensign prior to the effective date of the Spin-Off on June 1, 2014. The Parent Guarantor did not conduct any operations or have any business prior to the date of issuance of the Notes and the consummation of the Spin-Off related transactions.
CTR Partnership, L.P. and CareTrust Capital Corp. – The Issuers, each of which is a 100% owned subsidiary of the Parent Guarantor, were formed on May 8, 2014 and May 9, 2014, respectively, in anticipation of the Spin-Off and the related transactions. The Issuers did not conduct any operations or have any business prior to the date of issuance of the Notes and the consummation of the Spin-Off related transactions.
Subsidiary Guarantors – Each of the Subsidiary Guarantors is a 100% owned subsidiary of the Parent Guarantor. Prior to the consummation of the Spin-Off, each of the Subsidiary Guarantors was a wholly owned subsidiary of Ensign. The Ensign Properties entities consist of the Subsidiary Guarantors (other than the general partner of the Operating Partnership which was formed on May 8, 2014 in anticipation of the Spin-Off and the related transactions) and the subsidiaries of the Parent Guarantor that are not Subsidiary Guarantors or Issuers (collectively, the “Non-Guarantor Subsidiaries”).
Pursuant to Rule 3-10 of Regulation S-X, the following summarized consolidating information is provided for the Parent Guarantor, the Issuers, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries with respect to the Notes. This summarized financial information has been prepared from the financial statements of the Company and Ensign Properties and the books and records maintained by the Company and Ensign Properties. As described above, the Parent Guarantor and the Issuers did not conduct any operations or have any business during the periods prior to June 1, 2014.
The summarized financial information may not necessarily be indicative of the results of operations or financial position had the Parent Guarantor, the Issuers, the Subsidiary Guarantors or the Non-Guarantor Subsidiaries all been in existence or operated as independent entities during the relevant period or had the Ensign Properties entities been operated as subsidiaries of the Parent Guarantor during such period.


CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 2015
(in thousands, except share and per share amounts)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
 
 
Real estate investments, net
$
—

 
$
257,065

 
$
352,816

 
$
41,673

 
$
—

 
$
651,554

Other real estate investments
—

 
—

 
8,229

 
—

 
—

 
8,229

Cash and cash equivalents
—

 
12,098

 
—

 
—

 
—

 
12,098

Accounts receivable
—

 
217

 
2,533

 
211

 
—

 
2,961

Prepaid expenses and other assets
—

 
331

 
6

 
—

 
—

 
337

Deferred financing costs, net
—

 
9,384

 
—

 
409

 
—

 
9,793

Investment in subsidiaries
272,545

 
357,660

 
—

 
—

 
(630,205
)
 
—

Intercompany
—

 
—

 
47,722

 
3,464

 
(51,186
)
 
—

Total assets
$
272,545

 
$
636,755

 
$
411,306

 
$
45,757

 
$
(681,391
)
 
$
684,972

Liabilities and Equity:
 
 
 
 
 
 
 
 
 
 
 
Senior unsecured notes payable
$
—

 
$
260,000

 
$
—

 
$
—

 
$
—

 
$
260,000

Mortgage notes payable
—

 
—

 
—

 
95,696

 
—

 
95,696

Unsecured revolving credit facility
—

 
45,000

 
—

 
—

 
—

 
45,000

Accounts payable and accrued liabilities
279

 
8,024

 
3,057

 
650

 
—

 
12,010

Dividends payable
7,704

 
—

 
—

 
—

 
—

 
7,704

Intercompany
—

 
51,186

 
—

 
—

 
(51,186
)
 
—

Total liabilities
7,983

 
364,210

 
3,057

 
96,346

 
(51,186
)
 
420,410

Equity:
 
 
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 shares issued and outstanding as of September 30, 2015
477

 
—

 
—

 
—

 
—

 
477

Additional paid-in capital
409,790

 
274,913

 
374,660

 
(52,899
)
 
(596,674
)
 
409,790

Cumulative distributions in excess of earnings
(145,705
)
 
(2,368
)
 
33,589

 
2,310

 
(33,531
)
 
(145,705
)
Total equity
264,562

 
272,545

 
408,249

 
(50,589
)
 
(630,205
)
 
264,562

Total liabilities and equity
$
272,545

 
$
636,755

 
$
411,306

 
$
45,757

 
$
(681,391
)
 
$
684,972

CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2014
(in thousands, except share and per share amounts)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
 
 
Real estate investments, net
$
—

 
$
26,104

 
$
366,199

 
$
43,912

 
$
—

 
$
436,215

Other real estate investments
—

 
—

 
7,532

 
—

 
—

 
7,532

Cash and cash equivalents
—

 
25,320

 
—

 
—

 
—

 
25,320

Accounts receivable
—

 
—

 
2,170

 
121

 
—

 
2,291

Prepaid expenses and other assets
—

 
808

 
1

 
—

 
—

 
809

Deferred financing costs, net
—

 
9,808

 
—

 
597

 
—

 
10,405

Investment in subsidiaries
117,408

 
335,020

 
—

 
—

 
(452,428
)
 
—

Intercompany
—

 
—

 
15,262

 
1,323

 
(16,585
)
 
—

Total assets
$
117,408

 
$
397,060

 
$
391,164

 
$
45,953

 
$
(469,013
)
 
$
482,572

Liabilities and Equity:
 
 
 
 
 
 
 
 
 
 
 
Senior unsecured notes payable
$
—

 
$
260,000

 
$
—

 
$
—

 
$
—

 
$
260,000

Mortgage notes payable
—

 
—

 
557

 
97,648

 
—

 
98,205

Accounts payable and accrued liabilities
—

 
3,067

 
3,308

 
584

 
—

 
6,959

Dividends payable
3,946

 
—

 
—

 
—

 
—

 
3,946

Intercompany
—

 
16,585

 
—

 
—

 
(16,585
)
 
—

Total liabilities
3,946

 
279,652

 
3,865

 
98,232

 
(16,585
)
 
369,110

Equity:
 
 
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 31,251,157 shares issued and outstanding as of December 31, 2014
313

 
—

 
—

 
—

 
—

 
313

Additional paid-in capital
246,041

 
125,551

 
374,660

 
(52,899
)
 
(447,312
)
 
246,041

Cumulative distributions in excess of earnings
(132,892
)
 
(8,143
)
 
12,639

 
620

 
(5,116
)
 
(132,892
)
Total equity
113,462

 
117,408

 
387,299

 
(52,279
)
 
(452,428
)
 
113,462

Total liabilities and equity
$
117,408

 
$
397,060

 
$
391,164

 
$
45,953

 
$
(469,013
)
 
$
482,572



 
 
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
1,778

 
$
11,275

 
$
2,725

 
$
—

 
$
15,778

Tenant reimbursements
—

 
91

 
1,112

 
117

 
—

 
1,320

Independent living facilities
—

 
—

 
626

 
—

 
—

 
626

Interest and other income
—

 
19

 
242

 
—

 
—

 
261

Total revenues
—

 
1,888

 
13,255

 
2,842

 
—

 
17,985

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
—

 
600

 
4,483

 
732

 
—

 
5,815

Interest expense
—

 
5,807

 
2

 
1,412

 
—

 
7,221

Property taxes
—

 
91

 
1,112

 
117

 
—

 
1,320

Independent living facilities
—

 
—

 
610

 
—

 
—

 
610

General and administrative
435

 
1,855

 
2

 
—

 
—

 
2,292

Total expenses
435

 
8,353

 
6,209

 
2,261

 
—

 
17,258

Income in Subsidiary
1,162

 
7,627

 
—

 
—

 
(8,789
)
 
—

Net income
$
727

 
$
1,162

 
$
7,046

 
$
581

 
$
(8,789
)
 
$
727

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014
(in thousands)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:

 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
—

 
$
11,275

 
$
2,725

 
$
—

 
$
14,000

Tenant reimbursements
—

 
—

 
1,110

 
118

 
—

 
1,228

Independent living facilities
—

 
—

 
646

 
—

 
—

 
646

Interest and other income
—

 
10

 
—

 
—

 
—

 
10

Total revenues
—

 
10

 
13,031

 
2,843

 
—

 
15,884

Expenses:

 

 

 

 

 

Depreciation and amortization
—

 
—

 
4,592

 
770

 
—

 
5,362

Interest expense
—

 
4,482

 
12

 
1,449

 
—

 
5,943

Property taxes
—

 
—

 
1,110

 
118

 
—

 
1,228

Independent living facilities
—

 
—

 
586

 
—

 
—

 
586

General and administrative
—

 
798

 
—

 
—

 
—

 
798

Total expenses
—

 
5,280

 
6,300

 
2,337

 
—

 
13,917

Income in Subsidiary
1,967

 
7,237

 
—

 
—

 
(9,204
)
 
—

Loss before provision for income taxes
1,967

 
1,967

 
6,731

 
506

 
(9,204
)
 
1,967

Provision for income taxes
—

 
—

 
—

 
—

 
—

 
—

Net income
$
1,967

 
$
1,967

 
$
6,731

 
$
506

 
$
(9,204
)
 
$
1,967


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
3,869

 
$
33,825

 
$
8,175

 
$
—

 
$
45,869

Tenant reimbursements
—

 
220

 
3,297

 
349

 
—

 
3,866

Independent living facilities
—

 
—

 
1,868

 
—

 
—

 
1,868

Interest and other income
—

 
19

 
697

 
—

 
—

 
716

Total revenues
—

 
4,108

 
39,687

 
8,524

 
—

 
52,319

Expenses:

 

 

 

 

 

Depreciation and amortization
—

 
1,308

 
13,546

 
2,239

 
—

 
17,093

Interest expense
—

 
14,872

 
18

 
4,221

 
—

 
19,111

Property taxes
—

 
220

 
3,297

 
349

 
—

 
3,866

Independent living facilities
—

 
—

 
1,778

 
—

 
—

 
1,778

General and administrative
744

 
4,572

 
97

 
27

 
—

 
5,440

Total expenses
744

 
20,972

 
18,736

 
6,836

 
—

 
47,288

Income in Subsidiary
5,775

 
22,639

 
—

 
—

 
(28,414
)
 
—

Net income
$
5,031

 
$
5,775

 
$
20,951

 
$
1,688

 
$
(28,414
)
 
$
5,031


 
CONDENSED CONSOLIDATING AND COMBINING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in thousands)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
—

 
$
31,062

 
$
6,166

 
$
—

 
$
37,228

Tenant reimbursements
—

 
—

 
3,355

 
371

 
—

 
3,726

Independent living facilities
—

 
—

 
1,856

 
—

 
—

 
1,856

Interest and other income
—

 
10

 
—

 
—

 
—

 
10

Total revenues
—

 
10

 
36,273

 
6,537

 
—

 
42,820

Expenses:

 

 

 

 

 

Depreciation and amortization
—

 
—

 
15,008

 
2,623

 
—

 
17,631

Interest expense
—

 
5,974

 
6,295

 
3,453

 
—

 
15,722

Loss on extinguishment of debt
—

 
—

 
4,067

 
—

 
—

 
4,067

Property taxes
—

 
—

 
3,355

 
371

 
—

 
3,726

Independent living facilities
—

 
—

 
1,684

 
—

 
—

 
1,684

General and administrative
—

 
8,710

 
—

 
—

 
—

 
8,710

Total expenses
—

 
14,684

 
30,409

 
6,447

 
—

 
51,540

(Loss) income in Subsidiary
(8,773
)
 
5,901

 
—

 
—

 
2,872

 
—

(Loss) income before provision for income taxes
(8,773
)
 
(8,773
)
 
5,864

 
90

 
2,872

 
(8,720
)
Provision for income taxes
—

 
—

 
53

 
—

 
—

 
53

Net (loss) income
(8,773
)
 
(8,773
)
 
5,811

 
90

 
2,872

 
(8,773
)
Other comprehensive income:

 
 
 
 
 
 
 
 
 
 
Unrealized gain on interest rate swap
—

 
—

 
167

 
—

 
—

 
167

Reclassification adjustment on interest rate swap
—

 
—

 
1,661

 
—

 
—

 
1,661

Comprehensive (loss) income
$
(8,773
)
 
$
(8,773
)
 
$
7,639

 
$
90

 
$
2,872

 
$
(6,945
)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Cash flows from operating activities:

 
 
 
 
 
 
 
 
 
 
Net cash (used in) provided by operating activities
$
(239
)
 
$
(7,997
)
 
$
33,181

 
$
4,090

 
$
—

 
$
29,035

Cash flows from investing activities:

 

 

 

 

 

Acquisition of real estate
—

 
(231,501
)
 
—

 
—

 
—

 
(231,501
)
Improvements to real estate
—

 
(20
)
 
(123
)
 
—

 
—

 
(143
)
Purchases of equipment, furniture, and fixtures
—

 
(186
)
 
(70
)
 
—

 
—

 
(256
)
Net proceeds from sale of vacant land
—

 
—

 
30

 
—

 
—

 
30

Distribution from subsidiary
14,086

 
—

 
—

 
—

 
(14,086
)
 
—

Intercompany financing
(163,082
)
 
34,599

 
—

 
—

 
128,483

 
—

Net cash used in investing activities
(148,996
)
 
(197,108
)
 
(163
)
 
—

 
114,397

 
(231,870
)
Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of common stock, net
163,466

 
—

 
—

 
—

 
—

 
163,466

Borrowings under unsecured revolving credit facility
—

 
45,000

 
—

 
—

 
—

 
45,000

Borrowings under senior secured revolving credit facility
—

 
35,000

 
—

 
—

 
—

 
35,000

Repayments of borrowings under senior secured revolving credit facility
—

 
(35,000
)
 
—

 
—

 
—

 
(35,000
)
Payments on the mortgage notes payable
—

 
—

 
(558
)
 
(1,951
)
 
—

 
(2,509
)
Net-settle adjustment on restricted stock
(145
)
 

 

 

 

 
(145
)
Payments of deferred financing costs
—

 
(2,113
)
 
—

 
—

 
—

 
(2,113
)
Dividends paid on common stock
(14,086
)
 
—

 
—

 
—

 
—

 
(14,086
)
Distribution to Parent
—

 
(14,086
)
 
—

 
—

 
14,086

 
—

Intercompany financing
—

 
163,082

 
(32,460
)
 
(2,139
)
 
(128,483
)
 
—

Net cash provided by (used in) financing activities
149,235

 
191,883

 
(33,018
)
 
(4,090
)
 
(114,397
)
 
189,613

Net decrease in cash and cash equivalents
—

 
(13,222
)
 
—

 
—

 
—

 
(13,222
)
Cash and cash equivalents beginning of period
—

 
25,320

 
—

 
—

 
—

 
25,320

Cash and cash equivalents end of period of period
$
—

 
$
12,098

 
$
—

 
$
—

 
$
—

 
$
12,098


 
 
CONDENSED CONSOLIDATING AND COMBINING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in thousands)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Cash flows from operating activities:

 
 
 
 
 
 
 
 
 
 
Net cash (used in) provided by operating activities
$
—

 
$
(12,245
)
 
$
26,839

 
$
2,757

 
$
—

 
$
17,351

Cash flows from investing activities:

 

 

 

 

 

Improvements to real estate
—

 
—

 
(254
)
 
—

 
—

 
(254
)
Purchases of equipment, furniture, and fixtures
—

 
—

 
(14,718
)
 
(4,361
)
 
—

 
(19,079
)
Intercompany financing
—

 
(146,138
)
 
—

 
—

 
146,138

 
—

Net cash used in investing activities
—

 
(146,138
)
 
(14,972
)
 
(4,361
)
 
146,138

 
(19,333
)
Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of senior unsecured notes payable
—

 
260,000

 
—

 
—

 
—

 
260,000

Borrowings under the senior secured revolving credit facility
—

 
—

 
10,000

 
—

 
—

 
10,000

Proceeds from the issuance of mortgage notes payable
—

 
—

 
—

 
50,676

 
—

 
50,676

Repayments of borrowings under the senior secured revolving credit facility
—

 
—

 
(88,701
)
 
—

 
—

 
(88,701
)
Payments on the mortgage notes payable
—

 
—

 
(66,880
)
 
(613
)
 
—

 
(67,493
)
Payments on senior secured term loan
—

 
—

 
(65,624
)
 
—

 
—

 
(65,624
)
Payments of deferred financing costs
—

 
(12,772
)
 
—

 
(510
)
 
—

 
(13,282
)
Net contribution from Ensign
—

 
—

 
52,385

 
(48,029
)
 
—

 
4,356

Intercompany financing
—

 
—

 
146,058

 
80

 
(146,138
)
 
—

Net cash provided by (used in) financing activities
—

 
247,228

 
(12,762
)
 
1,604

 
(146,138
)
 
89,932

Net increase (decrease) in cash and cash equivalents
—

 
88,845

 
(895
)
 
—

 
—

 
87,950

Cash and cash equivalents beginning of period
—

 
—

 
895

 
—

 
—

 
895

Cash and cash equivalents end of period
$
—

 
$
88,845

 
$
—

 
$
—

 
$
—

 
$
88,845

Subsequent Events
Subsequent Events
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 and combined financial statements are issued.
On October 1, 2015, the Company acquired the Liberty Healthcare Portfolio, a 14 facility skilled nursing and assisted living portfolio in Ohio, for approximately $177.0 million inclusive of estimated transaction costs that will be accounted for as an asset acquisition. The acquisition was primarily funded with the net proceeds from the Company's common stock offering of $163.0 million, with the remainder funded from a draw on the unsecured revolving credit facility. Prior to the acquisition, the Liberty Healthcare Portfolio was owner-occupied and unaffiliated with the Company or the current tenant. In connection with the acquisition, the Company entered into a triple-net master lease with Pristine Senior Living, LLC. The lease carries an initial term of 15 years with two five-year renewal options and CPI-based rent escalators. The Company anticipates initial annual lease revenues of $17.0 million.
Summary of Significant Accounting Policies (Policies)
Consolidation 
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 505-60, Equity—Spinoffs and Reverse Spinoffs, the accounting for the separation of the Company follows its legal form, with Ensign as the legal and accounting spinnor and the Company as the legal and accounting spinnee, due to the relative significance of Ensign’s healthcare business, the relative fair values of the respective companies, the retention of all senior management (except Mr. Gregory K. Stapley) by Ensign, and other relevant indicators.
Basis of Presentation 
Basis of Presentation—The accompanying condensed consolidated and combined financial statements of the Company reflect, for all periods presented, the historical financial position, results of operations and cash flows of (i) the skilled nursing, assisted living and independent living facilities that Ensign contributed to the Company immediately prior to the Spin-Off and (ii) the operations of the three independent living facilities that the Company operated immediately following the Spin-Off. The condensed consolidated and combined financial statements included in this report also reflect the new investments that the Company has made after the Spin-Off. For the periods prior to the Spin-Off, the Company’s financial statements have been prepared on a “carve-out” basis from Ensign’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities attributable to such skilled nursing, assisted living and independent living facilities (the “Ensign Properties”).
For the periods prior to the Spin-Off, the condensed combined statements of operations reflect allocations of general corporate expenses from Ensign including, but not limited to, executive management, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, procurement, and other shared services. See further discussion in Note 6, Related Party Transactions.
Management believes that the assumptions and estimates used in preparation of the underlying condensed consolidated and combined financial statements are reasonable. However, the condensed consolidated and combined financial statements for the period January 1, 2014 through May 31, 2014 do not necessarily reflect what the Company’s financial position, results of operations or cash flows would have been if the Company had been a stand-alone company during the period presented. The historical financial information is not necessarily indicative of the Company’s future results of operations, financial position or cash flows.
The accompanying condensed consolidated and combined 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 and combined financial statements do not include all of the disclosures required by GAAP for a complete set of annual audited financial statements. The condensed consolidated and combined financial statements should be read in conjunction with the audited consolidated and combined financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 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. All intercompany transactions and account balances within the Company have been eliminated.
Estimates and Assumptions 
Estimates and Assumptions—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Reclassifications 
Reclassifications—Certain amounts in the Company’s condensed consolidated and combined financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.
Real Estate Depreciation and Amortization 
Real Estate Depreciation and Amortization—Real estate costs related to the acquisition and improvement of properties are capitalized and amortized over the expected useful life of the asset on a straight-line basis. Repair and maintenance costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Expenditures for tenant improvements are capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
 
Buildings
 
25-40 years
Building improvements
 
10-25 years
Tenant improvements
 
Shorter of lease term or expected useful life
Integral equipment, furniture and fixtures
 
5 years
Real Estate Acquisition Valuation 
Real Estate Acquisition Valuation— In accordance with ASC 805, Business Combinations, the Company records the acquisition of income-producing real estate as a business combination. If the acquisition does not meet the definition of a business, the Company records the acquisition as an asset acquisition. Under both methods, all assets acquired and liabilities assumed are measured at their acquisition date fair values. For transactions that are business combinations, acquisition costs are expensed as incurred and restructuring costs that do not meet the definition of a liability at the acquisition date are expensed in periods subsequent to the acquisition date. For transactions that are asset acquisitions, acquisition costs are capitalized as incurred.
The Company assesses the acquisition date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers, generally utilizing a discounted cash flow analysis that applies appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.
Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of the Company’s acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of the Company’s net income.
Impairment of Long-Lived Assets 
Impairment of Long-Lived Assets—At least annually, management evaluates the Company’s real estate investments for impairment indicators, including the evaluation of our assets’ useful lives. Management also assesses the carrying value of the Company’s real estate investments whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The judgment regarding the existence of impairment indicators is based on factors such as, but not limited to, market conditions, operator performance and legal structure. If indicators of impairment are present, management evaluates the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying facilities. Provisions for impairment losses related to long-lived assets are recognized when expected future undiscounted cash flows are determined to be less than the carrying values of the assets. An adjustment is made to the net carrying value of the real estate investments for the excess of carrying value over fair value. All impairments are taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset.
If the Company decides to sell real estate properties, we evaluate the recoverability of the carrying amounts of the assets. If the evaluation indicates that the carrying value is not recoverable from estimated net sales proceeds, the property is written down to estimated fair value less costs to sell.
In the event of impairment, the fair value of the real estate investment is determined by market research, which includes valuing the property in its current use as well as other alternative uses, and involves significant judgment. The Company’s estimates of cash flows and fair values of the properties are based on current market conditions and consider matters such as rental rates and occupancies for comparable properties, recent sales data for comparable properties, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers. The Company’s ability to accurately estimate future cash flows and estimate and allocate fair values impacts the timing and recognition of impairments. While the Company believes its assumptions are reasonable, changes in these assumptions may have a material impact on financial results.
Other Real Estate Investments 
Other Real Estate Investments — Preferred equity investments are accounted for at unpaid principal balance, plus accrued return, net of reserves. The Company recognizes return income on a quarterly basis based on the outstanding investment including any accrued and unpaid return.
The Company periodically evaluates each of its other real estate investments for indicators of impairment. An investment is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. A reserve is established for the excess of the carrying value of the investment over its fair value.
Cash and Cash Equivalents 
Cash and Cash Equivalents—Cash and cash equivalents consist of bank term deposits and money market funds with original maturities of three months or less at time of purchase and therefore approximate fair value. The fair value of these investments is determined based on “Level 1” inputs, which consist of unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. The Company places its cash and short-term investments with high credit quality financial institutions.
The Company’s cash and cash equivalents balance periodically exceeds federally insurable limits. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.
Deferred Financing Costs 
Deferred Financing Costs—External costs incurred from placement of our debt are capitalized and amortized on a straight-line basis over the terms of the related borrowings, which approximates the effective interest method. Amortization of deferred financing costs is classified as interest expense in our condensed consolidated and combined statements of operations. Accumulated amortization of deferred financing costs was $2.8 million and $2.2 million at September 30, 2015 and December 31, 2014, respectively.
When financings are terminated, unamortized deferred financing costs, as well as charges incurred for the termination, are expensed at the time the termination is made. Gains and losses from the extinguishment of debt are presented within income from continuing operations in our condensed consolidated and combined statements of operations.
Revenue Recognition 
Revenue Recognition —The Company recognizes rental revenue, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, if any, from tenants under lease arrangements with minimum fixed and determinable increases on a straight-line basis over the non-cancellable term of the related leases when collectability is reasonably assured. Tenant recoveries related to the reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the expenses are incurred and presented gross if the Company is the primary obligor and, with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk. For the three and nine months ended September 30, 2015 and 2014, such tenant reimbursement revenues consist of real estate taxes. Contingent revenue, if any, is not recognized until all possible contingencies have been eliminated.
The Company evaluates the collectability of rents and other receivables on a regular basis based on factors including, among others, payment history, the operations, the asset type and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected. We did not reserve any receivables as of September 30, 2015 or December 31, 2014.
Income Taxes 
Income Taxes—The Company’s operations prior to the Spin-Off were historically included in Ensign’s U.S. federal and state income tax returns and all income taxes for periods prior to the Spin-Off were paid by Ensign. Income tax expense and other income tax related information contained in these condensed consolidated and combined financial statements are presented on a separate tax return basis as if the Company filed its own tax returns for all periods. Management believes that the assumptions and estimates used to determine these tax amounts are reasonable. However, the condensed consolidated and combined financial statements herein may not necessarily reflect the Company’s income tax expense or tax payments in the future, or what its tax amounts would have been if the Company had been a stand-alone company prior to the Spin-Off.
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), beginning with its taxable year ending December 31, 2014. The Company believes it has been organized and has operated, and the Company intends to continue to operate, in a manner to qualify for taxation as a REIT under the Code. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions.
 
 
In connection with the Company’s intention to qualify as a real estate investment trust in 2014, on October 17, 2014, the Company’s board of directors declared a special dividend (the “Special Dividend”) of $132.0 million, or approximately $5.88 per common share, which represents the amount of accumulated earnings and profits, or “E&P,” allocated to the Company as a result of the Spin-Off. The Special Dividend was intended to purge the Company of accumulated E&P attributable to the period prior to the Company’s first taxable year as a REIT. The Special Dividend was paid on December 10, 2014, to stockholders of record on October 31, 2014, in a combination of both cash and stock. The cash portion totaled $33.0 million and the stock portion totaled $99.0 million. The Company issued 8,974,249 shares of common stock in connection with the stock portion of the Special Dividend.
Derivatives and Hedging Activities 
Derivatives and Hedging Activities—The Company evaluates variable and fixed interest rate risk exposure on a routine basis and to the extent the Company believes that it is appropriate, it will offset most of its variable rate risk exposure by entering into interest rate swap agreements. It is the Company’s policy to only utilize derivative instruments for hedging purposes (i.e., not for speculation). The Company formally designates its interest rate swap agreements as hedges and documents all relationships between hedging instruments and hedged items. The Company formally assesses effectiveness of its hedging relationships, both at the hedge inception and on an ongoing basis, then measures and records ineffectiveness. The Company would discontinue hedge accounting prospectively (i) if it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated or exercised, (iii) if it is no longer probable that the forecasted transaction will occur, or (iv) if management determines that designation of the derivative as a hedge instrument is no longer appropriate.
Effective May 30, 2014, the Company de-designated its interest rate swap contract that historically qualified for cash flow hedge accounting. This was due to the termination of the interest rate swap agreement related to the early retirement of the senior credit facility in place prior to the Spin-Off. As a result, the loss previously recorded in accumulated other comprehensive loss related to the interest rate swap was recognized in interest expense in the condensed consolidated and combined statements of operations during the three month period ended June 30, 2014. There was no outstanding interest rate swap contract as of September 30, 2015.
Stock-Based Compensation 
Stock-Based Compensation—The Company accounts for share-based payment awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. ASC 718 requires all entities to apply a fair value-based measurement method in accounting for share-based payment transactions with directors, officers and employees except for equity instruments held by employee share ownership plans. Net income reflects stock-based compensation expense of $0.4 million and $1.1 million for the three and nine months ended September 30, 2015, respectively.
Concentration of Credit Risk 
Concentration of Credit Risk—The Company is subject to concentrations of credit risk consisting primarily of operating leases on our owned properties. See Note 12, Concentration of Risk, for a discussion of major operator concentration.
Segment Disclosures 
Segment Disclosures —The FASB accounting guidance regarding disclosures about segments of an enterprise and related information establishes standards for the manner in which public business enterprises report information about operating segments. The Company has one reportable segment consisting of investments in healthcare-related real estate assets.
Earnings (Loss) Per Share 
Earnings (Loss) Per Share—The Company calculates earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution for all potentially-dilutive securities. Basic and diluted EPS for the three and nine months ended September 30, 2014 were retroactively restated for the number of basic and diluted shares outstanding immediately following the Spin-Off.
Recently Issued Accounting Standards Update 
Recently Issued Accounting Standards Update— In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of its new revenue recognition standard by one year. The standard will be effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. The Company is currently assessing the impact of adopting ASU No. 2014-09 but does not believe it will have a material effect on income from operations or the Company’s financial position.
 
 
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU No. 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU No. 2015-02 is effective for fiscal years, and interim periods within these fiscal years, beginning after December 15, 2015. The Company does not expect the adoption of ASU No. 2015-02 to have a significant impact on its consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU No. 2015-03”), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected. Upon adoption, we will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance. ASU No. 2015-03 is effective for fiscal years, and interim periods within these fiscal years, beginning after December 15, 2015. The Company does not expect the adoption of ASU No. 2015-03 to have a significant impact on its consolidated financial statements.
In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update) (“ASU No. 2015-15”). ASU No. 2015-15 was issued by the FASB in response to questions that arose after the issuance of ASU No. 2015-03, to incorporate an SEC staff announcement that the SEC staff will not object to an entity presenting the cost of securing a revolving line of credit as an asset, regardless of whether a balance is outstanding. ASU No. 2015-15 was effective upon announcement.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments (“ASU No. 2015-16”). ASU No. 2015-16 eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment, including the effect on earnings of any amounts it would have recorded in previous periods if the accounting had been completed at the acquisition date. ASU No. 2015-16 is effective for fiscal years, and interim periods within these fiscal years, beginning after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of ASU No. 2015-16 to have a significant impact on its consolidated financial statements.
Organization (Tables)
Schedule of Assets and Liabilities Contributed to the Company from Ensign or Incurred in Connection with Spin-Off
The assets and liabilities contributed to the Company from Ensign, or incurred in connection with the Spin-Off in the case of certain debt, were as follows (dollars in thousands):
 
 
 
Real estate investments, net
$
421,846

Cash
78,731

Accounts receivable and prepaid assets and other current assets
1,900

Deferred financing costs, net
11,088

Debt
(359,512
)
Other liabilities
(6,838
)
Net contribution
$
147,215

Summary of Significant Accounting Policies (Tables)
Summary of Estimated Useful Lives
The Company anticipates the estimated useful lives of its assets by class to be generally as follows:
 
Buildings
 
25-40 years
Building improvements
 
10-25 years
Tenant improvements
 
Shorter of lease term or expected useful life
Integral equipment, furniture and fixtures
 
5 years
Real Estate Investments, Net (Tables)
Summary of Investment in Owned Properties 
The following tables summarize our investment in owned properties at September 30, 2015, and December 31, 2014 (dollars in thousands):
 
 
September 30,
2015
 
December 31,
2014
Land
$
80,882

 
$
75,072

Buildings and improvements
465,561

 
417,414

Integral equipment, furniture and fixtures
50,048

 
47,134

Escrowed cash for October 1, 2015 acquisition (Note 14)
175,561

 
—

Real estate investments
772,052

 
539,620

Accumulated depreciation
(120,498
)
 
(103,405
)
Real estate investments, net
$
651,554

 
$
436,215

Schedule of Total Future Minimum Rental Revenues 
As of September 30, 2015, our total future minimum rental revenues for all of our tenants were (dollars in thousands): 
 
 
Year
Amount
Remaining 2015
$
15,854

2016
63,416

2017
63,416

2018
63,416

2019
63,416

Thereafter
651,062

 
$
920,580

Fair Value Measurements (Tables)
Summary of Fair Value of Financial Instruments Measured on Recurring Basis Using Unobservable Inputs
A summary of the face values, carrying amounts and fair values of the Company’s financial instruments as of September 30, 2015 and December 31, 2014 using Level 2 inputs, for the senior unsecured notes payable, and Level 3 inputs, for all other financial instruments, is as follows (dollars in thousands):
 
 
 
September 30, 2015
 
December 31, 2014
 
Face
Value
 
Carrying
Amount
 
Fair
Value
 
Face
Value
 
Carrying
Amount
 
Fair
Value
Financial assets:
 
 
 
 
 
 
 
 
 
 
 
Preferred equity investment
$
7,500

 
$
8,229

 
$
8,229

 
$
7,500

 
$
7,532

 
$
7,532

Financial liabilities:
 
 
 
 
 
 
 
 
 
 
 
Senior unsecured notes payable
$
260,000

 
$
260,000

 
$
266,500

 
$
260,000

 
$
260,000

 
$
265,200

Mortgage notes payable
$
95,696

 
$
95,696

 
$
98,128

 
$
98,205

 
$
98,205

 
$
101,822

Earnings Per Common Share (Tables)
Reconciliation of Weighted-Average Common Shares Outstanding Used in Calculation of Basic EPS to Diluted EPS
The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three and nine months ended September 30, 2015 and 2014, and reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands, except per share amounts):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Net income (loss)
$
727

 
$
1,967

 
$
5,031

 
$
(8,773
)
Less: Net income allocated to participating securities
(80
)
 
—

 
(209
)
 
—

Numerator for basic and diluted earnings (loss) available to common stockholders
$
647

 
$
1,967

 
$
4,822

 
$
(8,773
)
Denominator:
 
 
 
 
 
 
 
Weighted-average basic common shares outstanding
39,125

 
22,255

 
33,916

 
22,238

Weighted-average diluted common shares outstanding
39,125

 
22,436

 
33,916

 
22,238

 
 
 
 
 
 
 
 
Earnings (loss) per common share, basic
$
0.02

 
$
0.09

 
$
0.14

 
$
(0.39
)
Earnings (loss) per common share, diluted
$
0.02

 
$
0.09

 
$
0.14

 
$
(0.39
)
Summarized Condensed Consolidating and Combining Information (Tables)
Condensed Consolidating Balance Sheets 
CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 2015
(in thousands, except share and per share amounts)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
 
 
Real estate investments, net
$
—

 
$
257,065

 
$
352,816

 
$
41,673

 
$
—

 
$
651,554

Other real estate investments
—

 
—

 
8,229

 
—

 
—

 
8,229

Cash and cash equivalents
—

 
12,098

 
—

 
—

 
—

 
12,098

Accounts receivable
—

 
217

 
2,533

 
211

 
—

 
2,961

Prepaid expenses and other assets
—

 
331

 
6

 
—

 
—

 
337

Deferred financing costs, net
—

 
9,384

 
—

 
409

 
—

 
9,793

Investment in subsidiaries
272,545

 
357,660

 
—

 
—

 
(630,205
)
 
—

Intercompany
—

 
—

 
47,722

 
3,464

 
(51,186
)
 
—

Total assets
$
272,545

 
$
636,755

 
$
411,306

 
$
45,757

 
$
(681,391
)
 
$
684,972

Liabilities and Equity:
 
 
 
 
 
 
 
 
 
 
 
Senior unsecured notes payable
$
—

 
$
260,000

 
$
—

 
$
—

 
$
—

 
$
260,000

Mortgage notes payable
—

 
—

 
—

 
95,696

 
—

 
95,696

Unsecured revolving credit facility
—

 
45,000

 
—

 
—

 
—

 
45,000

Accounts payable and accrued liabilities
279

 
8,024

 
3,057

 
650

 
—

 
12,010

Dividends payable
7,704

 
—

 
—

 
—

 
—

 
7,704

Intercompany
—

 
51,186

 
—

 
—

 
(51,186
)
 
—

Total liabilities
7,983

 
364,210

 
3,057

 
96,346

 
(51,186
)
 
420,410

Equity:
 
 
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 shares issued and outstanding as of September 30, 2015
477

 
—

 
—

 
—

 
—

 
477

Additional paid-in capital
409,790

 
274,913

 
374,660

 
(52,899
)
 
(596,674
)
 
409,790

Cumulative distributions in excess of earnings
(145,705
)
 
(2,368
)
 
33,589

 
2,310

 
(33,531
)
 
(145,705
)
Total equity
264,562

 
272,545

 
408,249

 
(50,589
)
 
(630,205
)
 
264,562

Total liabilities and equity
$
272,545

 
$
636,755

 
$
411,306

 
$
45,757

 
$
(681,391
)
 
$
684,972

CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2014
(in thousands, except share and per share amounts)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
 
 
Real estate investments, net
$
—

 
$
26,104

 
$
366,199

 
$
43,912

 
$
—

 
$
436,215

Other real estate investments
—

 
—

 
7,532

 
—

 
—

 
7,532

Cash and cash equivalents
—

 
25,320

 
—

 
—

 
—

 
25,320

Accounts receivable
—

 
—

 
2,170

 
121

 
—

 
2,291

Prepaid expenses and other assets
—

 
808

 
1

 
—

 
—

 
809

Deferred financing costs, net
—

 
9,808

 
—

 
597

 
—

 
10,405

Investment in subsidiaries
117,408

 
335,020

 
—

 
—

 
(452,428
)
 
—

Intercompany
—

 
—

 
15,262

 
1,323

 
(16,585
)
 
—

Total assets
$
117,408

 
$
397,060

 
$
391,164

 
$
45,953

 
$
(469,013
)
 
$
482,572

Liabilities and Equity:
 
 
 
 
 
 
 
 
 
 
 
Senior unsecured notes payable
$
—

 
$
260,000

 
$
—

 
$
—

 
$
—

 
$
260,000

Mortgage notes payable
—

 
—

 
557

 
97,648

 
—

 
98,205

Accounts payable and accrued liabilities
—

 
3,067

 
3,308

 
584

 
—

 
6,959

Dividends payable
3,946

 
—

 
—

 
—

 
—

 
3,946

Intercompany
—

 
16,585

 
—

 
—

 
(16,585
)
 
—

Total liabilities
3,946

 
279,652

 
3,865

 
98,232

 
(16,585
)
 
369,110

Equity:
 
 
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 31,251,157 shares issued and outstanding as of December 31, 2014
313

 
—

 
—

 
—

 
—

 
313

Additional paid-in capital
246,041

 
125,551

 
374,660

 
(52,899
)
 
(447,312
)
 
246,041

Cumulative distributions in excess of earnings
(132,892
)
 
(8,143
)
 
12,639

 
620

 
(5,116
)
 
(132,892
)
Total equity
113,462

 
117,408

 
387,299

 
(52,279
)
 
(452,428
)
 
113,462

Total liabilities and equity
$
117,408

 
$
397,060

 
$
391,164

 
$
45,953

 
$
(469,013
)
 
$
482,572

Condensed Consolidating and Combining Statements of Operations 
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
1,778

 
$
11,275

 
$
2,725

 
$
—

 
$
15,778

Tenant reimbursements
—

 
91

 
1,112

 
117

 
—

 
1,320

Independent living facilities
—

 
—

 
626

 
—

 
—

 
626

Interest and other income
—

 
19

 
242

 
—

 
—

 
261

Total revenues
—

 
1,888

 
13,255

 
2,842

 
—

 
17,985

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
—

 
600

 
4,483

 
732

 
—

 
5,815

Interest expense
—

 
5,807

 
2

 
1,412

 
—

 
7,221

Property taxes
—

 
91

 
1,112

 
117

 
—

 
1,320

Independent living facilities
—

 
—

 
610

 
—

 
—

 
610

General and administrative
435

 
1,855

 
2

 
—

 
—

 
2,292

Total expenses
435

 
8,353

 
6,209

 
2,261

 
—

 
17,258

Income in Subsidiary
1,162

 
7,627

 
—

 
—

 
(8,789
)
 
—

Net income
$
727

 
$
1,162

 
$
7,046

 
$
581

 
$
(8,789
)
 
$
727

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014
(in thousands)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:

 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
—

 
$
11,275

 
$
2,725

 
$
—

 
$
14,000

Tenant reimbursements
—

 
—

 
1,110

 
118

 
—

 
1,228

Independent living facilities
—

 
—

 
646

 
—

 
—

 
646

Interest and other income
—

 
10

 
—

 
—

 
—

 
10

Total revenues
—

 
10

 
13,031

 
2,843

 
—

 
15,884

Expenses:

 

 

 

 

 

Depreciation and amortization
—

 
—

 
4,592

 
770

 
—

 
5,362

Interest expense
—

 
4,482

 
12

 
1,449

 
—

 
5,943

Property taxes
—

 
—

 
1,110

 
118

 
—

 
1,228

Independent living facilities
—

 
—

 
586

 
—

 
—

 
586

General and administrative
—

 
798

 
—

 
—

 
—

 
798

Total expenses
—

 
5,280

 
6,300

 
2,337

 
—

 
13,917

Income in Subsidiary
1,967

 
7,237

 
—

 
—

 
(9,204
)
 
—

Loss before provision for income taxes
1,967

 
1,967

 
6,731

 
506

 
(9,204
)
 
1,967

Provision for income taxes
—

 
—

 
—

 
—

 
—

 
—

Net income
$
1,967

 
$
1,967

 
$
6,731

 
$
506

 
$
(9,204
)
 
$
1,967


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
3,869

 
$
33,825

 
$
8,175

 
$
—

 
$
45,869

Tenant reimbursements
—

 
220

 
3,297

 
349

 
—

 
3,866

Independent living facilities
—

 
—

 
1,868

 
—

 
—

 
1,868

Interest and other income
—

 
19

 
697

 
—

 
—

 
716

Total revenues
—

 
4,108

 
39,687

 
8,524

 
—

 
52,319

Expenses:

 

 

 

 

 

Depreciation and amortization
—

 
1,308

 
13,546

 
2,239

 
—

 
17,093

Interest expense
—

 
14,872

 
18

 
4,221

 
—

 
19,111

Property taxes
—

 
220

 
3,297

 
349

 
—

 
3,866

Independent living facilities
—

 
—

 
1,778

 
—

 
—

 
1,778

General and administrative
744

 
4,572

 
97

 
27

 
—

 
5,440

Total expenses
744

 
20,972

 
18,736

 
6,836

 
—

 
47,288

Income in Subsidiary
5,775

 
22,639

 
—

 
—

 
(28,414
)
 
—

Net income
$
5,031

 
$
5,775

 
$
20,951

 
$
1,688

 
$
(28,414
)
 
$
5,031


 
CONDENSED CONSOLIDATING AND COMBINING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in thousands)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-
Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
—

 
$
—

 
$
31,062

 
$
6,166

 
$
—

 
$
37,228

Tenant reimbursements
—

 
—

 
3,355

 
371

 
—

 
3,726

Independent living facilities
—

 
—

 
1,856

 
—

 
—

 
1,856

Interest and other income
—

 
10

 
—

 
—

 
—

 
10

Total revenues
—

 
10

 
36,273

 
6,537

 
—

 
42,820

Expenses:

 

 

 

 

 

Depreciation and amortization
—

 
—

 
15,008

 
2,623

 
—

 
17,631

Interest expense
—

 
5,974

 
6,295

 
3,453

 
—

 
15,722

Loss on extinguishment of debt
—

 
—

 
4,067

 
—

 
—

 
4,067

Property taxes
—

 
—

 
3,355

 
371

 
—

 
3,726

Independent living facilities
—

 
—

 
1,684

 
—

 
—

 
1,684

General and administrative
—

 
8,710

 
—

 
—

 
—

 
8,710

Total expenses
—

 
14,684

 
30,409

 
6,447

 
—

 
51,540

(Loss) income in Subsidiary
(8,773
)
 
5,901

 
—

 
—

 
2,872

 
—

(Loss) income before provision for income taxes
(8,773
)
 
(8,773
)
 
5,864

 
90

 
2,872

 
(8,720
)
Provision for income taxes
—

 
—

 
53

 
—

 
—

 
53

Net (loss) income
(8,773
)
 
(8,773
)
 
5,811

 
90

 
2,872

 
(8,773
)
Other comprehensive income:

 
 
 
 
 
 
 
 
 
 
Unrealized gain on interest rate swap
—

 
—

 
167

 
—

 
—

 
167

Reclassification adjustment on interest rate swap
—

 
—

 
1,661

 
—

 
—

 
1,661

Comprehensive (loss) income
$
(8,773
)
 
$
(8,773
)
 
$
7,639

 
$
90

 
$
2,872

 
$
(6,945
)
Condensed Consolidating and Combining Statements of Cash Flows 
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Cash flows from operating activities:

 
 
 
 
 
 
 
 
 
 
Net cash (used in) provided by operating activities
$
(239
)
 
$
(7,997
)
 
$
33,181

 
$
4,090

 
$
—

 
$
29,035

Cash flows from investing activities:

 

 

 

 

 

Acquisition of real estate
—

 
(231,501
)
 
—

 
—

 
—

 
(231,501
)
Improvements to real estate
—

 
(20
)
 
(123
)
 
—

 
—

 
(143
)
Purchases of equipment, furniture, and fixtures
—

 
(186
)
 
(70
)
 
—

 
—

 
(256
)
Net proceeds from sale of vacant land
—

 
—

 
30

 
—

 
—

 
30

Distribution from subsidiary
14,086

 
—

 
—

 
—

 
(14,086
)
 
—

Intercompany financing
(163,082
)
 
34,599

 
—

 
—

 
128,483

 
—

Net cash used in investing activities
(148,996
)
 
(197,108
)
 
(163
)
 
—

 
114,397

 
(231,870
)
Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of common stock, net
163,466

 
—

 
—

 
—

 
—

 
163,466

Borrowings under unsecured revolving credit facility
—

 
45,000

 
—

 
—

 
—

 
45,000

Borrowings under senior secured revolving credit facility
—

 
35,000

 
—

 
—

 
—

 
35,000

Repayments of borrowings under senior secured revolving credit facility
—

 
(35,000
)
 
—

 
—

 
—

 
(35,000
)
Payments on the mortgage notes payable
—

 
—

 
(558
)
 
(1,951
)
 
—

 
(2,509
)
Net-settle adjustment on restricted stock
(145
)
 

 

 

 

 
(145
)
Payments of deferred financing costs
—

 
(2,113
)
 
—

 
—

 
—

 
(2,113
)
Dividends paid on common stock
(14,086
)
 
—

 
—

 
—

 
—

 
(14,086
)
Distribution to Parent
—

 
(14,086
)
 
—

 
—

 
14,086

 
—

Intercompany financing
—

 
163,082

 
(32,460
)
 
(2,139
)
 
(128,483
)
 
—

Net cash provided by (used in) financing activities
149,235

 
191,883

 
(33,018
)
 
(4,090
)
 
(114,397
)
 
189,613

Net decrease in cash and cash equivalents
—

 
(13,222
)
 
—

 
—

 
—

 
(13,222
)
Cash and cash equivalents beginning of period
—

 
25,320

 
—

 
—

 
—

 
25,320

Cash and cash equivalents end of period of period
$
—

 
$
12,098

 
$
—

 
$
—

 
$
—

 
$
12,098


 
 
CONDENSED CONSOLIDATING AND COMBINING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(in thousands)
 
 
Parent
Guarantor
 
Issuers
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Elimination
 
Consolidated
Cash flows from operating activities:

 
 
 
 
 
 
 
 
 
 
Net cash (used in) provided by operating activities
$
—

 
$
(12,245
)
 
$
26,839

 
$
2,757

 
$
—

 
$
17,351

Cash flows from investing activities:

 

 

 

 

 

Improvements to real estate
—

 
—

 
(254
)
 
—

 
—

 
(254
)
Purchases of equipment, furniture, and fixtures
—

 
—

 
(14,718
)
 
(4,361
)
 
—

 
(19,079
)
Intercompany financing
—

 
(146,138
)
 
—

 
—

 
146,138

 
—

Net cash used in investing activities
—

 
(146,138
)
 
(14,972
)
 
(4,361
)
 
146,138

 
(19,333
)
Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of senior unsecured notes payable
—

 
260,000

 
—

 
—

 
—

 
260,000

Borrowings under the senior secured revolving credit facility
—

 
—

 
10,000

 
—

 
—

 
10,000

Proceeds from the issuance of mortgage notes payable
—

 
—

 
—

 
50,676

 
—

 
50,676

Repayments of borrowings under the senior secured revolving credit facility
—

 
—

 
(88,701
)
 
—

 
—

 
(88,701
)
Payments on the mortgage notes payable
—

 
—

 
(66,880
)
 
(613
)
 
—

 
(67,493
)
Payments on senior secured term loan
—

 
—

 
(65,624
)
 
—

 
—

 
(65,624
)
Payments of deferred financing costs
—

 
(12,772
)
 
—

 
(510
)
 
—

 
(13,282
)
Net contribution from Ensign
—

 
—

 
52,385

 
(48,029
)
 
—

 
4,356

Intercompany financing
—

 
—

 
146,058

 
80

 
(146,138
)
 
—

Net cash provided by (used in) financing activities
—

 
247,228

 
(12,762
)
 
1,604

 
(146,138
)
 
89,932

Net increase (decrease) in cash and cash equivalents
—

 
88,845

 
(895
)
 
—

 
—

 
87,950

Cash and cash equivalents beginning of period
—

 
—

 
895

 
—

 
—

 
895

Cash and cash equivalents end of period
$
—

 
$
88,845

 
$
—

 
$
—

 
$
—

 
$
88,845

Organization - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 0 Months Ended 9 Months Ended
Sep. 30, 2015
real_estate_investment
Jun. 1, 2014
Ensign [Member]
company
Sep. 30, 2015
Ensign [Member]
lease
Sep. 30, 2015
Skilled Nursing, Assisted Living and Independent Living Facilities [Member]
Assets Leased to Ensign [Member]
bed
facility
Sep. 30, 2015
Skilled Nursing, Assisted Living and Independent Living Facilities [Member]
Assets Leased to Ensign [Member]
Ensign [Member]
bed
facility
Sep. 30, 2015
Independent Living Facilities Owned and Operated by Company [Member]
facility
unit
Real Estate Properties [Line Items]
 
 
 
 
 
 
Number of publicly traded companies into which Ensign split after the Spin-Off
 
2 
 
 
 
 
Ensign for CareTrust share exchange ratio to affect the Spin-Off
 
1 
 
 
 
 
Date of incorporation
Oct. 29, 2013 
 
 
 
 
 
Number of long-term leases
 
 
8 
 
 
 
Number of living facilities
 
 
 
105 
94 
3 
Number of units available in living facilities
 
 
 
10,886 
10,121 
 
Number of units available in living facilities
 
 
 
 
 
264 
Number of other real estate investments
1 
 
 
 
 
 
Preferred equity investment
$ 8,200 
 
 
 
 
 
Organization - Schedule of Assets and Liabilities Contributed to the Company from Ensign or Incurred in Connection with Spin-Off (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Real Estate Properties [Line Items]
 
 
Real estate investments, net
$ 651,554 
$ 436,215 
Deferred financing costs, net
9,793 
10,405 
Debt
(400,700)
(358,200)
Ensign [Member]
 
 
Real Estate Properties [Line Items]
 
 
Real estate investments, net
421,846 
 
Cash
78,731 
 
Accounts receivable and prepaid assets and other current assets
1,900 
 
Deferred financing costs, net
11,088 
 
Debt
(359,512)
 
Other liabilities
(6,838)
 
Net contribution
$ 147,215 
 
Summary of Significant Accounting Policies - Summary of Estimated Useful Lives (Detail)
9 Months Ended
Sep. 30, 2015
Tenant Improvements [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
Shorter of lease term or expected useful life 
Integral Equipment, Furniture and Fixtures [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
5 years 
Minimum [Member] |
Buildings [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
25 years 
Minimum [Member] |
Building Improvements [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
10 years 
Maximum [Member] |
Buildings [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
40 years 
Maximum [Member] |
Building Improvements [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
25 years 
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
0 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended
Aug. 18, 2015
Sep. 30, 2015
Sep. 30, 2015
segment
Sep. 30, 2014
Dec. 31, 2014
Dec. 10, 2014
Special Dividend [Member]
Sep. 30, 2015
Special Dividend [Member]
Oct. 17, 2014
Special Dividend [Member]
Sep. 30, 2015
Interest Rate Swap [Member]
Property, Plant and Equipment [Line Items]
 
 
 
 
 
 
 
 
 
Accumulated amortization of deferred financing costs
 
$ 2,800,000 
$ 2,800,000 
 
$ 2,200,000 
 
 
 
 
Reserve against receivables
 
0 
0 
 
0 
 
 
 
 
REIT taxable income to its stockholders, percentage - at least 90%
 
 
90.00% 
 
 
 
 
 
 
REIT non qualifying period
 
 
4 years 
 
 
 
 
 
 
Dividend, declared date
 
 
 
 
 
 
Oct. 17, 2014 
 
 
Dividend declared
 
7,704,000 
7,704,000 
 
3,946,000 
 
 
132,000,000 
 
Dividend payable per share
 
 
 
 
 
 
 
$ 5.88 
 
Dividend, payable date
 
 
Apr. 15, 2015 
 
 
 
Dec. 10, 2014 
 
 
Dividend, record date
 
 
Mar. 31, 2015 
 
 
 
Oct. 31, 2014 
 
 
Cash portion of dividend
 
 
 
 
 
33,000,000 
 
 
 
Stock portion of dividend
 
 
 
 
 
99,000,000 
 
 
 
Issuance of common stock, net, shares
16,330,000 
 
 
 
 
8,974,249 
 
 
 
Interest rate swap outstanding
 
 
 
 
 
 
 
 
0 
Stock-based compensation expense
 
$ 435,000 
$ 1,095,000 
$ 0 
 
 
 
 
 
Number of reportable segments
 
 
1 
 
 
 
 
 
 
Real Estate Investments, Net - Summary of Investment in Owned Properties (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Real Estate [Abstract]
 
 
Land
$ 80,882 
$ 75,072 
Buildings and improvements
465,561 
417,414 
Integral equipment, furniture and fixtures
50,048 
47,134 
Escrow cash for October 1, 2015 acquisition
175,561 
0 
Real estate investments
772,052 
539,620 
Accumulated depreciation
(120,498)
(103,405)
Real estate investments, net
$ 651,554 
$ 436,215 
Real Estate Investments, Net - Additional Information (Detail) (USD $)
1 Months Ended 9 Months Ended 0 Months Ended
Jan. 31, 2015
Bethany Rehabilitation Center [Member]
renewal_option
Apr. 30, 2015
Mira Vista Care Center [Member]
renewal_option
Jun. 30, 2015
Shoreline Health And Rehabilitation Center [Member]
Jul. 31, 2015
Bristol Court Assisted Living [Member]
renewal_option
Jul. 31, 2015
Shamrock Nursing and Rehabilitation Center [Member]
renewal_option
Sep. 30, 2015
Asbury Place Assisted Living [Member]
Sep. 30, 2015
Ensign Master Leases [Member]
facility
Oct. 1, 2015
Subsequent Events [Member]
Liberty Healthcare Portfolio [Member]
renewal_option
Investment [Line Items]
 
 
 
 
 
 
 
 
Number of facilities not leased
 
 
 
 
 
 
14 
 
Annual revenues from Master Leases during first year
 
 
 
 
 
 
$ 56,000,000 
 
Lease term for fixed contractual annual revenues
 
 
 
 
 
 
2 years 
 
Escalation factor for calculating revenues after year two
 
 
 
 
 
 
0.00% 
 
Percentage change in the consumer price index
 
 
 
 
 
 
2.50% 
 
Acquisition consideration
18,100,000 
9,300,000 
6,800,000 
8,500,000 
8,300,000 
5,400,000 
 
177,000,000 
Acquisition costs capitalized
100,000 
200,000 
200,000 
72,000 
49,000 
49,000 
 
500,000 
Leases period
15 years 
15 years 
 
15 years 
15 years 
 
 
15 years 
Leases renewal options
2 
2 
 
2 
2 
 
 
2 
Leases renewal term
5 years 
5 years 
 
5 years 
5 years 
 
 
5 years 
Anticipated annual lease revenues
$ 1,700,000 
$ 900,000 
$ 700,000 
$ 700,000 
$ 800,000 
$ 500,000 
 
$ 17,000,000 
Real Estate Investments, Net - Schedule of Total Future Minimum Rental Revenues (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Real Estate [Abstract]
 
Remaining 2015
$ 15,854 
2016
63,416 
2017
63,416 
2018
63,416 
2019
63,416 
Thereafter
651,062 
Total
$ 920,580 
Other Real Estate Investments - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2015
Dec. 31, 2014
Signature Senior Living [Member]
acre
bed
Sep. 30, 2015
Signature Senior Living [Member]
Real Estate Properties [Line Items]
 
 
 
 
Preferred equity investment
$ 8,200,000 
$ 8,200,000 
$ 7,500,000 
 
Return from preferred equity investment
 
 
12.00% 
 
Number of beds planned for construction
 
 
134 
 
Area under construction
 
 
5 
 
Initial lease yield
 
 
8.00% 
 
Project construction completion year
 
 
 
2016 
Recognized interest income
$ 200,000 
$ 700,000 
 
 
Fair Value Measurements - Summary of the Face Values, Carrying Amounts and Fair Values of Company's Financial Instruments Using Level 2 Inputs, for Senior Unsecured Notes Payable, and Level 3 Inputs, for all Other Financial Instruments (Detail) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Financial assets:
 
 
Preferred equity investment - face value
$ 7,500,000 
$ 7,500,000 
Preferred equity investment
8,200,000 
 
Financial liabilities:
 
 
Senior unsecured notes payable
260,000,000 
260,000,000 
Mortgage notes payable
95,696,000 
98,205,000 
Level 2 |
Senior unsecured notes payable
 
 
Financial liabilities:
 
 
Financial liabilities - face value
260,000,000 
260,000,000 
Level 3 |
Mortgage notes payable
 
 
Financial liabilities:
 
 
Financial liabilities - face value
95,696,000 
98,205,000 
Fair Value
 
 
Financial assets:
 
 
Preferred equity investment
8,229,000 
7,532,000 
Fair Value |
Level 2
 
 
Financial liabilities:
 
 
Senior unsecured notes payable
266,500,000 
265,200,000 
Fair Value |
Level 3
 
 
Financial liabilities:
 
 
Mortgage notes payable
98,128,000 
101,822,000 
Carrying Amount
 
 
Financial assets:
 
 
Preferred equity investment
8,229,000 
7,532,000 
Carrying Amount |
Level 2
 
 
Financial liabilities:
 
 
Senior unsecured notes payable
260,000,000 
260,000,000 
Carrying Amount |
Level 3
 
 
Financial liabilities:
 
 
Mortgage notes payable
$ 95,696,000 
$ 98,205,000 
Fair Value Measurements - Additional Information (Detail)
9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]
 
Fair value measurement, description
the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. 
Related Party Transactions - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Related Party Transaction [Line Items]
 
 
 
 
 
Allocations of expenses for general and administrative services
$ 0 
$ 0 
 
 
 
Rental income from related party
0 
14,000,000 
16,308,000 
18,667,000 
 
Tenant reimbursements from related party
0 
1,228,000 
1,406,000 
1,624,000 
 
Account receivable due from related party for tenant reimbursement
0 
 
0 
 
2,275,000 
Net contribution from (distribution to) Ensign
 
 
0 
4,356,000 
 
Allocation Of Corporate Expenses [Member] |
Affiliated Entity [Member]
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Allocations of expenses for general and administrative services
 
 
0 
7,400,000 
 
Rental Income From Affiliate [Member] |
Director [Member]
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Rental income from related party
0 
14,000,000 
16,300,000 
18,700,000 
 
Tenant reimbursements from related party
0 
1,200,000 
1,400,000 
1,600,000 
 
Account receivable due from related party for tenant reimbursement
 
 
 
 
2,300,000 
Centralized Cash Management System [Member] |
Affiliated Entity [Member]
 
 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Net contribution from (distribution to) Ensign
 
 
 
$ 4,400,000 
 
Debt - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended 0 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Sep. 30, 2014
Interest Rate Swap [Member]
Sep. 30, 2014
Interest Rate Swap [Member]
Sep. 30, 2015
Ensign [Member]
Sep. 30, 2015
General Electric Capital Corporation [Member]
May 30, 2014
General Electric Capital Corporation [Member]
Mortgage Notes Payable due May 30, 2017 [Member]
Sep. 30, 2015
General Electric Capital Corporation [Member]
Mortgage Notes Payable due May 30, 2017 [Member]
extension_option
property
Sep. 30, 2015
General Electric Capital Corporation [Member]
Mortgage Notes Payable due May 30, 2017 [Member]
Base Rate [Member]
Sep. 30, 2015
General Electric Capital Corporation [Member]
Mortgage Notes Payable due May 30, 2017 [Member]
Floating Rate [Member]
May 30, 2014
Johnson Land Enterprises, LLC [Member]
Promissory Notes September 30, 2019 [Member]
promissory_note
Oct. 31, 2009
Johnson Land Enterprises, LLC [Member]
Promissory Notes September 30, 2019 [Member]
promissory_note
Oct. 1, 2009
Johnson Land Enterprises, LLC [Member]
Promissory Notes September 30, 2019 [Member]
May 30, 2014
Senior Unsecured Notes [Member]
Sep. 30, 2015
Senior Unsecured Notes [Member]
May 30, 2014
Senior Unsecured Notes [Member]
May 30, 2014
Senior Unsecured Notes [Member]
Ensign [Member]
May 30, 2014
Senior Unsecured Notes [Member]
Minimum [Member]
May 30, 2014
Senior Unsecured Notes [Member]
Maximum [Member]
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
extension_option
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
Minimum [Member]
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
Minimum [Member]
LIBOR [Member]
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
Minimum [Member]
Base Rate [Member]
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
Maximum [Member]
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
Maximum [Member]
LIBOR [Member]
Aug. 5, 2015
Line of Credit [Member]
Unsecured Asset-Based Revolving Credit Facility [Member]
Maximum [Member]
Base Rate [Member]
May 30, 2014
Line of Credit [Member]
Senior Secured Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt outstanding
$ 400,700,000 
 
$ 400,700,000 
 
$ 358,200,000 
 
 
$ 359,512,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, face amount
 
 
 
 
 
 
 
 
 
 
46,500,000 
 
 
 
 
10,000,000.0 
 
 
260,000,000.0 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, interest rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.875% 
5.875% 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from the issuance of senior unsecured notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
260,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net proceeds from issuance of notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
253,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Approximate amount transferred from net proceeds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
220,800,000 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, maturity date
 
 
 
 
 
 
 
 
 
 
May 30, 2017 
 
 
 
 
 
 
Jun. 01, 2021 
 
 
 
 
 
 
 
 
 
 
 
 
 
Frequency of interest payable on notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest on the Notes is payable on June 1 and December 1 of each year, beginning on December 1, 2014. 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, early redeemable date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jun. 01, 2017 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, redemption price, percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable percentage of aggregate principal amount of notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
Percentage of aggregate principal amount of notes outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65.00% 
 
 
 
 
 
 
 
 
 
 
Debt instrument, redemption price, percentage upon change of control
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit facility, borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
300,000,000.0 
 
 
 
 
 
 
150,000,000.0 
Unsecured revolving credit facility
45,000,000 
 
45,000,000 
 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
45,000,000 
 
 
 
 
 
 
 
Number of extension options
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 
 
 
 
 
 
 
 
 
Line of credit facility, extension period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 months 
 
 
 
 
 
 
 
 
Line of credit facility, additional borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
200,000,000 
 
 
 
 
 
 
75,000,000.0 
Debt instrument, basis spread
 
 
 
 
 
 
 
 
 
 
 
0.50% 
3.35% 
 
 
 
 
 
 
 
 
 
 
 
 
1.75% 
0.75% 
 
2.40% 
1.40% 
 
Line of credit facility, commitment fee percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.15% 
 
 
0.25% 
 
 
 
Line of credit facility, facility fee percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.125% 
 
 
0.30% 
 
 
 
Number of properties subject to mortgage loans
 
 
 
 
 
 
 
 
 
 
10 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable
95,696,000 
 
95,696,000 
 
98,205,000 
 
 
 
 
 
95,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advances included in mortgage note payable
 
 
 
 
 
 
 
 
49,200,000 
50,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, interest rate terms
 
 
 
 
 
 
 
 
 
 
This advance bears interest at a floating rate equal to three month LIBOR plus 3.35%, reset monthly and subject to a LIBOR floor of 0.50%, with monthly principal and interest payments based on a 25 year amortization. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument payment amortization period
 
 
 
 
 
 
 
 
 
 
25 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument blended interest rate
 
 
 
 
 
 
 
 
 
 
7.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, number of extension options
 
 
 
 
 
 
 
 
 
 
2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, extension options period
 
 
 
 
 
 
 
 
 
 
12 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Extension fees equal percent on outstanding principal balance
 
 
 
 
 
 
 
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notice period for prepayments without penalty
 
 
 
 
 
 
 
 
 
 
30 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of promissory notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of promissory notes repaid
 
 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
7,221,000 
5,943,000 
19,111,000 
15,722,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of deferred financing costs
500,000 
500,000 
1,600,000 
1,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Write-off of deferred financing costs
 
 
1,208,000 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of debt discount
 
0 
 
51,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on settlement of interest rate swap
 
 
 
 
 
1,700,000 
1,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest payable
$ 5,700,000 
 
$ 5,700,000 
 
$ 1,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity - Additional Information (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Aug. 18, 2015
Sep. 30, 2015
Jun. 30, 2015
Mar. 31, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Aug. 18, 2015
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
Issuance of common stock, net, shares
16,330,000 
 
 
 
 
 
 
 
 
Proceeds from the issuance of common stock, net
$ 163,700 
 
 
 
 
$ 163,466 
$ 0 
 
 
Share price to the public (in usd per share)
 
 
 
 
 
 
 
 
$ 10.50 
Dividends declared per common share (in usd per share)
 
$ 0.16 
$ 0.16 
$ 0.16 
$ 0 
$ 0.48 
$ 0 
$ 0.125 
 
Dividend, payable date
 
 
 
 
 
Apr. 15, 2015 
 
 
 
Dividend, record date
 
 
 
 
 
Mar. 31, 2015 
 
 
 
Over-Allotment Option [Member]
 
 
 
 
 
 
 
 
 
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
Issuance of common stock, net, shares
2,130,000 
 
 
 
 
 
 
 
 
Stock-based Compensation - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended
Sep. 30, 2015
Sep. 30, 2015
Sep. 30, 2014
Jun. 1, 2014
Ensign Employees [Member]
Sep. 30, 2015
Restricted Stock Awards [Member]
Sep. 30, 2015
Restricted Stock Awards [Member]
Sep. 30, 2015
Restricted Stock Awards [Member]
Ensign Employees [Member]
Jun. 30, 2015
Restricted Stock Awards [Member]
Board Of Directors [Member]
Sep. 30, 2015
Restricted Stock Awards [Member]
Board Of Directors [Member]
Dec. 31, 2014
Restricted Stock Awards [Member]
Board Of Directors [Member]
Jun. 30, 2015
Restricted Stock Awards [Member]
Officers and Employees [Member]
Sep. 30, 2015
Restricted Stock Awards [Member]
Officers and Employees [Member]
Sep. 30, 2015
Restricted Stock Awards [Member]
Officers and Employees [Member]
Dec. 31, 2014
Restricted Stock Awards [Member]
Officers and Employees [Member]
Sep. 30, 2015
Restricted Stock Awards [Member]
Employee [Member]
Jun. 30, 2015
June 2015 Award 1 [Member]
Restricted Stock Awards [Member]
Board Of Directors [Member]
Jun. 30, 2015
June 2015 Award 2 [Member]
Restricted Stock Awards [Member]
Board Of Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock award conversion ratio related to the spin-off
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock awards unvested during spin-off (in shares)
 
 
 
 
 
 
207,580 
 
 
 
 
 
 
 
 
 
 
Shares vested
 
 
 
 
 
32,643 
56,410 
 
 
 
 
0 
 
 
 
 
 
Unvested stock awards outstanding (in shares)
 
 
 
 
 
 
102,620 
 
 
 
 
 
 
 
 
 
 
Shares granted
 
 
 
 
 
 
 
 
 
12,270 
235,880 
 
 
142,770 
7,500 
15,680 
13,240 
Shares granted, fair market value (in usd per share)
 
 
 
 
 
 
 
 
 
$ 12.23 
$ 12.76 
 
 
$ 12.23 
$ 10.87 
$ 12.76 
$ 12.67 
Shares granted, vesting period
 
 
 
 
 
 
 
1 year 
 
3 years 
4 years 
 
 
5 years 
4 years 
 
 
Shares granted, vesting period, start date
 
 
 
 
 
 
 
 
May 31, 2015 
 
 
 
May 31, 2015 
 
 
 
 
Shares forfeited
 
 
 
 
 
0 
 
 
 
 
 
 
 
 
 
 
 
Compensation expense associated with grants
$ 435,000 
$ 1,095,000 
$ 0 
 
$ 400,000 
$ 1,100,000 
 
 
 
 
 
 
 
 
 
 
 
Unamortized stock-based compensation expense related to unvested awards
 
 
 
 
$ 4,200,000 
$ 4,200,000 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average remaining vesting period
 
 
 
 
 
3 years 6 months 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Common Share - Reconciliation of Weighted-Average Common Shares Outstanding Used in Calculation of Basic EPS to Diluted EPS (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Numerator:
 
 
 
 
 
Net income (loss)
$ 727 
$ 1,967 
$ 5,031 
$ (8,773)
$ (8,143)
Less: Net income allocated to participating securities
(80)
0 
(209)
0 
 
Numerator for basic and diluted earnings (loss) available to common stockholders
$ 647 
$ 1,967 
$ 4,822 
$ (8,773)
 
Denominator:
 
 
 
 
 
Weighted-average basic common shares outstanding (in usd per share)
39,125 
22,255 
33,916 
22,238 
 
Weighted-average diluted common shares outstanding (in usd per share)
39,125 
22,436 
33,916 
22,238 
 
Earnings (loss) per common share, basic
$ 0.02 
$ 0.09 
$ 0.14 
$ (0.39)
 
Earnings (loss) per common share, diluted
$ 0.02 
$ 0.09 
$ 0.14 
$ (0.39)
 
Commitments and Contingencies - Additional Information (Detail) (Ensign [Member], USD $)
In Millions, unless otherwise specified
0 Months Ended 1 Months Ended
Oct. 1, 2013
Oct. 31, 2013
Ensign [Member]
 
 
Loss Contingencies [Line Items]
 
 
Single lump-sum remittance to the government
 
$ 48.0 
Corporate integrity agreement period
5 years 
 
Concentration of Risk - Additional Information (Detail)
9 Months Ended
Sep. 30, 2015
tenant
Concentration Risk [Line Items]
 
Number of major tenants
1 
Description of highest concentration of properties
The four states in which Ensign leases the highest concentration of properties are California, Texas, Utah and Arizona. 
Ensign [Member]
 
Concentration Risk [Line Items]
 
Number of states where Ensign leases the highest concentration of properties
4 
Skilled Nursing, Assisted Living and Independent Living Facilities [Member] |
Assets Leased to Ensign [Member]
 
Concentration Risk [Line Items]
 
Number of living facilities
105 
Number of units available in living facilities
10,886 
Skilled Nursing, Assisted Living and Independent Living Facilities [Member] |
Assets Leased to Ensign [Member] |
Ensign [Member]
 
Concentration Risk [Line Items]
 
Number of living facilities
94 
Number of units available in living facilities
10,121 
Revenue [Member]
 
Concentration Risk [Line Items]
 
Tenant description
The Company has one major tenant, Ensign 
Summarized Condensed Consolidating and Combining Information - Additional Information (Detail)
9 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2015
Senior Unsecured Notes [Member]
May 30, 2014
Senior Unsecured Notes [Member]
Sep. 30, 2015
Parent Guarantor [Member]
Sep. 30, 2015
CTR Partnership, L.P. [Member]
Sep. 30, 2015
CareTrust Capital Corp. [Member]
Sep. 30, 2015
Combined Subsidiary Guarantors [Member]
Condensed Financial Statements, Captions [Line Items]
 
 
 
 
 
 
 
Debt instrument, interest rate
 
5.875% 
5.875% 
 
 
 
 
Ownership percentage
100.00% 
 
 
 
100.00% 
100.00% 
100.00% 
Date of incorporation
Oct. 29, 2013 
 
 
Oct. 29, 2013 
 
 
 
Date of formation
 
 
 
 
May 08, 2014 
May 09, 2014 
May 08, 2014 
Summarized Condensed Consolidating and Combining Information - Condensed Consolidating Balance Sheets (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Sep. 30, 2014
Dec. 31, 2013
Assets:
 
 
 
 
Real estate investments, net
$ 651,554 
$ 436,215 
 
 
Other real estate investments
8,229 
7,532 
 
 
Cash and cash equivalents
12,098 
25,320 
88,845 
895 
Accounts receivable
2,961 
2,291 
 
 
Prepaid expenses and other assets
337 
809 
 
 
Deferred financing costs, net
9,793 
10,405 
 
 
Investment in subsidiaries
0 
0 
 
 
Intercompany
0 
0 
 
 
Total assets
684,972 
482,572 
 
 
Liabilities and Equity:
 
 
 
 
Senior unsecured notes payable
260,000 
260,000 
 
 
Mortgage notes payable
95,696 
98,205 
 
 
Unsecured revolving credit facility
45,000 
0 
 
 
Accounts payable and accrued liabilities
12,010 
6,959 
 
 
Dividends payable
7,704 
3,946 
 
 
Intercompany
0 
0 
 
 
Total liabilities
420,410 
369,110 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 and 31,251,157 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
477 
313 
 
 
Additional paid-in capital
409,790 
246,041 
 
 
Cumulative distributions in excess of earnings
(145,705)
(132,892)
 
 
Total equity
264,562 
113,462 
 
162,689 
Total liabilities and equity
684,972 
482,572 
 
 
Reportable Legal Entities [Member] |
Parent Guarantor [Member]
 
 
 
 
Assets:
 
 
 
 
Real estate investments, net
0 
0 
 
 
Other real estate investments
0 
0 
 
 
Cash and cash equivalents
0 
0 
0 
0 
Accounts receivable
0 
0 
 
 
Prepaid expenses and other assets
0 
0 
 
 
Deferred financing costs, net
0 
0 
 
 
Investment in subsidiaries
272,545 
117,408 
 
 
Intercompany
0 
0 
 
 
Total assets
272,545 
117,408 
 
 
Liabilities and Equity:
 
 
 
 
Senior unsecured notes payable
0 
0 
 
 
Mortgage notes payable
0 
0 
 
 
Unsecured revolving credit facility
0 
 
 
 
Accounts payable and accrued liabilities
279 
0 
 
 
Dividends payable
7,704 
3,946 
 
 
Intercompany
0 
0 
 
 
Total liabilities
7,983 
3,946 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 and 31,251,157 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
477 
313 
 
 
Additional paid-in capital
409,790 
246,041 
 
 
Cumulative distributions in excess of earnings
(145,705)
(132,892)
 
 
Total equity
264,562 
113,462 
 
 
Total liabilities and equity
272,545 
117,408 
 
 
Reportable Legal Entities [Member] |
Issuers [Member]
 
 
 
 
Assets:
 
 
 
 
Real estate investments, net
257,065 
26,104 
 
 
Other real estate investments
0 
0 
 
 
Cash and cash equivalents
12,098 
25,320 
88,845 
0 
Accounts receivable
217 
0 
 
 
Prepaid expenses and other assets
331 
808 
 
 
Deferred financing costs, net
9,384 
9,808 
 
 
Investment in subsidiaries
357,660 
335,020 
 
 
Intercompany
0 
0 
 
 
Total assets
636,755 
397,060 
 
 
Liabilities and Equity:
 
 
 
 
Senior unsecured notes payable
260,000 
260,000 
 
 
Mortgage notes payable
0 
0 
 
 
Unsecured revolving credit facility
45,000 
 
 
 
Accounts payable and accrued liabilities
8,024 
3,067 
 
 
Dividends payable
0 
0 
 
 
Intercompany
51,186 
16,585 
 
 
Total liabilities
364,210 
279,652 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 and 31,251,157 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
0 
0 
 
 
Additional paid-in capital
274,913 
125,551 
 
 
Cumulative distributions in excess of earnings
(2,368)
(8,143)
 
 
Total equity
272,545 
117,408 
 
 
Total liabilities and equity
636,755 
397,060 
 
 
Reportable Legal Entities [Member] |
Combined Subsidiary Guarantors [Member]
 
 
 
 
Assets:
 
 
 
 
Real estate investments, net
352,816 
366,199 
 
 
Other real estate investments
8,229 
7,532 
 
 
Cash and cash equivalents
0 
0 
0 
895 
Accounts receivable
2,533 
2,170 
 
 
Prepaid expenses and other assets
6 
1 
 
 
Deferred financing costs, net
0 
0 
 
 
Investment in subsidiaries
0 
0 
 
 
Intercompany
47,722 
15,262 
 
 
Total assets
411,306 
391,164 
 
 
Liabilities and Equity:
 
 
 
 
Senior unsecured notes payable
0 
0 
 
 
Mortgage notes payable
0 
557 
 
 
Unsecured revolving credit facility
0 
 
 
 
Accounts payable and accrued liabilities
3,057 
3,308 
 
 
Dividends payable
0 
0 
 
 
Intercompany
0 
0 
 
 
Total liabilities
3,057 
3,865 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 and 31,251,157 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
0 
0 
 
 
Additional paid-in capital
374,660 
374,660 
 
 
Cumulative distributions in excess of earnings
33,589 
12,639 
 
 
Total equity
408,249 
387,299 
 
 
Total liabilities and equity
411,306 
391,164 
 
 
Reportable Legal Entities [Member] |
Combined Non-Guarantor Subsidiaries [Member]
 
 
 
 
Assets:
 
 
 
 
Real estate investments, net
41,673 
43,912 
 
 
Other real estate investments
0 
0 
 
 
Cash and cash equivalents
0 
0 
0 
0 
Accounts receivable
211 
121 
 
 
Prepaid expenses and other assets
0 
0 
 
 
Deferred financing costs, net
409 
597 
 
 
Investment in subsidiaries
0 
0 
 
 
Intercompany
3,464 
1,323 
 
 
Total assets
45,757 
45,953 
 
 
Liabilities and Equity:
 
 
 
 
Senior unsecured notes payable
0 
0 
 
 
Mortgage notes payable
95,696 
97,648 
 
 
Unsecured revolving credit facility
0 
 
 
 
Accounts payable and accrued liabilities
650 
584 
 
 
Dividends payable
0 
0 
 
 
Intercompany
0 
0 
 
 
Total liabilities
96,346 
98,232 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 and 31,251,157 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
0 
0 
 
 
Additional paid-in capital
(52,899)
(52,899)
 
 
Cumulative distributions in excess of earnings
2,310 
620 
 
 
Total equity
(50,589)
(52,279)
 
 
Total liabilities and equity
45,757 
45,953 
 
 
Elimination [Member]
 
 
 
 
Assets:
 
 
 
 
Real estate investments, net
0 
0 
 
 
Other real estate investments
0 
0 
 
 
Cash and cash equivalents
0 
0 
0 
0 
Accounts receivable
0 
0 
 
 
Prepaid expenses and other assets
0 
0 
 
 
Deferred financing costs, net
0 
0 
 
 
Investment in subsidiaries
(630,205)
(452,428)
 
 
Intercompany
(51,186)
(16,585)
 
 
Total assets
(681,391)
(469,013)
 
 
Liabilities and Equity:
 
 
 
 
Senior unsecured notes payable
0 
0 
 
 
Mortgage notes payable
0 
0 
 
 
Unsecured revolving credit facility
0 
 
 
 
Accounts payable and accrued liabilities
0 
0 
 
 
Dividends payable
0 
0 
 
 
Intercompany
(51,186)
(16,585)
 
 
Total liabilities
(51,186)
(16,585)
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized, 47,650,952 and 31,251,157 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
0 
0 
 
 
Additional paid-in capital
(596,674)
(447,312)
 
 
Cumulative distributions in excess of earnings
(33,531)
(5,116)
 
 
Total equity
(630,205)
(452,428)
 
 
Total liabilities and equity
$ (681,391)
$ (469,013)
 
 
Summarized Condensed Consolidating and Combining Information - Condensed Consolidating Balance Sheets - Shares Information (Detail) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Summarized Condensed Consolidating And Combining Information [Abstract]
 
 
Common Stock, Par Value (in usd per share)
$ 0.01 
$ 0.01 
Common Stock, Shares authorized
500,000,000 
500,000,000 
Common Stock, Shares Issued
47,650,952 
31,251,157 
Common Stock, Shares Outstanding
47,650,952 
31,251,157 
Summarized Condensed Consolidating and Combining Information - Condensed Consolidating and Combining Statements of Operations (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Revenues:
 
 
 
 
 
Rental income
$ 15,778 
$ 14,000 
$ 45,869 
$ 37,228 
 
Tenant reimbursements
1,320 
1,228 
3,866 
3,726 
 
Independent living facilities
626 
646 
1,868 
1,856 
 
Interest and other income
261 
10 
716 
10 
 
Total revenues
17,985 
15,884 
52,319 
42,820 
 
Expenses:
 
 
 
 
 
Depreciation and amortization
5,815 
5,362 
17,093 
17,631 
 
Interest expense
7,221 
5,943 
19,111 
15,722 
 
Loss on extinguishment of debt
0 
0 
0 
4,067 
 
Property taxes
1,320 
1,228 
3,866 
3,726 
 
Independent living facilities
610 
586 
1,778 
1,684 
 
General and administrative
2,292 
798 
5,440 
8,710 
 
Total expenses
17,258 
13,917 
47,288 
51,540 
 
Income (loss) in Subsidiary
0 
0 
0 
0 
 
(Loss) income before provision for income taxes
727 
1,967 
5,031 
(8,720)
 
Provision for income taxes
0 
0 
0 
53 
 
Net income (loss)
727 
1,967 
5,031 
(8,773)
(8,143)
Other comprehensive income:
 
 
 
 
 
Unrealized gain on interest rate swap
0 
0 
0 
167 
167 
Reclassification adjustment on interest rate swap
0 
0 
0 
1,661 
1,661 
Comprehensive income (loss)
727 
1,967 
5,031 
(6,945)
 
Reportable Legal Entities [Member] |
Parent Guarantor [Member]
 
 
 
 
 
Revenues:
 
 
 
 
 
Rental income
0 
0 
0 
0 
 
Tenant reimbursements
0 
0 
0 
0 
 
Independent living facilities
0 
0 
0 
0 
 
Interest and other income
0 
0 
0 
0 
 
Total revenues
0 
0 
0 
0 
 
Expenses:
 
 
 
 
 
Depreciation and amortization
0 
0 
0 
0 
 
Interest expense
0 
0 
0 
0 
 
Loss on extinguishment of debt
 
 
 
0 
 
Property taxes
0 
0 
0 
0 
 
Independent living facilities
0 
0 
0 
0 
 
General and administrative
435 
0 
744 
0 
 
Total expenses
435 
0 
744 
0 
 
Income (loss) in Subsidiary
1,162 
1,967 
5,775 
(8,773)
 
(Loss) income before provision for income taxes
 
1,967 
 
(8,773)
 
Provision for income taxes
 
0 
 
0 
 
Net income (loss)
727 
1,967 
5,031 
(8,773)
 
Other comprehensive income:
 
 
 
 
 
Unrealized gain on interest rate swap
 
 
 
0 
 
Reclassification adjustment on interest rate swap
 
 
 
0 
 
Comprehensive income (loss)
 
 
 
(8,773)
 
Reportable Legal Entities [Member] |
Issuers [Member]
 
 
 
 
 
Revenues:
 
 
 
 
 
Rental income
1,778 
0 
3,869 
0 
 
Tenant reimbursements
91 
0 
220 
0 
 
Independent living facilities
0 
0 
0 
0 
 
Interest and other income
19 
10 
19 
10 
 
Total revenues
1,888 
10 
4,108 
10 
 
Expenses:
 
 
 
 
 
Depreciation and amortization
600 
0 
1,308 
0 
 
Interest expense
5,807 
4,482 
14,872 
5,974 
 
Loss on extinguishment of debt
 
 
 
0 
 
Property taxes
91 
0 
220 
0 
 
Independent living facilities
0 
0 
0 
0 
 
General and administrative
1,855 
798 
4,572 
8,710 
 
Total expenses
8,353 
5,280 
20,972 
14,684 
 
Income (loss) in Subsidiary
7,627 
7,237 
22,639 
5,901 
 
(Loss) income before provision for income taxes
 
1,967 
 
(8,773)
 
Provision for income taxes
 
0 
 
0 
 
Net income (loss)
1,162 
1,967 
5,775 
(8,773)
 
Other comprehensive income:
 
 
 
 
 
Unrealized gain on interest rate swap
 
 
 
0 
 
Reclassification adjustment on interest rate swap
 
 
 
0 
 
Comprehensive income (loss)
 
 
 
(8,773)
 
Reportable Legal Entities [Member] |
Combined Subsidiary Guarantors [Member]
 
 
 
 
 
Revenues:
 
 
 
 
 
Rental income
11,275 
11,275 
33,825 
31,062 
 
Tenant reimbursements
1,112 
1,110 
3,297 
3,355 
 
Independent living facilities
626 
646 
1,868 
1,856 
 
Interest and other income
242 
0 
697 
0 
 
Total revenues
13,255 
13,031 
39,687 
36,273 
 
Expenses:
 
 
 
 
 
Depreciation and amortization
4,483 
4,592 
13,546 
15,008 
 
Interest expense
2 
12 
18 
6,295 
 
Loss on extinguishment of debt
 
 
 
4,067 
 
Property taxes
1,112 
1,110 
3,297 
3,355 
 
Independent living facilities
610 
586 
1,778 
1,684 
 
General and administrative
2 
0 
97 
0 
 
Total expenses
6,209 
6,300 
18,736 
30,409 
 
Income (loss) in Subsidiary
0 
0 
0 
0 
 
(Loss) income before provision for income taxes
 
6,731 
 
5,864 
 
Provision for income taxes
 
0 
 
53 
 
Net income (loss)
7,046 
6,731 
20,951 
5,811 
 
Other comprehensive income:
 
 
 
 
 
Unrealized gain on interest rate swap
 
 
 
167 
 
Reclassification adjustment on interest rate swap
 
 
 
1,661 
 
Comprehensive income (loss)
 
 
 
7,639 
 
Reportable Legal Entities [Member] |
Combined Non-Guarantor Subsidiaries [Member]
 
 
 
 
 
Revenues:
 
 
 
 
 
Rental income
2,725 
2,725 
8,175 
6,166 
 
Tenant reimbursements
117 
118 
349 
371 
 
Independent living facilities
0 
0 
0 
0 
 
Interest and other income
0 
0 
0 
0 
 
Total revenues
2,842 
2,843 
8,524 
6,537 
 
Expenses:
 
 
 
 
 
Depreciation and amortization
732 
770 
2,239 
2,623 
 
Interest expense
1,412 
1,449 
4,221 
3,453 
 
Loss on extinguishment of debt
 
 
 
0 
 
Property taxes
117 
118 
349 
371 
 
Independent living facilities
0 
0 
0 
0 
 
General and administrative
0 
0 
27 
0 
 
Total expenses
2,261 
2,337 
6,836 
6,447 
 
Income (loss) in Subsidiary
0 
0 
0 
0 
 
(Loss) income before provision for income taxes
 
506 
 
90 
 
Provision for income taxes
 
0 
 
0 
 
Net income (loss)
581 
506 
1,688 
90 
 
Other comprehensive income:
 
 
 
 
 
Unrealized gain on interest rate swap
 
 
 
0 
 
Reclassification adjustment on interest rate swap
 
 
 
0 
 
Comprehensive income (loss)
 
 
 
90 
 
Elimination [Member]
 
 
 
 
 
Revenues:
 
 
 
 
 
Rental income
0 
0 
0 
0 
 
Tenant reimbursements
0 
0 
0 
0 
 
Independent living facilities
0 
0 
0 
0 
 
Interest and other income
0 
0 
0 
0 
 
Total revenues
0 
0 
0 
0 
 
Expenses:
 
 
 
 
 
Depreciation and amortization
0 
0 
0 
0 
 
Interest expense
0 
0 
0 
0 
 
Loss on extinguishment of debt
 
 
 
0 
 
Property taxes
0 
0 
0 
0 
 
Independent living facilities
0 
0 
0 
0 
 
General and administrative
0 
0 
0 
0 
 
Total expenses
0 
0 
0 
0 
 
Income (loss) in Subsidiary
(8,789)
(9,204)
(28,414)
2,872 
 
(Loss) income before provision for income taxes
 
(9,204)
 
2,872 
 
Provision for income taxes
 
0 
 
0 
 
Net income (loss)
(8,789)
(9,204)
(28,414)
2,872 
 
Other comprehensive income:
 
 
 
 
 
Unrealized gain on interest rate swap
 
 
 
0 
 
Reclassification adjustment on interest rate swap
 
 
 
0 
 
Comprehensive income (loss)
 
 
 
$ 2,872 
 
Summarized Condensed Consolidating and Combining Information - Condensed Consolidating and Combining Statements of Cash Flows (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities:
 
 
Net cash (used in) provided by operating activities
$ 29,035 
$ 17,351 
Cash flows from investing activities:
 
 
Acquisition of real estate
(231,501)
0 
Improvements to real estate
(143)
(254)
Purchases of equipment, furniture and fixtures
(256)
(19,079)
Net proceeds from the sale of vacant land
30 
0 
Distribution from subsidiary
0 
 
Intercompany financing
0 
0 
Net cash used in investing activities
(231,870)
(19,333)
Cash flows from financing activities:
 
 
Proceeds from the issuance of common stock, net
163,466 
0 
Proceeds from the issuance of senior unsecured notes payable
0 
260,000 
Borrowings under unsecured revolving credit facility
45,000 
0 
Borrowings under senior secured revolving credit facility
35,000 
10,000 
Proceeds from the issuance of mortgage notes payable
0 
50,676 
Repayments of borrowings under senior secured revolving credit facility
(35,000)
(88,701)
Payments on the mortgage notes payable
(2,509)
(67,493)
Net-settle adjustment on restricted stock
(145)
0 
Payments on senior secured term loan
0 
(65,624)
Payments of deferred financing costs
(2,113)
(13,282)
Dividends paid on common stock
(14,086)
0 
Net contribution from Ensign
0 
4,356 
Intercompany financing
0 
0 
Net cash provided by financing activities
189,613 
89,932 
Net (decrease) increase in cash and cash equivalents
(13,222)
87,950 
Cash and cash equivalents beginning of period
25,320 
895 
Cash and cash equivalents end of period
12,098 
88,845 
Reportable Legal Entities [Member] |
Parent Guarantor [Member]
 
 
Cash flows from operating activities:
 
 
Net cash (used in) provided by operating activities
(239)
0 
Cash flows from investing activities:
 
 
Acquisition of real estate
0 
 
Improvements to real estate
0 
0 
Purchases of equipment, furniture and fixtures
0 
0 
Net proceeds from the sale of vacant land
0 
 
Distribution from subsidiary
14,086 
 
Intercompany financing
(163,082)
0 
Net cash used in investing activities
(148,996)
0 
Cash flows from financing activities:
 
 
Proceeds from the issuance of common stock, net
163,466 
 
Proceeds from the issuance of senior unsecured notes payable
 
0 
Borrowings under unsecured revolving credit facility
0 
 
Borrowings under senior secured revolving credit facility
0 
0 
Proceeds from the issuance of mortgage notes payable
 
0 
Repayments of borrowings under senior secured revolving credit facility
0 
0 
Payments on the mortgage notes payable
0 
0 
Net-settle adjustment on restricted stock
(145)
 
Payments on senior secured term loan
 
0 
Payments of deferred financing costs
0 
0 
Dividends paid on common stock
(14,086)
 
Net contribution from Ensign
0 
0 
Intercompany financing
0 
0 
Net cash provided by financing activities
149,235 
0 
Net (decrease) increase in cash and cash equivalents
0 
0 
Cash and cash equivalents beginning of period
0 
0 
Cash and cash equivalents end of period
0 
0 
Reportable Legal Entities [Member] |
Issuers [Member]
 
 
Cash flows from operating activities:
 
 
Net cash (used in) provided by operating activities
(7,997)
(12,245)
Cash flows from investing activities:
 
 
Acquisition of real estate
(231,501)
 
Improvements to real estate
(20)
0 
Purchases of equipment, furniture and fixtures
(186)
0 
Net proceeds from the sale of vacant land
0 
 
Distribution from subsidiary
0 
 
Intercompany financing
34,599 
(146,138)
Net cash used in investing activities
(197,108)
(146,138)
Cash flows from financing activities:
 
 
Proceeds from the issuance of common stock, net
0 
 
Proceeds from the issuance of senior unsecured notes payable
 
260,000 
Borrowings under unsecured revolving credit facility
45,000 
 
Borrowings under senior secured revolving credit facility
35,000 
0 
Proceeds from the issuance of mortgage notes payable
 
0 
Repayments of borrowings under senior secured revolving credit facility
(35,000)
0 
Payments on the mortgage notes payable
0 
0 
Net-settle adjustment on restricted stock
   
 
Payments on senior secured term loan
 
0 
Payments of deferred financing costs
(2,113)
(12,772)
Dividends paid on common stock
0 
 
Net contribution from Ensign
(14,086)
0 
Intercompany financing
163,082 
0 
Net cash provided by financing activities
191,883 
247,228 
Net (decrease) increase in cash and cash equivalents
(13,222)
88,845 
Cash and cash equivalents beginning of period
25,320 
0 
Cash and cash equivalents end of period
12,098 
88,845 
Reportable Legal Entities [Member] |
Combined Subsidiary Guarantors [Member]
 
 
Cash flows from operating activities:
 
 
Net cash (used in) provided by operating activities
33,181 
26,839 
Cash flows from investing activities:
 
 
Acquisition of real estate
0 
 
Improvements to real estate
(123)
(254)
Purchases of equipment, furniture and fixtures
(70)
(14,718)
Net proceeds from the sale of vacant land
30 
 
Distribution from subsidiary
0 
 
Intercompany financing
0 
0 
Net cash used in investing activities
(163)
(14,972)
Cash flows from financing activities:
 
 
Proceeds from the issuance of common stock, net
0 
 
Proceeds from the issuance of senior unsecured notes payable
 
0 
Borrowings under unsecured revolving credit facility
0 
 
Borrowings under senior secured revolving credit facility
0 
10,000 
Proceeds from the issuance of mortgage notes payable
 
0 
Repayments of borrowings under senior secured revolving credit facility
0 
(88,701)
Payments on the mortgage notes payable
(558)
(66,880)
Net-settle adjustment on restricted stock
   
 
Payments on senior secured term loan
 
(65,624)
Payments of deferred financing costs
0 
0 
Dividends paid on common stock
0 
 
Net contribution from Ensign
0 
52,385 
Intercompany financing
(32,460)
146,058 
Net cash provided by financing activities
(33,018)
(12,762)
Net (decrease) increase in cash and cash equivalents
0 
(895)
Cash and cash equivalents beginning of period
0 
895 
Cash and cash equivalents end of period
0 
0 
Reportable Legal Entities [Member] |
Combined Non-Guarantor Subsidiaries [Member]
 
 
Cash flows from operating activities:
 
 
Net cash (used in) provided by operating activities
4,090 
2,757 
Cash flows from investing activities:
 
 
Acquisition of real estate
0 
 
Improvements to real estate
0 
0 
Purchases of equipment, furniture and fixtures
0 
(4,361)
Net proceeds from the sale of vacant land
0 
 
Distribution from subsidiary
0 
 
Intercompany financing
0 
0 
Net cash used in investing activities
0 
(4,361)
Cash flows from financing activities:
 
 
Proceeds from the issuance of common stock, net
0 
 
Proceeds from the issuance of senior unsecured notes payable
 
0 
Borrowings under unsecured revolving credit facility
0 
 
Borrowings under senior secured revolving credit facility
0 
0 
Proceeds from the issuance of mortgage notes payable
 
50,676 
Repayments of borrowings under senior secured revolving credit facility
0 
0 
Payments on the mortgage notes payable
(1,951)
(613)
Net-settle adjustment on restricted stock
   
 
Payments on senior secured term loan
 
0 
Payments of deferred financing costs
0 
(510)
Dividends paid on common stock
0 
 
Net contribution from Ensign
0 
(48,029)
Intercompany financing
(2,139)
80 
Net cash provided by financing activities
(4,090)
1,604 
Net (decrease) increase in cash and cash equivalents
0 
0 
Cash and cash equivalents beginning of period
0 
0 
Cash and cash equivalents end of period
0 
0 
Elimination [Member]
 
 
Cash flows from operating activities:
 
 
Net cash (used in) provided by operating activities
0 
0 
Cash flows from investing activities:
 
 
Acquisition of real estate
0 
 
Improvements to real estate
0 
0 
Purchases of equipment, furniture and fixtures
0 
0 
Net proceeds from the sale of vacant land
0 
 
Distribution from subsidiary
(14,086)
 
Intercompany financing
128,483 
146,138 
Net cash used in investing activities
114,397 
146,138 
Cash flows from financing activities:
 
 
Proceeds from the issuance of common stock, net
0 
 
Proceeds from the issuance of senior unsecured notes payable
 
0 
Borrowings under unsecured revolving credit facility
0 
 
Borrowings under senior secured revolving credit facility
0 
0 
Proceeds from the issuance of mortgage notes payable
 
0 
Repayments of borrowings under senior secured revolving credit facility
0 
0 
Payments on the mortgage notes payable
0 
0 
Net-settle adjustment on restricted stock
   
 
Payments on senior secured term loan
 
0 
Payments of deferred financing costs
0 
0 
Dividends paid on common stock
0 
 
Net contribution from Ensign
14,086 
0 
Intercompany financing
(128,483)
(146,138)
Net cash provided by financing activities
(114,397)
(146,138)
Net (decrease) increase in cash and cash equivalents
0 
0 
Cash and cash equivalents beginning of period
0 
0 
Cash and cash equivalents end of period
$ 0 
$ 0 
Subsequent Events - Additional Information (Detail) (USD $)
0 Months Ended 9 Months Ended 0 Months Ended
Aug. 18, 2015
Sep. 30, 2015
Oct. 1, 2015
Subsequent Events [Member]
Liberty Healthcare Portfolio [Member]
renewal_option
facility
Oct. 1, 2015
Subsequent Events [Member]
Liberty Healthcare Portfolio [Member]
facility
Subsequent Event [Line Items]
 
 
 
 
Number of facilities acquired
 
 
 
14 
Acquisition consideration
 
 
$ 177,000,000 
 
Net proceeds from common stock offering
163,000,000 
162,963,000 
 
 
Leases period
 
 
15 years 
 
Leases renewal options
 
 
2 
 
Leases renewal term
 
 
5 years 
 
Anticipated annual lease revenues
 
 
$ 17,000,000