DEF 14A of CareTrust REIT, Inc., Mar 8, 2024

DEF 14A of CareTrust REIT, Inc.

Filed Mar 8, 2024 · FY20230001628280-24-009965

Open on EDGAR

  1. PROPOSAL 1: ELECTION OF DIRECTORS

    PROPOSAL 1: ELECTION OF DIRECTORS

  2. General

    General Our Board of Directors is currently comprised of five directors, with each director serving a term that continues until the Annual Meeting and until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. As further described below, our Board of Directors has selected five director nominees for election at the Annual Meeting. Our Board of Directors selected Ms. Diana M. Laing, Ms. Anne Olson, Mr. Spencer G. Plumb, Mr. David M. Sedgwick and Ms. Careina D. Williams as its nominees for election to our Board at the Annual Meeting. All of our director nominees were previously elected to serve on our Board of Directors by our stockholders. If all of the director nominees are elected to the Board at the Annual Meeting, our Board of Directors will continue to consist of five directors immediately following the Annual Meeting. Each of the nominees standing for election has consented to being named in this Proxy Statement and to serve as a director if elected. We have no reason to believe that any nominee will be unable or unwilling for good cause to serve if elected. In the event any nominee is unable for any reason or unwilling for good cause to serve at the time of the Annual Meeting, the persons who are designated as proxy holders may exercise discretionary authority to vote for a substitute nominee selected by our Board of Directors or our Board of Directors may reduce the number of directors on the Board.

  3. Director Nominees

    Director Nominees Set forth below is biographical information about each of our director nominees. Such information is current as of the date of this Proxy Statement. The information presented below for each director nominee includes the specific experience, qualifications, attributes and skills that led us to the conclusion that such individual should be nominated to serve on our Board of Directors in light of our business. Three members of our Board of Directors, including our Chair of the Board, are female (Mses. Laing, Olson and Williams). In addition, one of our directors, Ms. Williams, self-identifies as African American.

  4. Director Nominees

    | Name | Age | Director Since | | Diana M. Laing, Chair of the Board | 69 | 2019 | | Anne Olson | 47 | 2022 | | Spencer G. Plumb | 49 | 2017 | | David M. Sedgwick | 48 | 2022 | | Careina D. Williams | 48 | 2022 |

  5. Director Nominees

    Diana M. Laing has served as a member of our Board of Directors since 2019, as our lead independent director from January 2022 to June 2022 and as Chair of the Board since June 2022. Ms. Laing was the Interim Executive Vice President (from October 2018 until May 2019) and Interim Chief Financial Officer (from November 2018 until May 2019) of Alexander & Baldwin, Inc. (NYSE:ALEX), a Hawaii-based publicly-traded commercial real estate investment trust (“REIT”), which completed its conversion to REIT status as of the 2017 tax year. From 2014 until June 2018, Ms. Laing was the Chief Financial Officer of American Homes 4 Rent (NYSE:AMH), a publicly-traded REIT focused on the acquisition, renovation, leasing and operation of single-family homes as rental properties. From May 2004 until its merger with Parkway Properties of Orlando, Florida in December 2013, Ms. Laing was the Chief Financial Officer and Secretary of Thomas Properties Group, Inc., a publicly traded real estate operating company and institutional investment manager focused on the development, acquisition, operation and ownership of commercial properties throughout the United States. Ms. Laing served as Chief Financial Officer of each of Triple Net Properties, LLC from January through April 2004, New Pacific Realty Corporation from December 2001 to December 2003, and Firstsource Corp. from July 2000 to May 2001. From August 1996 to July 2000, Ms. Laing was Executive Vice President, Chief Financial Officer and Treasurer of Arden Realty, Inc., a publicly traded REIT which was the largest owner and operator of commercial office properties in Southern California. From 1982 to August 1996, she served in various capacities, including Executive Vice President, Chief Financial Officer and Treasurer of Southwest Property Trust, Inc., a publicly traded multi-family REIT which owned multi-family properties throughout the southwestern United States. Ms. Laing began her career as an auditor with Arthur Andersen & Co. She currently serves as an independent director on the board of directors of Alexander & Baldwin, Inc. (NYSE:ALEX) and Host Hotels & Resorts (Nasdaq:HST). Ms. Laing also previously served as an independent director on the board of directors of The Macerich Company (NYSE:MAC) and Spirit Realty Capital, Inc. (NYSE: SRC). She is a member of the board of directors of the RREEF Core Plus Industrial Fund and a member of the board of trustees of the Oklahoma State University Foundation. Ms. Laing’s executive leadership experience in multiple REITs and other real estate companies, network of relationships with other real estate professionals, and extensive experience with public companies in accounting, financial reporting, capital markets and finance, qualify her to serve on our Board of Directors. Anne Olson has served as a member of our Board of Directors since 2022. Ms. Olson currently serves as President and Chief Executive Officer of Centerspace (NYSE:CSR), a multifamily-focused real estate investment trust, and previously served as Centerspace’s Chief Operating Officer and Secretary from 2018 to March 2023 and as its Executive Vice President, General Counsel and Secretary from 2017 to 2018. From 2011 to 2017, Ms. Olson was in the private practice of law, most recently as a partner with the law firm of Dorsey & Whitney LLP in its Real Estate Practice Group, where her practice focused on real estate development and investments for REITs, private equity funds, and national developers and owners. From 2006 to 2011 she served as Director of Investment Operations and in-house counsel for Welsh Companies, LLC and its affiliates, the predecessor to Welsh Property Trust and WPT Industrial REIT. Ms. Olson is an active member of the Urban Land Institute and the National Multifamily Housing Council, where she is Vice Chair of its Innovation Committee. She holds a B.A. in English from Drake University, and a J.D. from Drake University Law School. Ms. Olson’s executive leadership experience in a growing public REIT, expertise in complex real estate transactions, proficiency in corporate governance matters, legal experience working in and advising public and other companies, and general real estate knowledge and experience qualify her to serve on our Board of Directors. Spencer G. Plumb has served as a member of our Board of Directors since 2017. Mr. Plumb serves as President and Chief Executive Officer of Sabin Holdings, LLC, a global real estate platform launched in 2016. Prior to Sabin Holdings, LLC, Mr. Plumb co-founded Excel Trust, Inc. (formerly NYSE:EXL) in 2009 and served as its President and Chief Operating Officer and as a member of its Board of Directors. Excel Trust, Inc. was acquired and taken private by Blackstone Property Partners in July 2015. In addition, Mr. Plumb has held various positions over his career with other public and private companies, including Excel Realty Holdings, Price Legacy Corporation, Excel Legacy Corporation, New Plan Excel Realty Trust, Excel Realty Trust, and Excel Interfinancial Corporation. Mr. Plumb also serves on the board of directors of The Sabin Children’s Foundation, whose mission is to relieve the distress of children around the world. Mr. Plumb received a B.A. in Economics from Brigham Young University. Mr. Plumb’s leadership experience, his executive leadership experience in a REIT, and general real estate and REIT background qualify him to serve on our Board of Directors. Careina D. Williams has served as a member of our Board of Directors since 2022. Ms. Williams had served as a Principal at Sundance Bay, a real estate private equity firm that specializes in multifamily investing, net lease investing and real estate debt lending nationwide, from May 2020 to September 2023. Ms. Williams served as a member of Sundance Bay’s Advisory Board from 2018 to 2020 prior to joining the firm as a Principal. In addition, from 2017 to 2018, Ms. Williams served as Chief Operating Officer of Zero G Capital Management LLC, an equity hedge fund, and from 2012 to 2017, Ms. Williams served as Principal, Acquisitions and Asset Management at Artemis Real Estate Partners, a real estate investment manager with a focus on multifamily, industrial, office, retail, hospitality, senior housing and medical office. Prior to her role at Artemis Real Estate Partners, from 2003 to 2012, Ms. Williams served as a Principal, Investments at Capri Capital Partners, LLC. Ms. Williams serves as a Trustee and Vice-Chair of the Investments & Endowment Committee of the United Church of Christ, and previously served as a Trustee and Chair of the Finance & Endowment Committee for Peoples Congregational Church of the United Church of Christ. Ms. Williams is also a member of the Urban Land Institute Commercial & Retail Development Council (Silver). Ms. Williams received an A.B. in Economics from Harvard University and an M.B.A. from Harvard Business School. Ms. Williams’ expertise in credit analysis, her network of relationships within the real estate industry, her experience in underwriting, financing, acquiring and managing real estate across a broad array of sub-classes, and her experience with environmental and sustainability issues in real estate qualify her to serve on our Board of Directors.

  6. Director Nominees

    David M. Sedgwick has served as a member of our board since June 2022, as our Chief Executive Officer since January 2022, and as our President since February 2021. He previously served as our Chief Operating Officer from August 2018 through 2021, and as our Vice President-Operations from our formation in 2014 through August 2018. He is a licensed nursing home administrator and, prior to joining CareTrust REIT, served in several key leadership roles at Ensign since 2001. During 2013, he supported Ensign’s skilled nursing operations in Colorado. During 2012, he served as President of Ensign’s Maryland-based urgent care franchise venture, Doctors Express. From 2007 to 2012, Mr. Sedgwick served as Ensign’s President of Facility Services and Chief Human Capital Officer and was responsible for overall facility support services, new acquisition integration, and Ensign University, which included Ensign’s facility Chief Executive Officer recruiting and training program. From 2002 to 2007, he operated three Ensign skilled nursing facilities in two states. Mr. Sedgwick holds a B.S. in Accounting from Brigham Young University and an M.B.A. from the University of Southern California. Mr. Sedgwick’s extensive operating experience and executive experience with CareTrust since our founding brings to the Board a deep understanding of our business and operations, critical knowledge of our properties and key tenants, substantial industry contacts and knowledge and understanding of the healthcare business in general. Our Board of Directors recommends that the stockholders vote FOR the election of each of the five director nominees listed above. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR each such director nominee.

  7. Role of the Compensation Consultant

    Role of the Compensation Consultant Pursuant to its charter, the compensation committee is authorized to retain or obtain the advice of compensation consultants, outside counsel, experts or other advisors to advise the compensation committee with respect to amounts or forms of executive compensation or in carrying out its other responsibilities. In 2020, the compensation committee retained Pearl Meyer as its independent compensation consultant to provide a full review of the executive compensation program for 2021. In 2022, the compensation committee again retained Pearl Meyer to provide a review of the executive compensation program. The results of this review informed changes to the program approved in late 2022 and executive compensation decisions for fiscal 2023. Since 2021, the compensation committee has also retained Infinite Equity as an additional independent compensation consultant to provide ongoing design, valuation, and accounting support for our relative TSR performance-based equity awards that were first introduced into our executive compensation program for 2021. The compensation committee is directly responsible for the appointment, compensation and oversight of Pearl Meyer’s and Infinite Equity’s work. The compensation committee has assessed the independence of Pearl Meyer and Infinite Equity pursuant to applicable SEC and NYSE rules and concluded that no conflict of interest existed with respect to Pearl Meyer’s or Infinite Equity’s services to the compensation committee. Neither Pearl Meyer nor Infinite Equity has performed any services for us, except for compensation-related services on behalf of, and as instructed by, the compensation committee. In connection with Pearl Meyer’s engagement in 2020, Pearl Meyer provided advice on a newly constructed peer group described below that was approved in the beginning of 2021 and recommended changes to the design and structure of our overall executive compensation program, including the addition of relative TSR performance-based equity awards. In connection with Pearl Meyer’s engagement in 2022, Pearl Meyer conducted an independent review of our executive compensation program to provide a competitive reference on pay levels and performance alignment for our fiscal 2023 executive compensation program. As part of this review, Pearl Meyer analyzed the salaries, target bonus opportunities, target cash compensation opportunities, equity award opportunities and targeted total direct compensation paid by our peer group of companies described below. The compensation committee relied on this prior review in making its executive compensation decisions for fiscal 2023, including with respect to the base salary increases and annual cash incentive bonus targets established for 2023 as described below.

  8. Peer Companies

    Peer Companies At the end of 2020, the compensation committee engaged Pearl Meyer to provide advice on a newly constructed peer group that was used by Pearl Meyer in its independent review of our executive compensation program. In constructing the peer group, Pearl Meyer and the compensation committee determined to select (1) publicly traded REITs that had greater overlap with the peer companies used by proxy advisory firms to evaluate our executive compensation program, and (2) publicly traded REITs that had a comparable market capitalization to us as of August 1, 2020. In connection with Pearl Meyer’s engagement in 2022, the compensation committee selected the same group of peer companies that were selected at the end of 2020, which comprised the following companies (the “Peer Group”):

  9. Peer Group

    Peer Group Agree Realty Corporation Centerspace Community Healthcare Trust Incorporated EPR Properties Four Corners Property Trust, Inc. Healthcare Realty Trust Incorporated* LTC Properties, Inc. National Health Investors, Inc. Omega Healthcare Investors, Inc. Pebblebrook Hotel Trust Physicians Realty Trust Piedmont Office Realty Trust, Inc. Retail Opportunity Investments Corp. Sabra Health Care REIT, Inc. Terreno Realty Corporation Washington Real Estate Investment Trust *Prior to July 2022, the peer group also included Healthcare Trust of America, Inc., which merged with Healthcare Realty Trust Incorporated. While the compensation committee does not rigidly adhere to a peer-based benchmarking strategy in setting compensation amounts for our named executive officers, the compensation committee’s practice is to set our named executive officers’ total targeted direct compensation (which is base salary + target annual cash incentive + target grant date value of long-term equity awards) with reference to approximately the 50th percentile of total targeted direct compensation provided by our peer group companies to their similarly situated executives, which amount may be adjusted above or below this level based on factors the compensation committee determines appropriate for the particular executive. The compensation committee does not currently believe a comprehensive executive compensation review needs to be performed on an annual basis and intends to engage a compensation consultant to perform a comprehensive review of our executive compensation program approximately every two years, or more frequently if it is considering any structural changes to our executive compensation program. Consistent with this intent, the compensation committee engaged Pearl Meyer to update its executive compensation review in late 2022 for the purpose of informing executive compensation decisions with respect to 2023, including the annual equity awards granted in December 2022 for 2023, as further described below.

  10. 2023 Annual Cash Incentive Awards

    2023 Annual Cash Incentive Awards In General. We provide our named executive officers with a performance-based annual cash incentive compensation opportunity to motivate and reward the executives for their achievement of annual financial and operational goals and other strategic objectives measured over the year. We believe the annual cash incentive opportunity helps further our compensation objective of aligning executive compensation with achievement of the Company’s corporate strategies, business objectives and the creation of long-term value for our stockholders. Design. Based on input from Pearl Meyer, the compensation committee redesigned the structure of the annual cash incentive program for 2021 to more closely reflect peer group practices, and the compensation committee has continued this program structure in subsequent years. The principal change to the named executive officers’ cash incentive opportunity under this new program structure was that the compensation committee determined to approve a predetermined target bonus amount for each named executive officer, rather than having percentage values for each performance metric that are multiplied by an executive’s base salary in order to determine the bonus payout. We believe that having a predetermined target bonus amount, coupled with upside and downside leverage, is more consistent with the practices of our peer group based on Pearl Meyer’s study. As further described below, for 2023 the compensation committee retained the key incentive metrics used for annual cash incentive opportunities in prior years. The compensation committee believes that these incentive metrics have served to effectively incentivize our named executive officers’ performance. The compensation committee also determined to continue use of a separate ESG Incentives metric for our President and Chief Executive Officer. Incentive Targets. For 2023, the compensation committee established the following annual cash incentive bonus targets for each named executive officer.

  11. 2023 Annual Cash Incentive Awards

    | Named Executive Officer | Annual Cash Incentive Bonus Target | | David M. Sedgwick | $1,200,000 | | William M. Wagner | $555,660 | | James B. Callister | $500,000 |

  12. 2023 Annual Cash Incentive Awards

    Mr. Sedgwick’s annual cash incentive bonus target was set at 150% of his annual base salary, which increased slightly from the percentage of annual base salary applicable to his annual cash incentive bonus target for 2022 to adjust his total cash compensation level closer to peer comparison levels for similarly situated executives following Mr. Sedgwick’s recent promotion to President and Chief Executive Officer and taking into account his additional year of experience in that role. For Mr. Wagner and Mr. Callister, the above annual cash incentive bonus targets represented 100% of each named executive officer’s annual base salary, which corresponded to the same percentage of annual base salary applicable to their respective annual cash incentive bonus target for 2022. Incentive Metrics. Under our annual cash incentive plan design for 2023, the compensation committee selected the following performance measures to evaluate executive incentive performance: (1) NFFO per share for 2023; (2) capital deployment; (3) average net debt to normalized run rate EBITDA calculated at each quarter end during 2023; and (4) for our President and Chief Executive Officer, certain ESG Incentives as further described below. FFO, as defined by the National Association of Real Estate Investment Trusts (“Nareit”), is an important supplemental measure not computed in accordance with GAAP and measures operating performance for a REIT. FFO is defined by Nareit as net income computed in accordance with GAAP, excluding gains or losses from real estate dispositions, real estate depreciation and amortization and impairment charges, and adjustments for unconsolidated partnerships and joint ventures. We compute FFO in accordance with Nareit’s definition. NFFO adjusts FFO for certain revenue and expense items that we do not believe are indicative of our ongoing operating results, such as provision for loan losses, provision for doubtful accounts and lease restructuring, effect of the senior unsecured notes payable redemption, recovery of previously reversed rent, lease termination revenue, accelerated amortization of stock-based compensation, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and property operating expenses. Normalized EBITDA represents net income before interest expense (including amortization of deferred financing costs) and amortization of stock-based compensation, and depreciation and amortization, adjusted for certain income and expense items we do not believe are indicative of our ongoing operating results, such as real estate impairment charges, provision for loan losses, provision for doubtful accounts and lease restructuring, recovery of previously reversed rent, lease termination revenue, property operating expenses, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and gains or losses from dispositions of real estate or other real estate. These performance measures are non-GAAP financial measures for which net income is the most directly comparable financial measure reported under GAAP. The compensation committee chose NFFO per share as a performance metric because the committee believes it is a common performance metric used by investors to evaluate the performance of REITs, and the committee believes that motivating the executives to drive growth in our NFFO per share performance will in turn benefit stockholders in the form of increased stockholder returns. For 2023, the compensation committee determined the following threshold, target and high performance levels for our NFFO per share: NFFO per share of $1.314 to earn the threshold bonus amount, $1.349 to earn the target bonus amount, and $1.374 to earn the high bonus amount payable with respect to this performance measure. The NFFO per share performance levels set by the compensation committee were lower than the NFFO per share levels established for 2022 to reflect expected lower revenue levels during 2023 compared to 2022 due to expectations for a continued challenging operating environment caused by, among other things, a delayed recovery in tenant occupancy levels in connection with the COVID-19 pandemic, ensuing labor shortages and lower Provider Relief Funds for healthcare providers under the Public Health Emergency than expected. The compensation committee determined a target level for our 2023 NFFO per share performance that represented business plan expectations for 2023, including the lower revenue expectations as well as expected investment and disposition activity, including the continued execution of the Company’s previously announced repositioning plan. The threshold NFFO per share performance level for 2023 reflected a potential higher risk of rental revenue loss to account for, among other things, rent collection at levels lower than expected as well as possible re-tenanting or rent deferral actions for certain tenants. Conversely, the high NFFO per share performance level was set at a level that could be achieved only if our 2023 NFFO per share exceeded our expectations. The compensation committee believed the target NFFO per share level would require the named executive officers to successfully execute our business plan during 2023, while it believed the maximum bonus opportunity for the NFFO per share performance metric was a stretch goal that was meant to be difficult to attain. The compensation committee determined that the lower NFFO per share metrics for each of the threshold, target and high levels compared to prior years was appropriate in light of the continuing challenges facing the Company that were expected to continue in 2023 given the ongoing risk that the COVID-19 pandemic and prolonged recovery continued to present. The compensation committee chose our capital deployment and our 2023 average quarterly net debt to normalized run rate EBITDA ratio as performance metrics because it wanted to motivate the executives to grow our portfolio and pursue new tenant relationships with quality operators to further diversify our revenue stream, while at the same time motivating the executives to responsibly manage our leverage ratios and our overall capital structure.

  13. 2023 Annual Cash Incentive Awards

    For 2023, the compensation committee required capital deployment of $100 million to earn the threshold bonus amount, $150 million to earn the target bonus amount, and $200 million to earn the high bonus amount payable with respect to this performance measure. Additionally, a super high performance measure was included as part of the capital deployment objective, which required capital deployment of $400 million to earn the super high bonus amount payable with respect to this performance measure. With respect to our leverage levels, the compensation committee required a 2023 average quarterly ratio of net debt to normalized run rate EBITDA to be 4.50x to earn the threshold bonus amount, 4.25x to earn the target bonus amount, and 4.00x to earn the high bonus amount payable with respect to this performance measure. The capital deployment targets were higher compared to 2022, reflecting cautious optimism about the Company’s chances to grow through acquisitions in 2023 following the challenging industry dynamics for investments that existed during the height of the COVID-19 pandemic and into 2022. The capital deployment target was held constant at the super high amount compared to 2022 to reward the named executive officers if investment activity in 2023 significantly exceeded expectations. Finally, the net debt-to-normalized EBITDA ratio targets were set slightly higher than 2022 levels to reflect the expected use of more debt to finance investments in order to bring our net debt-to-normalized EBITDA ratio to our stated range of 4.0x to 5.0x. As noted above, we believe these capital deployment and ratio of net debt to normalized EBITDA targets operated in tandem to motivate the executives to grow and diversify our portfolio while at the same time motivating them to responsibly manage our capital structure and use of leverage. The following table illustrates the performance metrics set forth above for the named executive officers at the threshold, target, high and super high bonus levels.

  14. 2023 Annual Cash Incentive Awards

    | Performance Measure | Threshold | Target | High | Super High | | NFFO per share | $1.314 | $1.349 | $1.374 | $— | | Capital Deployment (in millions) | $100 | $150 | $200 | $400 | | Average Quarterly Net Debt to Normalized Run Rate EBITDA | 4.50x | 4.25x | 4.0x | — |

  15. 2023 Annual Cash Incentive Awards

    In addition to the performance metrics above, the compensation committee decided to continue the ESG Incentives for our President and Chief Executive Officer to reinforce the Company’s commitment to achieving its ESG targets. The ESG Incentives that our President and Chief Executive Officer was required to achieve to receive the ESG Incentives amount at either a threshold, target or high level were as follows for 2023: •ESG Incentives Threshold: Track 100 facilities’ utilities expenditures. •ESG Incentives Target: Meet threshold requirement above plus (i) conduct a Tenant ESG survey and (ii) provide and begin tracking community service by employees. •ESG Incentives High: Meet target requirement above plus begin tracking climate risk by properties. The following table illustrates the weighting of each performance measure for each named executive officer at the threshold, target, high and super high bonus levels.

  16. Performance Measure Weighting

    | Name | Level | NFFO per share | Capital Deployment | Net Debt to Normalized Run Rate EBITDA | ESG Incentives | Total | | David M. Sedgwick | Threshold | 25% | 15% | 20% | 5% | 65% | | | Target | 40% | 25% | 27.5% | 7.5% | 100% | | | High | 55% | 35% | 35% | 10% | 135% | | | Super High | 55% | 75% | 35% | 10% | 175% | | William M. Wagner | Threshold | 35% | 10% | 20% | —% | 65% | | | Target | 50% | 25% | 25% | —% | 100% | | | High | 65% | 40% | 30% | —% | 135% | | | Super High | 65% | 75% | 30% | —% | 170% | | James B. Callister | Threshold | 30% | 25% | 10% | —% | 65% | | | Target | 40% | 40% | 20% | —% | 100% | | | High | 50% | 55% | 30% | —% | 135% | | | Super High | 50% | 100% | 30% | —% | 180% |

  17. Performance Measure Weighting

    The actual annual cash incentive earned by each named executive officer is determined by the sum of the percentage values for each metric at the level achieved for that metric multiplied by each executive’s target bonus amount. If the actual performance level achieved for any metric falls below the threshold level, no percentage is awarded for that metric. If the actual performance is above the high level, high level is awarded for that metric (except for capital deployment, where there is a super high opportunity). If actual performance is in between, the percentage for each metric is calculated using straight line linear interpolation. On February 1, 2024, the compensation committee assessed performance based on actual results achieved for 2023. The compensation committee determined that the Company achieved a 2023 NFFO per share amount of $1.408, 2023 capital deployment of approximately $288.3 million, and a 2023 average quarterly net debt to normalized run rate EBITDA ratio of 2.82x. Based on the Company’s accomplishments with respect to the sustainability initiatives required by the ESG Incentives described above, the SCR committee determined that each of the ESG Initiatives were met and the compensation committee determined that this performance metric was met at the high performance level with respect to the annual cash incentive award for our President and Chief Executive Officer. The following table illustrates the percentage value actually achieved for each performance metric based on our 2023 performance.

  18. Performance Measure Weighting

    | Total Annual Cash Incentive Award | Threshold | Target | High | Super High | Actual | | David M. Sedgwick | 65% | 100% | 135% | 175% | 152.7% | | William M. Wagner | 65% | 100% | 135% | 170% | 150.5% | | James B. Callister | 65% | 100% | 135% | 180% | 154.9% |

  19. Performance Measure Weighting

    | Named Executive Officer | Actual Performance | Target Bonus | Cash Incentive Award | | David M. Sedgwick | 152.7% | $1,200,000 | $1,832,030 | | William M. Wagner | 150.5% | $555,660 | $836,034 | | James B. Callister | 154.9% | $500,000 | $774,389 |

  20. Long-Term Equity Incentive Awards Granted in 2023

    Long-Term Equity Incentive Awards Granted in 2023 In General. The compensation committee believes that stock-based incentives align the interests of our named executive officers with the interests of our stockholders, and that the long-term compensation of the named executive officers should be linked to the value provided to our stockholders. Our stock-based incentives are structured in the form of full value stock awards payable in shares of our Common Stock that may increase or decrease in value over the multi-year vesting period. Our stock awards are designed to reward long-term performance and generally consist of an equal number of time- and performance-based vesting awards. We also use stock-based compensation as a retention tool. Because the stock awards generally vest over a multi-year period subject to continued employment with the Company (and subject to the achievement of the applicable performance-vesting conditions), these awards provide our executives with an ongoing incentive to continue their employment with the Company and to maximize stockholder value. As part of the design changes for our 2021 equity awards, we decided to move away from our prior practice of determining the amount of each named executive officer’s long-term equity award based on the achievement of the annual incentive plan performance metrics in the prior year. Instead, based on the advice of Pearl Meyer, beginning in 2021 we switched to a practice of awarding each named executive officer a target grant date value of long-term equity awards that is set at a level with reference to the 50th percentile of our Peer Group companies to their similarly situated executives, which, consistent with our named executive officers’ total targeted direct compensation, may be adjusted above or below this level based on factors the compensation committee determines appropriate for the particular executive. In addition, beginning with our equity grants made in December 2021, we changed the timing of our annual equity grant schedule to late in the fourth quarter of each calendar year. We believe making annual equity awards in the fourth quarter of each calendar year (instead of during the first quarter of each calendar year) better allows us to take our performance for the calendar year into account when determining the level of equity awards to be granted, while also ensuring that the applicable service period for those awards commences after their grant date. The annual equity awards granted under our long-term equity incentive award program are divided equally between time-based and performance-based awards. The time-based awards, which are awarded in the form of restricted stock, vest ratably over a three-year vesting period. The performance-based equity awards, which are awarded in the form of stock units, are eligible to cliff-vest at the end of a three-year performance period based on the Company’s TSR performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs. We believe this is consistent with the practice at our Peer Group companies and will result in each named executive officer receiving a market-based long-term incentive opportunity each year. Performance-based TSR awards granted under our long-term equity award program entitle the executive to receive an additional credit of stock units having a value equal to the amount of the ordinary cash dividends paid on the shares of common stock underlying the award (i.e., dividend equivalents are reinvested in additional units). Any additional stock units credited as a dividend equivalent payment will not be paid unless they vest and are subject to the same performance-based vesting requirements as the stock unit awards to which they relate. The compensation committee believes the performance-based award structure that began in 2021 includes several improvements over our prior plan design, including (1) awards cliff-vest at the end of three years, rather than being eligible to vest on an annual basis over the length of the performance period, (2) the “catch-up” vesting opportunity for missed performance years in our prior plan design has been eliminated, (3) awards now have a different performance metric (relative TSR) than any of the performance metrics used to measure performance for our annual cash incentive awards, and (4) awards will become earned solely based on our TSR performance, which we believe creates a direct link between the value realized by our named executive officers and our stockholders. 2023 Annual Equity Awards. Consistent with the change in equity grant timing described above, the compensation committee approved annual equity awards for 2023 in December 2022. The time-based awards granted in December 2022 vest in three equal annual installments, that began January 31, 2024, subject to the named executive’s continued employment with the Company. The performance-based equity awards granted in December 2022 are eligible to cliff-vest at the end of a three-year performance period ending December 31, 2025 based on the Company’s TSR performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs. The 2023 annual equity awards are intended as compensation to the named executive officers for 2023; however, because they were granted in December 2022, these 2023 annual equity awards were reported in the Summary Compensation Table as compensation to the named executive officers in 2022. 2024 Annual Equity Awards. Similar to the 2023 annual equity awards, the compensation committee approved annual equity awards for 2024 in December 2023. The time-based awards granted in December 2023 vest in three equal annual installments beginning January 31, 2025, subject to the named executive’s continued employment with the Company. The performance-based equity awards granted in December 2023 will be eligible to cliff-vest at the end of a three-year performance period ending December 31, 2026 based on the Company’s TSR performance relative to a custom TSR peer group consisting of other publicly traded healthcare REITs. Although these 2024 annual equity awards are intended as compensation to the named executive officers for 2024, they are reported in the Summary Compensation Table as compensation to the named executive officers in 2023 because the grant date occurred in 2023. The relative TSR performance-based awards will vest based on our three-year TSR performance relative to the following publicly-traded REITs:

  21. TSR Award Peer Companies

    TSR Award Peer Companies Community Healthcare Trust, Inc. Diversified Healthcare Trust, Inc. Global Medical REIT, Inc. Healthcare Realty Trust Inc. Healthpeak Properties, Inc. LTC Properties, Inc. Medical Properties Trust, Inc. National Health Investors, Inc. Omega Healthcare Investors, Inc. Physicians Realty Trust Sabra Health Care REIT, Inc. Universal Health Realty Income Trust Ventas, Inc. Welltower, Inc. The TSR award peer group companies is the same for both the 2024 TSR awards and the 2023 TSR awards. We selected our TSR award peer group companies based on their similarity to the Company, taking into account their respective businesses and sources of revenue. While there is significant overlap between the TSR award peer group companies and the Peer Group companies described above, the two peer groups are not identical. This is because the compensation committee believes that the two peer groups are accomplishing different objectives. Many of the TSR award peer group companies have a much larger market capitalization than the Company, which makes them inappropriate to use as peer companies for compensation comparison purposes. However, we believe company size plays a relatively small role in TSR, and that our TSR award peer group companies are valuable comparators to measure our TSR because of the similarity of business models and tenant pools. If the Company’s TSR for the three-year performance period compared to the TSRs of the peers for the same period is less than the 25th percentile (the threshold level), 0% of each named executive officers’ TSR awards will vest. If our relative TSR performance is at the 50th percentile (the target level), 100% of each named executive officer’s TSR awards will vest. If the Company achieves relative TSR performance at or above the 85th percentile (the maximum level), 200% of each named executive officer’s TSR awards will vest. For performance between target and the threshold and the high levels, the number of TSR awards that vest will be determined by linear interpolation. The performance vesting schedule for the TSR awards can be illustrated as follows:

  22. TSR Award Peer Companies

    | Percentile vs. TSR Award Peers | Performance Level | TSR Awards Earned | | >85 | | 200% | | 85 | High/Max | 200% | | 50 | Target | 100% | | 25 | Threshold | 50% | | <25 | — | —% |

  23. Status of Performance-Based Vesting of Prior Long-Term Incentive Awards

    Status of Performance-Based Vesting of Prior Long-Term Incentive Awards 2021 TSR Equity Awards. The performance-based equity awards granted in February 2021 under the new long-term equity incentive award program in effect beginning in 2021 were eligible to cliff-vest at the end of a three-year performance period ended December 31, 2023 according to the same performance vesting schedule described above that was in place for the performance-based equity awards granted in 2022 and 2023 and based on the Company’s TSR performance relative to a custom TSR peer group consisting of the same publicly traded healthcare REITs selected for the 2022 and 2023 awards. The Company’s TSR for the three-year performance period of the awards was 20.36% and exceeded the 85th percentile compared to the TSR peer group, which resulted in vesting at the maximum level of 200%. 2021 Performance Equity Awards. In accordance with our long-term equity incentive award program in effect prior to 2021, beginning in 2018 50% of the number of restricted stock awards granted based on the prior year’s performance were subject to additional performance-based vesting conditions based on NFFO growth over a specified performance period (which is either three or four years). The performance period for these awards began in the year the award was granted, with one tranche eligible to vest at the end of each of the calendar years commencing with the year of grant. Each tranche vests at the end of the applicable calendar year only if we achieve a minimum established NFFO per share growth for the year. If the applicable NFFO per share growth target was not achieved for any calendar year in the performance period, the tranche of shares eligible to vest for the missed year was eligible to vest at the end of any subsequent calendar year in the performance period if we achieved the specified cumulative NFFO per share growth during the performance period through the end of the applicable measurement year. If the NFFO per share growth target was achieved for any calendar year (or on a cumulative basis thereafter during the performance period of the award if the NFFO per share growth target was not achieved in a previous year), the applicable tranche of performance-based restricted stock awards vested and was paid to each named executive officer. At the time of this payment, we also paid each named executive officer a cash amount equal to the dividends that had accrued with respect to the vested performance shares, which dividends only became payable upon achievement of the performance vesting conditions for the underlying shares. For 2023, we achieved NFFO per share of $1.408, which resulted in no vesting for any of the remaining tranches of performance-based restricted stock awards subject to an NFFO growth performance condition. The following table summarizes the vesting of the previously awarded performance-based restricted stock awards (as determined by the compensation committee following the end of calendar year 2023) based on this NFFO per share achievement. Mr. Callister, who did not become employed by us until February 2021 and did not become an executive officer until July 2022, did not receive any of the equity awards disclosed in the table below. There are no remaining unvested performance-based restricted stock awards outstanding that were granted pursuant to this prior long-term equity incentive award program.

  24. Status of Performance-Based Vesting of Prior Long-Term Incentive Awards

    | Award Year | Minimum NFFO Per Share Growth Target for 2023 | Number of Shares That Vested for 2023 | Number of Shares That Previously Vested | Number of Shares Remaining Eligible to Vest | | 2020 | $1.554 | | | | | David M. Sedgwick | | — | 9,322 | — | | William M. Wagner | | — | 11,252 | — | | 2021 | $1.540 | | | | | David M. Sedgwick | | — | 13,500 | — | | William M. Wagner | | — | 15,674 | — |

  25. Status of Performance-Based Vesting of Prior Long-Term Incentive Awards

    For more information on the restricted stock awards that were granted to our named executive officers in 2020-2021 based on the prior year’s performance, see our proxy statement filed in those years.

  26. Severance Benefits

    Severance Benefits We believe that severance protections, particularly in the context of the uncertainty surrounding any potential change in control transaction, play a valuable role in attracting and retaining quality executive officers. Accordingly, we have entered into a change in control and severance agreement with each of our named executive officers (each, as amended, a “CIC and Severance Agreement”). We believe that the level of potential benefits helps us to retain our qualified executive team and is more consistent with the severance benefits provided by our Peer Group companies than our prior practice of providing no severance benefits to the named executive officers. As described in more detail below under the heading “Potential Payments Upon Termination or Change in Control,” pursuant to the CIC and Severance Agreement, each of the named executive officers is entitled to severance benefits in the event of a termination of employment by us without “cause” or by the executive for “good reason” (as those terms are defined in each executive’s CIC and Severance Agreement), with the level of severance benefits enhanced if such a termination of employment occurs upon or following a change in control of the Company. None of the severance benefits payable under the CIC and Severance Agreement is a “single trigger” benefit triggered by the occurrence of a change in control, and benefits under the CIC and Severance Agreement are only payable on a “double trigger” basis as a result of a qualifying termination of employment. Also as described in more detail below under the heading “Potential Payments Upon Termination or Change in Control,” the CIC and Severance Agreement also entitles each named executive officer to specified benefits if the executive’s employment is terminated as a result of an “authorized retirement” or due to the executive’s death or “disability” (as such terms are defined in each executive’s CIC and Severance Agreement). No named executive officer is entitled to receive a “gross-up” or similar payment for any excise taxes that may become payable in connection with a change in control pursuant to Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), and, depending on what results in the best after-tax benefit for the executive, benefits may be “cut back” instead in such circumstances. In addition, under the terms of our stockholder-approved equity incentive plan, outstanding restricted stock or stock unit awards will be subject to accelerated vesting in connection with a change in control of the Company (with outstanding performance-based awards vesting at the targeted performance level). Please see the “Potential Payments Upon Termination or Change in Control” section below for additional details.

  27. Summary Compensation Table — 2021 — 2023

    Summary Compensation Table — 2021 — 2023 The following table sets forth certain information with respect to compensation for the years ended December 31, 2023, 2022 and 2021, earned by, awarded to or paid to our named executive officers.

  28. Summary Compensation Table — 2021 — 2023

    | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | | David M. Sedgwick | 2023 | 800,000 | — | 2,788,376 | 1,832,030 | 9,900 | 5,430,306 | | President and Chief Executive Officer | 2022 | 700,000 | — | 1,957,759 | 1,272,000 | 9,150 | 3,938,909 | | | 2021 | 495,000 | — | 3,404,295 | 641,250 | 8,700 | 4,549,245 | | William M. Wagner | 2023 | 555,660 | — | 1,262,362 | 836,034 | 9,900 | 2,663,956 | | Chief Financial Officer and Treasurer | 2022 | 529,200 | — | 1,267,451 | 686,902 | 9,150 | 2,492,703 | | | 2021 | 472,500 | — | 3,251,032 | 637,875 | 8,700 | 4,370,107 | | James B. Callister | 2023 | 500,000 | — | 1,182,116 | 774,389 | 9,900 | 2,466,405 | | Chief Investment Officer and Secretary(4) | 2022 | 465,000 | 348,750 | 1,151,664 | — | 9,150 | 1,974,564 |

  29. Summary Compensation Table — 2021 — 2023

    (1) The amounts in this column represent the aggregate fair value of each award on its grant date, computed in accordance with Accounting Standards Codification (“ASC”) Topic 718. Please see footnote (2) to the Grants of Plan-Based Awards in 2023 table below and Note 9 to the Consolidated Financial Statements included in our 2023 Annual Report for a discussion of the assumptions used in determining the award values. Please also see “Compensation Discussion and Analysis — Material Elements of Compensation — Long-Term Equity Incentive Awards Granted in 2023” above for further information about these awards. (2) The amounts in this column for 2023 represent the cash bonus paid in 2024 under the annual incentive plan for 2023 based on the performance level achieved under the plan. See “Compensation Discussion and Analysis — Material Elements of Compensation — 2023 Annual Cash Incentive Awards” above. (3) The amounts in this column represent 401(k) plan Company matching contributions. (4) Mr. Callister became an executive officer in 2022 upon his appointment as Executive Vice President in July 2022 and was promoted to the position of Chief Investment Officer effective December 31, 2022.

  30. Grants of Plan-Based Awards in 2023

    Grants of Plan-Based Awards in 2023 The following table sets forth certain information concerning the cash and equity incentive opportunities awarded to our named executive officers for 2023.

  31. Grants of Plan-Based Awards in 2023

    | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | | | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(2) | | David M. Sedgwick | N/A | 780,000 | 1,200,000 | 2,100,000 | — | — | — | — | — | | Time-Based Award | 12/15/2023 | — | — | — | — | — | — | 57,057 | 1,279,789 | | Performance-Based Award | 12/15/2023 | — | — | — | 28,529 | 57,057 | 114,114 | — | 1,508,587 | | William M. Wagner | N/A | 361,179 | 555,660 | 944,622 | — | — | — | — | — | | Time-Based Award | 12/15/2023 | — | — | — | — | — | — | 23,742 | 532,533 | | Performance-Based Award | 12/15/2023 | — | — | — | 11,871 | 23,742 | 47,484 | — | 729,829 | | James B. Callister | N/A | 325,000 | 500,000 | 900,000 | — | — | — | — | — | | Time-Based Award | 12/15/2023 | — | — | — | — | — | — | 24,189 | 542,559 | | Performance-Based Award | 12/15/2023 | — | — | — | 12,095 | 24,189 | 48,378 | — | 639,557 |

  32. Grants of Plan-Based Awards in 2023

    (1) Represents the threshold, target and maximum award opportunities for performance-based cash awards payable for 2023 under our annual performance-based cash incentive award program. The actual cash incentive awards earned for 2023 are reflected in the “Summary Compensation Table — 2021 — 2023” above under the caption “Non-Equity Incentive Plan Compensation.” For a description of the material terms of the cash incentive plan awards reported in the table above, see “Compensation Discussion and Analysis — Material Elements of Compensation — 2023 Annual Cash Incentive Awards.” (2) The amounts in this column represent the aggregate fair value of each award on its grant date, computed in accordance with ASC Topic 718. We valued the time-based restricted stock awards granted on December 15, 2023 by multiplying the closing price of our Common Stock on that date ($22.43) by the number of shares of restricted stock awarded. We valued the performance-based restricted stock unit awards granted on December 15, 2023 by multiplying the number of performance-based stock units awarded by the fair value of the award as determined using a Monte Carlo simulation as further described in Note 9 to the Consolidated Financial Statements included in our 2023 Annual Report. For a description of the material terms of these restricted stock and stock unit awards, see “Compensation Discussion and Analysis — Material Elements of Compensation — Long-Term Equity Incentive Awards Granted in 2023.”

  33. Outstanding Equity Awards at 2023 Fiscal Year End

    Outstanding Equity Awards at 2023 Fiscal Year End The following table sets forth certain information with respect to outstanding equity awards of our named executive officers as of December 31, 2023. As of December 31, 2023, the only outstanding equity awards granted to our named executive officers are restricted stock or stock unit awards.

  34. Outstanding Equity Awards at 2023 Fiscal Year End

    | | | Stock Awards | | | | | Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (4) | | David M. Sedgwick | 12/15/2023 | 57,057 | 1,276,936 | 57,057 | 1,276,936 | | | 12/15/2022 | 43,170 | 966,145 | 43,170 | 966,145 | | | 12/15/2021 | 20,402 | 456,597 | 30,603 | 684,895 | | | 2/26/2021 | 6,763 | 151,356 | — | — | | | 1/27/2021 | 6,750 | 151,065 | 6,750(5) | 151,065 | | | 3/9/2020 | 4,661 | 104,313 | 9,322(5) | 208,626 | | William M. Wagner | 12/15/2023 | 23,742 | 531,346 | 23,742 | 531,346 | | | 12/15/2022 | 26,133 | 584,857 | 26,133 | 584,857 | | | 12/15/2021 | 15,380 | 344,204 | 23,070 | 516,307 | | | 2/26/2021 | 6,575 | 147,149 | — | — | | | 1/27/2021 | 7,837 | 175,392 | 7,837(5) | 175,392 | | | 3/9/2020 | 5,626 | 125,910 | 11,252(5) | 251,820 | | James B. Callister | 12/15/2023 | 24,189 | 541,350 | 24,189 | 541,350 | | | 12/15/2022 | 25,395 | 568,340 | 25,395 | 568,340 | | | 12/15/2021 | 16,667 | 373,007 | — | — |

  35. Outstanding Equity Awards at 2023 Fiscal Year End

    (1) The remaining unvested portion of the restricted stock awards granted on March 9, 2020, January 27, 2021 and February 26, 2021 vested on February 5, 2024, January 27, 2024 and January 31, 2024, respectively. One-half of the remaining unvested portion of the restricted stock awards granted on December 15, 2021 vested on January 31, 2024 and the remaining unvested portion will vest on January 31, 2025. One-third of the restricted stock awards granted on December 15, 2022 vested on January 31, 2024 and the remaining portions vests in equal installments on January 31, 2025 and 2026. The restricted stock awards granted on December 15, 2023 vest in three equal installments on January 31, 2025, 2026 and 2027. (2) Market value of unvested restricted stock is based on the closing price of our Common Stock of $22.38 as of December 29, 2023, which was the last trading day in 2023. (3) The restricted stock units granted on December 15, 2021 are scheduled to cliff vest on December 31, 2024 based on total shareholder return relative to a comparable set of other healthcare real estate investment trusts described in the Compensation Discussion and Analysis section above. The restricted stock units granted on December 15, 2022 are scheduled to cliff vest on December 31, 2025 based on total shareholder return relative to a comparable set of other healthcare real estate investment trusts described in the Compensation Discussion and Analysis section above. The restricted stock units granted on December 15, 2023 are scheduled to cliff vest on December 31, 2026 based on total shareholder return relative to a comparable set of other healthcare real estate investment trusts described in the Compensation Discussion and Analysis section above. In each case, the restricted stock units shown are based on the target level which is 100% of the original award. The actual amount that will vest can range from 0% to 200%. See footnote (5) for information about the restricted stock awards granted on March 9, 2020 and January 27, 2021. (4) Market value of unvested restricted stock or stock units is based on the closing price of our Common Stock of $22.38 as of December 29, 2023, which was the last trading day in 2023. (5) Subsequent to December 31, 2023, the compensation committee determined that the NFFO per share performance condition for the remaining tranches of the restricted stock awards granted on March 9, 2020 and January 27, 2021 was not achieved, which resulted in no vesting of the remaining tranche of these awards.

  36. Option Exercises and Stock Vested in 2023

    Option Exercises and Stock Vested in 2023 The following table sets forth certain information with respect to restricted stock and unit awards held by our named executive officers that vested during 2023.

  37. Option Exercises and Stock Vested in 2023

    | | Stock Awards | | | Name | Number of shares acquired on vesting (#) | Value realized on vesting ($)(1) | | David M. Sedgwick(2) | 85,603 | 1,848,200 | | William M. Wagner(2) | 85,839 | 1,849,976 | | James B. Callister | 8,333 | 172,660 |

  38. Option Exercises and Stock Vested in 2023

    (1) The value realized on vesting is determined by multiplying the number of shares of restricted stock or units that vested by the per-share closing price of our Common Stock on the vesting date. The values reported do not represent the actual cash value realized by the named individual upon the vesting of shares to the extent such individual did not immediately sell the shares upon vesting. (2) Includes the following number of shares related to TSR awards that vested following a three-year performance period that ended December 31, 2023 based on the Company’s TSR performance relative to a custom TSR peer group during that period: Mr. Sedgwick (47,623 shares) and Mr. Wagner (46,299) shares.

  39. Potential Payments Upon Termination or Change in Control

    Potential Payments Upon Termination or Change in Control The following section describes the benefits that may become payable to the named executive officers in connection with a termination of their employment with us or a change in control of the Company. We do not have employment agreements with any of our named executive officers, so these benefits are generally provided under the CIC and Severance Agreement we have entered into with each of our named executive officers or under the terms governing outstanding equity-based awards. Severance Benefits — Change in Control and Severance Agreement The CIC and Severance Agreement provides that if an executive’s employment is terminated by us without “cause” or by the executive for a “good reason” (as those terms are defined in the CIC and Severance Agreement), the executive will be entitled to receive the following benefits: (1) a lump sum payment equal to one times (or two times for Mr. Sedgwick) the executive’s annual base salary, (2) a lump sum payment equal to a pro-rata portion of the executive’s target annual cash incentive opportunity, and (3) reimbursement of the premiums charged to continue the executive’s and his dependents’ benefits under COBRA for up to 18 months (and subject to earlier termination upon the executive beginning new full-time employment) (the “COBRA Benefits”). If an executive’s termination without cause or for good reason occurs upon or following a change in control of the Company, then in lieu of the benefits described above, the executive will be entitled to receive the following benefits: (1) a lump sum payment equal to two times (or three times for Mr. Sedgwick) the sum of (a) the executive’s annual base salary and (b) the average annual cash incentive opportunity actually earned for the three years preceding the year in which the executive’s termination of employment occurs, (2) full vesting of all outstanding equity awards (with any performance-based awards granted prior to February 1, 2021 vesting at the target performance level and performance-based awards granted thereafter vesting in accordance with the terms of the award agreement) and (3) the COBRA Benefits. No executive is entitled to receive a “gross-up” or similar payment for any excise taxes that may become payable in connection with a change in control of the Company, and, depending on what results in the best after-tax benefit for the executive, benefits may be “cut back” instead in such circumstances. If an executive’s employment is terminated as a result of an “authorized retirement” (as such term is defined in the CIC and Severance Agreement), the executive will be entitled to receive the COBRA Benefits, full vesting of all outstanding time-based equity awards and (1) for performance-based equity awards granted prior to February 1, 2021, full vesting at the target performance level, and (2) for performance-based equity awards granted after February 1, 2021, vesting of the performance-based awards pursuant to the terms of the award agreement. If an executive’s employment terminates due to the executive’s death or disability, the executive will be entitled to receive (1) a lump sum payment equal to the executive’s target annual cash incentive opportunity, (2) full vesting of all outstanding equity awards (with any performance-based awards vesting at the target performance level) and (3) the COBRA Benefits (but only for up to 12 months). In order to receive any of the foregoing benefits payable upon a termination without cause, for good reason or an authorized retirement, the executive must execute and not revoke a full release of claims in favor of us. The CIC and Severance Agreement includes an indefinite restriction on an executive’s disclosure of our confidential information and a 2-year post termination restriction on an executive’s solicitation of our employees and independent contractors. Accelerated Vesting — Equity Awards. Pursuant to the terms of our stockholder-approved equity incentive plan, outstanding restricted stock and unit awards granted to the named executive officers under the equity incentive plan are subject to accelerated vesting in connection with a change in control of the Company (with outstanding performance-based awards vesting at the targeted performance level). Benefits Payable Upon Termination or Change in Control Occurring on December 31, 2023 The following table provides information concerning the potential termination or change in control payments that would have been made to each named executive officer under the circumstances described above. As prescribed by the SEC’s disclosure rules, in calculating the amount of any potential payments to the named executive officers, we have assumed that the applicable triggering event (i.e., termination of employment and/or change in control) occurred on December 31, 2023. In the following table, we use the term “involuntary termination” to refer to termination by us without cause or by the executive for good reason.

  40. Potential Payments Upon Termination or Change in Control

    | | Cash Severance ($) | Equity Acceleration Value ($)(1) | Health Benefits ($) | Total ($)(2) | | David M. Sedgwick | | | | | | Authorized Retirement | — | 6,394,078 | 78,752 | 6,472,830 | | Death or Disability | 1,200,000 | 6,394,078 | 52,502 | 7,646,580 | | Involuntary Termination (3) | 1,600,000 | — | 78,752 | 1,678,752 | | Involuntary Termination in Connection With Change in Control | 6,145,280 | 6,394,078 | 78,752 | 12,618,110 | | William M. Wagner | | | | | | Authorized Retirement | — | 3,968,578 | 52,575 | 4,021,153 | | Death or Disability | 555,660 | 3,968,578 | 35,050 | 4,559,288 | | Involuntary Termination (3) | 555,660 | — | 52,575 | 608,235 | | Involuntary Termination in Connection With Change in Control | 2,551,861 | 3,968,578 | 52,575 | 6,573,014 | | James B. Callister | | | | | | Authorized Retirement | — | 2,592,387 | 52,575 | 2,644,962 | | Death or Disability | 500,000 | 2,592,387 | 35,050 | 3,127,437 | | Involuntary Termination (3) | 500,000 | — | 52,575 | 552,575 | | Involuntary Termination in Connection With Change in Control | 2,123,139 | 2,592,387 | 52,575 | 4,768,101 |

  41. Potential Payments Upon Termination or Change in Control

    (1) The equity acceleration value for each named executive officer is based upon the closing price of our Common Stock of $22.38 on December 29, 2023, which was the last trading day in 2023. For an authorized retirement, we have assumed that all outstanding performance-based restricted stock and units will vest at target. (2) We have assumed that no named executive officer’s severance benefits would be “cut back” under his CIC and Severance Agreement in order to obtain the greatest after-tax benefit after giving effect to the excise tax imposed under Section 4999 of the Code. The actual severance benefits payable to the named executive officers may be less than the reported amounts as a result of the application of this “cut-back.” (3) None of the named executive officers would have been entitled to an additional pro-rated bonus payment from us for a termination of employment occurring at the end of the 2023 calendar year, so the pro-rated bonus-based severance provisions contained in each executive’s CIC and Severance Agreement would not result in any additional severance amounts for a termination occurring at year end.

  42. Pay Ratio Disclosure

    Pay Ratio Disclosure Pursuant to the Exchange Act, we are required to disclose in this Proxy Statement the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all of our employees (excluding our Chief Executive Officer). Based on SEC rules for this disclosure, we have determined that our Chief Executive Officer’s total compensation for 2023 was $5,430,306, and the median of the total 2023 compensation of all of our employees (excluding our Chief Executive Officer) was $314,499. Accordingly, we estimate the ratio of our Chief Executive Officer’s total compensation for 2023 to the median of the total 2023 compensation of all of our employees (excluding our Chief Executive Officer) to be 17.27 to 1. We identified the median employee by taking into account the total gross wages as reported on Form W-2 paid in 2023 to all individuals, excluding our Chief Executive Officer, who were employed by us on December 31, 2023. We included all employees, whether employed on a full-time, part-time, or seasonal basis. We did not make any assumptions, adjustments or estimates with respect to their total cash compensation for 2023, although we did annualize the compensation for any permanent employees who were not employed by us for all of 2023. We believe gross wages for all employees is an appropriate measure because generally all employees are eligible to receive annual equity awards. Once the median employee was identified as described above, that employee’s annual total compensation for 2023 was determined using the same rules that apply to reporting the compensation of our named executive officers (including our Chief Executive Officer) in the “Total” column of the “Summary Compensation Table - 2021 - 2023” above. The total compensation amounts included in the first paragraph of this pay ratio disclosure were determined based on that methodology. We believe that the pay ratio disclosure presented above is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, the pay ratio disclosure may not be comparable to the pay ratio reported by other REITs or other public companies.

  43. Pay Versus Performance Disclosure

    Pay Versus Performance Disclosure Pursuant to the Exchange Act, we are required to disclose in this Proxy Statement certain information comparing the total compensation of our Chief Executive Officer and the average total compensation of our other named executive officers, in each case both as reported in the Summary Compensation Table presented in this Proxy Statement and as “actually paid” to such named executive officers as determined pursuant to applicable SEC rules, to the Company’s performance as presented in the table below. In this discussion, our Chief Executive Officer in each applicable year is also referred to as our principal executive officer or “PEO”, and our other named executive officers in each applicable year are referred to as our “Non-PEO NEOs.” The calculations and analysis below do not necessarily reflect the Company’s approach to aligning compensation with performance. For information concerning the Company’s compensation philosophy and how our executive compensation program is designed to align compensation with performance, please see “Compensation Discussion and Analysis” above. Pay Versus Performance Table

  44. Pay Versus Performance Disclosure

    | | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | Summary Compensation Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(2) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($)(3) | Average Compensation Actually Paid to Non-PEO Named Executive Officers ($)(2) | Total Stockholder Return ($)(4) | Peer Group Total Stockholder Return ($)(4) | Net Income (Loss) ($ in 000’s)(5) | NFFO Per Share ($)(6) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | 5,430,306 | 6,850,721 | 2,565,181 | 3,246,204 | 134.60 | 113.54 | 53,735 | 1.41 | | 2022 | 3,938,909 | 2,915,967 | 1,511,853 | 483,338 | 105.83 | 99.82 | (7,506) | 1.49 | | 2021 | 6,727,006 | 7,030,740 | 4,340,601 | 4,579,656 | 122.62 | 132.23 | 71,982 | 1.49 | | 2020 | 3,709,949 | 4,312,813 | 1,709,846 | 1,950,822 | 113.67 | 92.43 | 80,867 | 1.38 |

  45. Pay Versus Performance Disclosure

    (1) The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Sedgwick for 2023 and 2022 and for Mr. Stapley for 2021 and 2020 in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation Tables — Summary Compensation Table — 2021-2023” for further detail on the total compensation paid to our named executive officers for the applicable years covered by the Summary Compensation Table. (2) The dollar amounts reported in columns (c) and (e) represent the amount of “compensation actually paid” to our PEO and the average of our non-PEO NEOs in each applicable year, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned or paid during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to total compensation for each year to determine the compensation actually paid:

  46. Pay Versus Performance Disclosure

    | | 2020 | | 2021 | | 2022 | | 2023 | | | Adjustments (a) | PEO | Average Non-PEO NEOs | PEO | Average Non-PEO NEOs | PEO | Average Non-PEO NEOs | PEO | Average Non-PEO NEOs | | Reported Summary Compensation Table Total | $3,709,949 | $1,709,846 | $6,727,006 | $4,340,601 | $3,938,909 | $1,511,853 | $5,430,306 | $2,565,181 | | Deduction for Amounts Reported under “Stock Awards” Column in the Summary Compensation Table for Fiscal Year | (1,829,624) | (759,738) | (4,477,306) | (3,223,026) | (1,957,759) | (604,779) | (2,788,376) | (1,222,239) | | Increase at Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Fiscal Year | 2,129,191 | 884,124 | 4,619,799 | 3,397,044 | 1,839,474 | 568,763 | 2,777,535 | 1,218,873 | | Increase for Fair Value at Vesting of Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | — | — | — | — | — | — | — | — | | Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years | 161,634 | 63,726 | 99,117 | 40,230 | (691,447) | (355,498) | 1,091,253 | 540,113 | | Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | 141,663 | 52,864 | 62,124 | 24,807 | (148,030) | (598,019) | 638,621 | 321,613 | | Fair Value as of Prior Fiscal Year-End of Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | — | — | — | — | (65,180) | (38,982) | (298,618) | (177,337) |

  47. Pay Versus Performance Disclosure

    | Increase Based on Dividends or Other Earnings Paid on Outstanding and Unvested Stock Awards | — | — | — | — | — | — | — | — | | Increase Based on Incremental Fair Value of Options/SARs Modified During Applicable Fiscal Year | — | — | — | — | — | — | — | — | | Increase for Service Cost and, If Applicable, Prior Service Cost for Pension Plans | — | — | — | — | — | — | — | — | | Compensation Actually Paid | $4,312,813 | $1,950,822 | $7,030,740 | $4,579,656 | $2,915,967 | $483,338 | $6,850,721 | $3,246,204 |

  48. Pay Versus Performance Disclosure

    (a) In making each of the adjustments, the “value” of a stock award is the fair value of the award on the applicable date determined in accordance with FASB ASC Topic 718 using the valuation assumptions we then used to calculate the fair value of our equity awards for financial statement reporting purposes. For more information on the valuation of our equity awards, please see the notes to our financial statements that appear in our Annual Report on Form 10-K each fiscal year and the footnotes to the Summary Compensation Table that appears in our annual Proxy Statement. (3) The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s Non-PEO NEOs as a group in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the non-PEO NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2023, William M. Wagner and James B. Callister, (ii) for 2022, Gregory K. Stapley, William M. Wagner, James B. Callister and Mark D. Lamb; and (iii) for 2021 and 2020, David M. Sedgwick, William M. Wagner and Mark D. Lamb. (4) Total stockholder return represents cumulative total stockholder return on a fixed investment of $100 in our common stock for the period beginning on the last trading day of 2019 through the end of the applicable fiscal year, and is calculated assuming the reinvestment of dividends before consideration of income taxes. Peer total stockholder return represents cumulative total stockholder return on a fixed investment of $100 in the MSCI U.S. Total Return Index (RMS) for the period beginning on the last trading day of 2019 through the end of the applicable fiscal year, and is calculated assuming the reinvestment of dividends before consideration of income taxes. (5) Represents our net income (loss) reported in our audited financial statements for the applicable year. (6) Represents our normalized funds from operations, or NFFO, per share. NFFO is an important supplemental measure not computed in accordance with GAAP. We define NFFO as FFO defined in accordance with Nareit’s definition (calculated as net income computed in accordance with GAAP, excluding gains or losses from real estate dispositions, real estate depreciation and amortization and impairment charges, and adjustments for unconsolidated partnerships and joint ventures), and adjusted for certain revenue and expense items that we do not believe are indicative of our ongoing operating results, such as provision for loan losses, provision for doubtful accounts and lease restructuring, effect of the senior unsecured notes payable redemption, recovery of previously reversed rent, lease termination revenue, accelerated amortization of stock-based compensation, non-routine transaction costs, loss on extinguishment of debt, unrealized loss on other real estate related investments and property operating expenses. Description of Relationship Between Information Presented in Pay Versus Performance Table The following chart illustrates the Compensation Actually Paid for our PEO and the average Compensation Actually Paid for our Non-PEO NEOs as presented in the table above for each of the last four fiscal years against our total stockholder return and the total stockholder return for the RMS (each calculated as described above in footnote (4) of the table above) over that period of time. The following chart illustrates the Compensation Actually Paid for our PEO and the average Compensation Actually Paid for our Non-PEO NEOs as reported in the table above for each of the last four fiscal years against our net income (loss) in each of those years. The following chart illustrates the Compensation Actually Paid for our PEO and the average Compensation Actually Paid for our Non-PEO NEOs as reported in the table above for each of the last four fiscal years against our NFFO in each of those years. Financial Performance Measures Following is an unranked list of financial performance measures we consider most important in linking the compensation actually paid to our named executive officers for 2023 with our performance. •NFFO per share (used for our annual cash incentive plan) •Average Quarterly Net Debt to Normalized Run Rate EBITDA (used for our annual cash incentive plan) •Capital Deployment (used for our annual cash incentive plan) •Relative TSR (used for our long-term incentive plan) In addition to the financial performance measures listed above, we view our stock price, upon which the value of all of our long-term incentive awards is dependent, as a key performance-based component of our executive compensation program in order to further align the interests of our senior management team with the interests of our stockholders.

  49. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION

  50. Director Compensation Program

    Director Compensation Program We provide cash and stock compensation to our non-employee directors for their services as directors or members of committees of the Board of Directors. Effective in April 2023, the Board of Directors approved an increase in the annual cash retainer and the annual stock compensation payable to Board members, as described below. We also reimburse our non-employee directors for their reasonable expenses incurred in attending meetings of our Board of Directors and committees of the Board of Directors. Each member of our Board of Directors who is not our employee is entitled to receive an annual cash retainer for their service on our Board of Directors and its committees. The cash retainers payable for 2023 were as follows: • $75,000 per year for service as a Board member, which was increased to $80,000 per year commencing in April 2023; • $20,000 per year for service as chairperson of the audit committee; • $15,000 per year for service as chairperson of the compensation committee; • $15,000 per year for service as chairperson of the nominating and corporate governance committee; and • $15,000 per year for service as chairperson of the SCR committee. Further, the Chair of the Board receives an additional annual cash retainer of $80,000 per year for service as non-executive Chair of the Board. Each member of our Board may elect to have his or her fees that would otherwise be paid in cash converted into an award of restricted stock (subject to a one-year vesting requirement). In addition, pursuant to the Non-Employee Director Compensation Policy, our non-employee directors are entitled to receive annual, non-discretionary grants of restricted stock awards, with a grant date value that increased to $120,000 commencing with our 2023 annual meeting of stockholders. These awards are generally granted on the date of our annual meeting of stockholders and vest in full on the earlier of the first anniversary of the grant date or the date of the following year’s annual meeting of stockholders, subject to the non-employee director’s continued service as a director through the vesting date. The number of shares of restricted stock subject to the 2023 award was determined by dividing $120,000 by the per-share closing price (in regular trading) of our Common Stock on the date of grant, rounded up to the nearest whole share.

  51. 2023 Director Compensation Table

    2023 Director Compensation Table The following table sets forth the compensation paid to our non-employee directors for the year ended December 31, 2023.

  52. 2023 Director Compensation Table

    | Name (1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | Total ($) | | Diana M. Laing(3) | 175,000 | 120,000 | 295,000 | | Anne Olson | 95,000 | 120,000 | 215,000 | | Spencer G. Plumb | 95,000 | 120,000 | 215,000 | | Careina D. Williams | 100,000 | 120,000 | 220,000 |

  53. 2023 Director Compensation Table

    (1) The compensation paid to Mr. Sedgwick, the Company’s President and Chief Executive Officer is not included in this table because Mr. Sedgwick was an employee of the Company during his respective service as a director and received no additional compensation for service as director. Mr. Sedgwick’s compensation is disclosed in the “Summary Compensation Table — 2021 — 2023” above. (2) The amounts in this column represent the aggregate fair value of each annual equity award on its grant date, computed in accordance with ASC Topic 718. We valued the stock awards as of the grant date by multiplying the closing price of our Common Stock on that date by the number of shares of stock awarded. As of December 31, 2023, each of our non-employee directors held the following number of unvested restricted stock awards:

  54. 2023 Director Compensation Table

    | Name | Number of Unvested Restricted Stock Awards | | Diana M. Laing | 6,192 | | Anne Olson | 6,192 | | Spencer G. Plumb | 6,192 | | Careina D. Williams | 6,192 |

  55. 2023 Director Compensation Table

    (3) Ms. Laing served as our non-executive Chair of the Board commencing June 2022.