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LEASES
 9 Months Ended
Sep. 30, 2025
Leases [Abstract]  
LEASES LEASES
The Company leases from CareTrust real property associated with 104 independent skilled nursing and senior living facilities used in the Company’s operations under eight “triple-net” master lease agreements (collectively, the Master Leases), which range in terms from 13 to 20 years. At the Company’s option, the Master Leases may be extended for two or three five-year renewal terms beyond the initial term, on the same terms and conditions. The extension of the term of any of the Master Leases is subject to the following conditions: (1) no event of default under any of the Master Leases having occurred and continuing; and (2) the tenants providing timely notice of their intent to renew. The term of the Master Leases is subject to termination prior to the expiration of the current term upon default by the tenants in their obligations, if not cured within any applicable cure periods set forth in the Master Leases. If the Company elects to renew the term of a Master Lease, the renewal will be effective to all, but not less than all, of the leased property then subject to the Master Lease. In the third quarter of 2025, the Company added eight operations to an existing Master Lease and amended the initial term to 15 years. As a result, the total lease liabilities and right-of-use assets increased by $124,761 to reflect the new lease obligations.
The Company does not have the ability to terminate the obligations under a Master Lease prior to its expiration without CareTrust’s consent. If a Master Lease is terminated prior to its expiration other than with CareTrust’s consent, the Company may be liable for damages and incur charges such as continued payment of rent through the end of the lease term as well as maintenance and repair costs for the leased property.
The rent structure under the Master Leases includes a fixed component, subject to annual escalation equal to the lesser of (1) the percentage change in the Consumer Price Index (but not less than zero) or (2) 2.5%. In addition to rent, the Company is required to pay the following: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all facility maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. Total rent expense under the Master Leases was approximately $18,800 and $52,830 for the three and nine months ended September 30, 2025, respectively, and $17,635 and $51,707 for the three and nine months ended September 30, 2024, respectively.
Among other things, under the Master Leases, the Company must maintain compliance with specified financial covenants measured on a quarterly basis, including a portfolio coverage ratio and a minimum rent coverage ratio. The Master Leases also include certain reporting, legal and authorization requirements. The Company is in compliance with requirements of the Master Leases as of September 30, 2025.
The Company leases facilities where its independent subsidiaries operate and certain administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years. Most of these leases contain renewal options, certain of which involve rent increases.
The Company's 102 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases with CareTrust, are operated under 18 separate Master Leases. In the first quarter of 2025, the Company entered into one new Master Lease to add six stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 15 years. The new Master Lease increased the lease liabilities and right-of-use assets by $57,961 to reflect the new lease obligations. In the second quarter of 2025, the Company entered into two new Master Lease to add four stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 15 years. The new Master Lease increased the lease liabilities and right-of-use assets by $52,753 to reflect the new lease obligations. In the third quarter of 2025, the Company entered into one new Master Lease to add two stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 14 years. The new Master Lease increased the lease liabilities and right-of-use assets by $6,833 to reflect the new lease obligations. Under the Master Leases, a default at a single facility could subject one or more of the other facilities covered by the same Master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is an event of default under several of the Company’s leases, master lease agreements and debt financing instruments. In addition, other potential defaults related to an individual facility may cause a default of an entire master lease portfolio and could trigger cross-default provisions in the Company’s outstanding debt arrangements and other leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord.
The components of operating lease expense are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Rent - cost of services(1)
$61,528 $54,792 $175,799 $159,940 
Cost of services(2)
6,787 6,344 19,827 17,763 
General and administrative expense195 179 608 513 
Depreciation and amortization(3)
273 303 687 909 
$68,783 $61,618 $196,921 $179,125 
(1)Rent - cost of services includes deferred rent expense adjustments of $225 and $632 for the three and nine months ended September 30, 2025, respectively, and $205 and $590 for the three and nine months ended September 30, 2024, respectively. Additionally, rent - cost of services includes other variable lease costs such as CPI increases and short-term leases of $4,922 and $13,560 for the three and nine months ended September 30, 2025, respectively, and $3,668 and $10,025 for the three and nine months ended September 30, 2024, respectively.
(2)Cost of services includes variable lease costs consisting of property taxes and insurance.
(3)Depreciation and amortization is related to the amortization of favorable and direct lease costs.
Future minimum lease payments for all third-party leases as of September 30, 2025 are as follows:
YearAmount
2025 (remainder)$58,013 
2026232,010 
2027231,598 
2028230,640 
2029225,219 
2030220,897 
Thereafter1,818,251 
TOTAL LEASE PAYMENTS$3,016,628 
Less: present value adjustment (1,002,865)
PRESENT VALUE OF TOTAL LEASE LIABILITIES$2,013,763 
Less: current lease liabilities(110,817)
LONG-TERM OPERATING LEASE LIABILITIES$1,902,946 
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. As of September 30, 2025, the weighted average remaining lease term is 14.0 years and the weighted average discount rate used to determine the operating lease liabilities is 6.3%.
Subsequent to September 30, 2025, the Company expanded its operations through a long-term lease with the addition of one stand-alone skilled nursing operation. The aggregate impact to the carrying value of lease liabilities and right-of-use assets related to the long-term lease is estimated to be $10,896.
Lessor Activities

The Company leases 36 of its owned real estate properties to third-party operators, of which 32 senior living operations are operated by The Pennant Group, Inc. (Pennant). All of these properties are triple-net leases, whereby the respective tenants are responsible for all costs at the properties including: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all facility maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. The initial terms range from 14 to 16 years.

In the second quarter of 2025, the Company entered into two lease agreements with a separate third-party operator for one skilled nursing and one senior living operation, both with initial lease terms of 15 years. In the third quarter of 2025, the Company entered into one lease agreement with a separate third-party operator for one skilled nursing operation with an initial lease term of 8 years.
Total rental income from all third-party sources for the three and nine months ended September 30, 2025 and 2024 is as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Pennant(1)
$4,084 $3,821 $12,288 $11,465 
Other third-party(2)
2,542 1,863 6,694 5,617 
TOTAL$6,626 $5,684 $18,982 $17,082 
(1) Pennant rental income includes variable rent such as property taxes of $274 and $854 during the three and nine months ended September 30, 2025 and $308 and $940 for the three and nine months ended September 30, 2024.
(2) Other third-party includes rental revenue associated with the Company's subleases to third parties of $1,116 and $3,339 for the three and nine months ended September 30, 2025, respectively, and $1,089 and $3,258 for the three and nine months ended September 30, 2024, respectively.
Future annual rental income for all third-party leases as of September 30, 2025 were as follows:
Year
Amount(1)
2025 (remainder)$6,871 
202626,977 
202726,399 
202826,071 
202925,960 
203024,907 
Thereafter122,114 
TOTAL$259,299 
(1) Annual rental income includes base rents and variable rental income pursuant to existing leases as of September 30, 2025.
LEASES LEASES
The Company leases from CareTrust real property associated with 104 independent skilled nursing and senior living facilities used in the Company’s operations under eight “triple-net” master lease agreements (collectively, the Master Leases), which range in terms from 13 to 20 years. At the Company’s option, the Master Leases may be extended for two or three five-year renewal terms beyond the initial term, on the same terms and conditions. The extension of the term of any of the Master Leases is subject to the following conditions: (1) no event of default under any of the Master Leases having occurred and continuing; and (2) the tenants providing timely notice of their intent to renew. The term of the Master Leases is subject to termination prior to the expiration of the current term upon default by the tenants in their obligations, if not cured within any applicable cure periods set forth in the Master Leases. If the Company elects to renew the term of a Master Lease, the renewal will be effective to all, but not less than all, of the leased property then subject to the Master Lease. In the third quarter of 2025, the Company added eight operations to an existing Master Lease and amended the initial term to 15 years. As a result, the total lease liabilities and right-of-use assets increased by $124,761 to reflect the new lease obligations.
The Company does not have the ability to terminate the obligations under a Master Lease prior to its expiration without CareTrust’s consent. If a Master Lease is terminated prior to its expiration other than with CareTrust’s consent, the Company may be liable for damages and incur charges such as continued payment of rent through the end of the lease term as well as maintenance and repair costs for the leased property.
The rent structure under the Master Leases includes a fixed component, subject to annual escalation equal to the lesser of (1) the percentage change in the Consumer Price Index (but not less than zero) or (2) 2.5%. In addition to rent, the Company is required to pay the following: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all facility maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. Total rent expense under the Master Leases was approximately $18,800 and $52,830 for the three and nine months ended September 30, 2025, respectively, and $17,635 and $51,707 for the three and nine months ended September 30, 2024, respectively.
Among other things, under the Master Leases, the Company must maintain compliance with specified financial covenants measured on a quarterly basis, including a portfolio coverage ratio and a minimum rent coverage ratio. The Master Leases also include certain reporting, legal and authorization requirements. The Company is in compliance with requirements of the Master Leases as of September 30, 2025.
The Company leases facilities where its independent subsidiaries operate and certain administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years. Most of these leases contain renewal options, certain of which involve rent increases.
The Company's 102 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases with CareTrust, are operated under 18 separate Master Leases. In the first quarter of 2025, the Company entered into one new Master Lease to add six stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 15 years. The new Master Lease increased the lease liabilities and right-of-use assets by $57,961 to reflect the new lease obligations. In the second quarter of 2025, the Company entered into two new Master Lease to add four stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 15 years. The new Master Lease increased the lease liabilities and right-of-use assets by $52,753 to reflect the new lease obligations. In the third quarter of 2025, the Company entered into one new Master Lease to add two stand-alone skilled nursing facilities operated by the Company's independent subsidiaries with an initial term of 14 years. The new Master Lease increased the lease liabilities and right-of-use assets by $6,833 to reflect the new lease obligations. Under the Master Leases, a default at a single facility could subject one or more of the other facilities covered by the same Master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is an event of default under several of the Company’s leases, master lease agreements and debt financing instruments. In addition, other potential defaults related to an individual facility may cause a default of an entire master lease portfolio and could trigger cross-default provisions in the Company’s outstanding debt arrangements and other leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the lease without the consent of the landlord.
The components of operating lease expense are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Rent - cost of services(1)
$61,528 $54,792 $175,799 $159,940 
Cost of services(2)
6,787 6,344 19,827 17,763 
General and administrative expense195 179 608 513 
Depreciation and amortization(3)
273 303 687 909 
$68,783 $61,618 $196,921 $179,125 
(1)Rent - cost of services includes deferred rent expense adjustments of $225 and $632 for the three and nine months ended September 30, 2025, respectively, and $205 and $590 for the three and nine months ended September 30, 2024, respectively. Additionally, rent - cost of services includes other variable lease costs such as CPI increases and short-term leases of $4,922 and $13,560 for the three and nine months ended September 30, 2025, respectively, and $3,668 and $10,025 for the three and nine months ended September 30, 2024, respectively.
(2)Cost of services includes variable lease costs consisting of property taxes and insurance.
(3)Depreciation and amortization is related to the amortization of favorable and direct lease costs.
Future minimum lease payments for all third-party leases as of September 30, 2025 are as follows:
YearAmount
2025 (remainder)$58,013 
2026232,010 
2027231,598 
2028230,640 
2029225,219 
2030220,897 
Thereafter1,818,251 
TOTAL LEASE PAYMENTS$3,016,628 
Less: present value adjustment (1,002,865)
PRESENT VALUE OF TOTAL LEASE LIABILITIES$2,013,763 
Less: current lease liabilities(110,817)
LONG-TERM OPERATING LEASE LIABILITIES$1,902,946 
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. As of September 30, 2025, the weighted average remaining lease term is 14.0 years and the weighted average discount rate used to determine the operating lease liabilities is 6.3%.
Subsequent to September 30, 2025, the Company expanded its operations through a long-term lease with the addition of one stand-alone skilled nursing operation. The aggregate impact to the carrying value of lease liabilities and right-of-use assets related to the long-term lease is estimated to be $10,896.
Lessor Activities

The Company leases 36 of its owned real estate properties to third-party operators, of which 32 senior living operations are operated by The Pennant Group, Inc. (Pennant). All of these properties are triple-net leases, whereby the respective tenants are responsible for all costs at the properties including: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all facility maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. The initial terms range from 14 to 16 years.

In the second quarter of 2025, the Company entered into two lease agreements with a separate third-party operator for one skilled nursing and one senior living operation, both with initial lease terms of 15 years. In the third quarter of 2025, the Company entered into one lease agreement with a separate third-party operator for one skilled nursing operation with an initial lease term of 8 years.
Total rental income from all third-party sources for the three and nine months ended September 30, 2025 and 2024 is as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Pennant(1)
$4,084 $3,821 $12,288 $11,465 
Other third-party(2)
2,542 1,863 6,694 5,617 
TOTAL$6,626 $5,684 $18,982 $17,082 
(1) Pennant rental income includes variable rent such as property taxes of $274 and $854 during the three and nine months ended September 30, 2025 and $308 and $940 for the three and nine months ended September 30, 2024.
(2) Other third-party includes rental revenue associated with the Company's subleases to third parties of $1,116 and $3,339 for the three and nine months ended September 30, 2025, respectively, and $1,089 and $3,258 for the three and nine months ended September 30, 2024, respectively.
Future annual rental income for all third-party leases as of September 30, 2025 were as follows:
Year
Amount(1)
2025 (remainder)$6,871 
202626,977 
202726,399 
202826,071 
202925,960 
203024,907 
Thereafter122,114 
TOTAL$259,299 
(1) Annual rental income includes base rents and variable rental income pursuant to existing leases as of September 30, 2025.