What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-09 · 104 added, 101 removed, 271 unchanged (43% of the section changed)

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Such discussion is provided as a supplement to, and should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2024 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or SEC, on February 28, 2025.

Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of March 31, 2025 and December 31, 2024, together with our results of operations and cash flows for the three months ended March 31, 2025 and 2024.

Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of June 30, 2025 and December 31, 2024, together with our results of operations for the three and six months ended June 30, 2025 and 2024 and cash flows for the six months ended June 30, 2025 and 2024.

Our results of operations and financial condition, as reflected in the accompanying condensed consolidated financial statements and related notes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors that could affect the ongoing operations and occupancy of our tenants and residents.

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unexpected labor costs and inflationary pressures;

changing macroeconomic, domestic legal and fiscal policies and geopolitical conditions;

and those risks identified in Item 1A, Risk Factors in our 2024 Annual Report on Form 10-K, as filed with the SEC on February 28, 2025, this Quarterly Report on Form 10-Q, and any future filings we make with the SEC.

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We have built a fully-integrated management platform that operates clinical healthcare properties throughout the United States, and in the United Kingdom and the Isle of Man.

We own and operate our integrated senior health campuses and senior-housing operating properties, or SHOP, utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure.

We own and operate our integrated senior health campuses, or ISHC, and senior-housing operating properties, or SHOP, utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure.

We have also originated and acquired secured loans and may acquire other real estate-related investments in the future on an infrequent and opportunistic basis.

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We conduct substantially all of our operations through American Healthcare REIT Holdings, LP, or our operating partnership, and we are the sole general partner of our operating partnership.

As of March 31, 2025 and December 31, 2024 , we owned 98.8% and 98.7%, respectively, of the operating partnership units, or OP units, in our operating partnership, and the remaining 1.2% and 1.3% of the OP units, respectively, were owned by the following limited partners:

As of June 30, 2025 and December 31, 2024 , we owned 98.8% and 98.7%, respectively, of the operating partnership units, or OP units, in our operating partnership, and the remaining 1.2% and 1.3% of the OP units, respectively, were owned by the following limited partners:

(i) AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T.

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See Note 11, Redeemable Noncontrolling Interests, and Note 12, Equity — Noncontrolling Interests in Total Equity, to our accompanying condensed consolidated financial statements for a further discussion of the ownership in our operating partnership.

Our Real Estate Investments Portfolio

Real Estate Investments Portfolio

We currently operate through four reportable business segments:

integrated senior health campuses, OM, SHOP and triple-net leased properties.

As of March 31, 2025, we owned and/or operated 312 buildings and integrated senior health campuses, representing approximately 19,031,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,523,782,000.

In addition, as of March 31, 2025, we also owned a real estate-related debt investment purchased for $60,429,000.

ISHC, OM, SHOP and triple-net leased properties.

As of June 30, 2025, we owned and/or operated 309 buildings and ISHC, representing approximately 19,228,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,513,420,000.

In addition, as of June 30, 2025, we also owned a real estate-related debt investment purchased for $60,429,000.

Critical Accounting Estimates

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Acquisitions and Dispositions in 2025

For a discussion of our acquisitions and dispositions of investments in 2025, see Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements.

For a discussion of our acquisitions and dispositions of investments in 2025, see Note 3, Real Estate Investments, to our accompanying condensed consolidated financial statements.

Factors Which May Influence Results of Operations

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For a further discussion of these and other factors that could impact our future results or performance, see “Forward-Looking Statements” above and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and those Risk Factors previously disclosed in our 2024 Annual Report on Form 10-K, as filed with the SEC on February 28, 2025.

During the three months ended March 31, 2025 and 2024, inflation has affected our operations.

The annual rate of inflation in the United States was 2.4% in March 2025 and 3.5% in March 2024, as measured by the Consumer Price Index.

We believe inflation has impacted our operations such that we have experienced, and continue to experience, increases in the cost of labor, services, energy and supplies, and therefore continued inflationary pressures on our integrated senior health campuses and SHOP could continue to impact our profitability in future periods.

During the six months ended June 30, 2025 and 2024, inflation has affected our operations.

The annual rate of inflation in the United States was 2.7% in June 2025 and 3.0% in June 2024, as measured by the Consumer Price Index.

We believe inflation has impacted our operations such that we have experienced, and continue to experience, increases in the cost of labor, services, energy and supplies, and therefore continued inflationary pressures on our ISHC and SHOP could continue to impact our profitability in future periods.

To offset the impact of inflation on the cost of labor and services, we had our RIDEA managers bill higher than average annual rent and care fee increases for existing residents in 2024 and 2025, as compared to prior years, while adjusting market rates as frequently as needed based on competitor pricing and market conditions.

We believe this practice will improve operating performance in our integrated senior health campuses and SHOP, as well as increase rent coverage and the stability of our real estate revenue in our triple-net leased properties over time.

We believe this practice will improve operating performance in our ISHC and SHOP, as well as increase rent coverage and the stability of our real estate revenue in our triple-net leased properties over time.

For properties that are not operated under a RIDEA structure, there are provisions in the majority of our tenant leases that help us mitigate the impact of inflation.

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Scheduled Lease Expirations

Excluding our SHOP and integrated senior health campuses, as of March 31, 2025, our properties were 89.9% leased, and, during the remainder of 2025, 10.0% of the leased GLA is scheduled to expire.

Excluding our ISHC and SHOP, as of June 30, 2025, our properties were 89.0% leased, and, during the remainder of 2025, 5.6% of the leased GLA is scheduled to expire.

Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next 12 months.

In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy.

As of March 31, 2025, our remaining weighted average lease term was 6.7 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 87.6% leased as of March 31, 2025.

As of June 30, 2025, our remaining weighted average lease term was 6.8 years, excluding our ISHC and SHOP.

Our combined ISHC and SHOP were 88.7% leased as of June 30, 2025.

Substantially all of our leases with residents at such properties are for a term of one year or less.

Results of Operations

Comparison of Three Months Ended March 31, 2025 and 2024

Comparison of Three and Six Months Ended June 30, 2025 and 2024

Our operating results are primarily comprised of income derived from our portfolio of properties and expenses in connection with the acquisition and operation of such properties.

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We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions.

As of March 31, 2025, we operated through four reportable business segments:

integrated senior health campuses, OM, SHOP and triple-net leased properties.

The most significant drivers behind changes in our consolidated results of operations for the three months ended March 31, 2025 compared to the corresponding period in 2024 were primarily due to:

the increase in resident occupancies and billing rates;

As of June 30, 2025, we operated through four reportable business segments:

ISHC, OM, SHOP and triple-net leased properties.

The most significant drivers behind changes in our consolidated results of operations for the three and six months ended June 30, 2025 compared to the corresponding periods in 2024 were primarily due to:

our increase in resident occupancies and billing rates;

the adverse impact of inflation, which resulted in increases in the cost of labor, services, energy and supplies;

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Additional information behind the changes in our consolidated results of operations is discussed in more detail below.

See Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions during 2025.

As of March 31, 2025 and 2024, we owned and/or operated the following types of properties (dollars in thousands):

See Note 3, Real Estate Investments, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions during 2025.

As of June 30, 2025 and 2024, we owned and/or operated the following types of properties (dollars in thousands):

Campuses Aggregate

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Purchase Price Leased

Integrated senior health campuses 125 $ 2,025,365 88.4 % 126 $ 1,967,091 86.1 %

ISHC 124 $ 2,011,503 89.4 % 126 $ 2,012,932 87.0 %

OM 81 1,143,645 86.1 % 86 1,239,845 88.5 %

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Total/weighted average(2) 309 $ 4,513,420 89.0 % 318 $ 4,612,670 91.3 %

(1) Leased percentage includes all third-party leased space at our non-RIDEA properties (including master leases), except for our SHOP and integrated senior health campuses where leased percentage represents resident occupancy of the available units/beds therein.

(2) Weighted average leased percentage excludes our SHOP and integrated senior health campuses.

(1) Leased percentage includes all third-party leased space at our non-RIDEA properties (including master leases), except for our ISHC and SHOP where leased percentage represents resident occupancy of the available units/beds therein.

(2) Weighted average leased percentage excludes our ISHC and SHOP.

Our primary sources of revenue include resident fees and services revenue generated by our RIDEA properties and rent from our leased, non-RIDEA properties.

For the three months ended March 31, 2025 and 2024, resident fees and services revenue primarily consisted of rental fees related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries.

For the three and six months ended June 30, 2025 and 2024, resident fees and services revenue primarily consisted of rental fees related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries.

The amount of revenues generated by our RIDEA properties depends principally on our ability to maintain resident occupancy rates.

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Revenues by reportable segment consisted of the following for the periods presented below (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2025 2024 2025 2024

Resident Fees and Services Revenue

Integrated senior health campuses $ 423,364 $ 393,122

ISHC $ 423,825 $ 393,774 $ 847,189 $ 786,896

SHOP 77,460 64,239 151,272 123,235

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Resident Fees and Services Revenue

For our integrated senior health campuses segment, we increased resident fees and services revenue by $30,242,000 for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to increased resident occupancy and higher resident fees as a result of an increase in billing rates and levels of service.

For our SHOP segment, resident fees and services revenue increased $14,816,000 for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to:

(i) an increase of $4,771,000 due to the acquisition of five senior housing properties in Washington in September 2024;

(ii) an increase of $4,348,000 due to the acquisition of 14 senior housing properties in Oregon in February 2024;

and (iii) an increase of $1,043,000 due to the acquisition of one senior housing property in Georgia in October 2024.

The remaining increase in resident fees and services

revenue for our SHOP segment was primarily attributable to increased resident occupancy and higher resident fees as a result of an increase in billing rates.

For our ISHC segment, we increased resident fees and services revenue by $30,051,000 and $60,293,000, respectively, for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to increased resident occupancy and higher resident fees as a result of an increase in billing rates and levels of care service.

For our SHOP segment, resident fees and services revenue increased $13,221,000 and $28,037,000, respectively, for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to:

(i) an increase of $4,933,000 and $9,703,000, respectively, due to the acquisition of five senior housing properties in Washington in September 2024;

(ii) an increase of $2,640,000 due to the acquisition of one senior housing property in Virginia in April 2025;

(iii) an increase of $946,000 and $1,989,000, respectively, due to the acquisition of one senior housing property in Georgia in October 2024;

and (iv) an increase of $3,503,000 and $7,297,000, respectively, due to increased resident occupancy

and higher resident fees as a result of an increase in billing rates.

In addition, SHOP revenue increased by $4,836,000 for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, due to the acquisition of 14 senior housing properties in Oregon in February 2024.

Real Estate Revenue

For the three months ended March 31, 2025, real estate revenue within our triple-net leased properties segment decreased $3,115,000, as compared to the three months ended March 31, 2024, primarily due to the disposition of eight triple-net leased properties in Missouri in December 2024 and straight-line rent adjustment recognized in connection with the early extension of a tenant lease at one of our triple-net leased properties.

Real estate revenue for our OM segment decreased $873,000 for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to dispositions of OM buildings in 2024.

For our triple-net leased properties segment, real estate revenue decreased $2,922,000 and $6,037,000, respectively, for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to the disposition of eight triple-net leased properties in Missouri in December 2024.

Real estate revenue for our OM segment decreased $2,428,000 and $3,301,000, respectively, for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to dispositions of OM buildings in 2024 and 2025.

Property Operating Expenses and Rental Expenses

Integrated senior health campuses and SHOP typically have a higher percentage of direct operating expenses to revenue than OM buildings and triple-net leased properties due to the nature of RIDEA-type facilities where we conduct day-to-day operations.

ISHC and SHOP typically have a higher percentage of direct operating expenses to revenue than OM buildings and triple-net leased properties due to the nature of RIDEA-type facilities where we conduct day-to-day operations.

Property operating expenses and property operating expenses as a percentage of resident fees and services revenue, as well as rental expenses and rental expenses as a percentage of real estate revenue, by reportable segment consisted of the following for the periods presented below (dollars in thousands):

Three Months Ended March 31,

Property Operating Expenses

Integrated senior health campuses

Three Months Ended June 30,

Six Months Ended June 30,

2025 2024 2025 2024

Property Operating Expenses

ISHC $ 363,757 85.8 % $ 348,466 88.5 % $ 734,404 86.7 % $ 699,608 88.9 %

SHOP 62,528 80.7 % 54,098 84.2 % 124,304 82.2 % 106,585 86.5 %

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Total rental expenses $ 12,990 31.5 % $ 13,323 28.6 % $ 26,633 31.5 % $ 27,050 28.8 %

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, the increase in total property operating expenses for our integrated senior health campuses segment was predominately due to:

(i) increased resident occupancy at the facilities within such segment;

and (ii) an increase of $2,511,000 within Trilogy’s ancillary business unit due to higher labor costs associated with the expansion of services offered and inflation’s impact on labor costs and other operating expenses.

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, total property operating expenses for our SHOP segment increased primarily due to:

(i) an increase of $3,795,000 due to the acquisition of 14 senior housing properties in Oregon in February 2024;

(ii) an increase of $3,688,000 due to the acquisition of five senior housing properties in Washington in September 2024;

and (iii) an increase of $905,000 due to the acquisition of one senior housing property in Georgia in October 2024.

Rental expenses for our OM segment decreased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to the dispositions of OM buildings in 2024.

For our ISHC segment, total property operating expenses increased by $15,291,000 and $34,796,000, respectively, for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, predominately due to increased resident occupancy and levels of care services at the facilities within such segment, thereby increasing labor costs and other operating expenses.

For our SHOP segment, total property operating expenses increased by $8,430,000 and $17,719,000, respectively, for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to:

(i) an increase of $3,690,000 and $7,377,000, respectively, due to the acquisition of five senior housing properties in Washington in September 2024;

(ii) an increase of $1,479,000 and $2,131,000, respectively, due to higher operating expenses as a result of increased occupancy;

(iii) an increase of $899,000 and $1,804,000, due to the acquisition of one senior housing property in Georgia in October 2024;

and (iv) an increase of $1,396,000 due to the acquisition of one senior housing property located in Virginia in April 2025.

In addition, SHOP expenses increased by $5,052,000 for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, due to the acquisition of 14 senior housing properties in Oregon in February 2024.

Interest Expense

Interest expense, including gain or loss in fair value of derivative financial instruments, consisted of the following for the periods presented below (in thousands):

Three Months Ended March 31,

Three Months Ended

Six Months Ended

2025 2024 2025 2024

Interest expense:

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Mortgage loans payable

470 786 870 1,566

Amortization of debt discount/premium, net

503 1,402 1,020 2,776

Loss (gain) in fair value of derivative financial instruments 629 (388) 1,379 (6,805)

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Interest expense on financing obligations and other liabilities

715 664 1,405 1,326

Capitalized interest (345) (71) (442) (205)

Total $ 23,261 $ 30,208 $ 46,956 $ 60,229

The decrease in total interest expense for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily due to an $11,352,000 decrease in interest expense related to a decrease in debt balances.

Such decrease in debt balances was predominately a result of the payoff of our variable-rate mortgage loans payable and paydown of our variable-rate lines of credit using net proceeds raised from equity offerings during 2024.

Such decrease in total interest expense for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was partially offset by the $7,167,000 change from gain to loss in fair value of derivative financial instruments.

The decrease in total interest expense for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, was primarily due to the $7,249,000 and $18,638,000, respectively, decrease in interest expense related to a decrease in debt balances.

Such decrease in debt balances was predominantly a result of the payoff of our variable-rate mortgage loans payable and paydown of our variable-rate lines of credit using net proceeds raised from our equity offerings, since February 2024.

The decrease in total interest expense for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was partially offset by a $1,298,000 loss on extinguishment of debt primarily due to debt payoff of one of our fixed-rate mortgage loans payable in May 2025 and a $1,017,000 change from gain to loss in fair value of derivative financial instruments.

The decrease in total interest expense for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was partially offset by the $8,184,000 change from gain to loss in fair value of derivative financial instruments.

Gain or Loss on Dispositions of Real Estate Investments

For the three months ended March 31, 2025, we recognized an aggregate loss on sale of $359,000 primarily related to the sale of one SHOP and one integrated senior health campus.

For the three months ended March 31, 2024, we recognized an aggregate net gain on dispositions of our real estate investments of $2,263,000 related to the sale of two OM buildings and one SHOP.

See Note 3, Real Estate Investments, Net — Dispositions of Real Estate Investments, to our accompanying condensed consolidated financial statements for a further discussion.

For the three months ended June 30, 2025, we recognized an aggregate net loss on disposition of $2,676,000 primarily related to the sale of three OM buildings and one ISHC.

For the six months ended June 30, 2025, we recognized an aggregate net loss on disposition of $3,035,000 primarily related to the sale of one SHOP, two ISHC and three OM buildings.

See Note 3, Real Estate Investments — Dispositions of Real Estate Investments, to our accompanying condensed consolidated financial statements for a further discussion.

For the three months ended June 30, 2024, we did not have any real estate investment dispositions.

For the six months ended June 30, 2024, we recognized an aggregate net gain on dispositions of our real estate investments of $2,261,000 related to the sale of two OM buildings and one SHOP.

Impairment of Real Estate Investments

As we continued to evaluate our properties based on their historical operating performance and our expected holding period, for the three months ended March 31, 2025, we determined that one of our OM buildings was impaired and recognized an impairment charge of $21,706,000.

See Note 3, Real Estate Investments, Net — Impairment of Real Estate Investments, to our accompanying condensed consolidated financial statements for a further discussion.

For the three months ended March 31, 2024, we did not recognize impairment charges on real estate investments.

As we continued to evaluate our properties based on their historical operating performance and our expected holding period, for the three and six months ended June 30, 2025, we recognized an aggregate impairment charge of $12,659,000 and $34,365,000, respectively, for five and six OM buildings, respectively.

See Note 3, Real Estate Investments — Impairment of Real Estate Investments, to our accompanying condensed consolidated financial statements for a further discussion.

For the three and six months ended June 30, 2024, we did not recognize any impairment charges on real estate investments.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations, net proceeds from the issuances of equity securities, including through our ATM Offering (as defined and described at Note 12, Equity – Common Stock, to our accompanying condensed consolidated financial statements), borrowings under our line of credit and proceeds from the disposition of real estate investments.

Our principal sources of liquidity are cash flows from operations, net proceeds from the issuances of equity securities, including through our ATM Offering (as defined and described at Note 12, Equity — Common Stock, to our accompanying condensed consolidated financial statements), borrowings under our line of credit and proceeds from the dispositions of real estate investments.

For the next 12 months, our principal liquidity needs are to:

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The capital plan for each investment is adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs.

As of March 31, 2025, we had $13,654,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures.

Based on the budget for the properties we owned as of March 31, 2025, we estimate that expenditures for capital and tenant improvements as of such date are approximately $61,066,000 for the remaining nine months of 2025, although actual expenditures are predominantly discretionary and are dependent on many factors which are not presently known.

As of June 30, 2025, we had $11,902,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures.

Based on the budget for the properties we owned as of June 30, 2025, we estimate that expenditures for capital and tenant improvements as of such date are approximately $45,260,000 for the remaining six months of 2025, although actual expenditures are predominantly discretionary and are dependent on many factors which are not presently known.

Contractual Obligations

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(iii) operating lease obligations;

and (iv) financing and other obligations as of March 31, 2025 (in thousands):

and (iv) financing and other obligations as of June 30, 2025 (in thousands):

Payments Due by Period

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— 550,000 — — 550,000

Interest payments — variable-rate debt (based on rates in effect as of March 31, 2025)

Interest payments — variable-rate debt (based on rates in effect as of June 30, 2025)

15,855 33,002 — — 48,857

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See Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for a further discussion.

As of March 31, 2025, our borrowing capacity under the 2024 Credit Facility was $1,150,000,000.

As of March 31, 2025, our borrowings outstanding under such credit facility was $643,000,000, and we had $507,000,000 available on such facility.

As of June 30, 2025, our borrowing capacity under the 2024 Credit Facility was $1,150,000,000.

As of June 30, 2025, our borrowings outstanding under such credit facility was $550,000,000, and we had $600,000,000 available on such facility.

We believe that such resource will be sufficient to satisfy our cash requirements for the next 12 months and the longer term thereafter.

The following table sets forth changes in cash flows (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Cash, cash equivalents and restricted cash — beginning of period $ 123,301 $ 90,782

Net cash provided by (used in) operating activities 60,616 (5,954)

Net cash provided by operating activities 132,091 53,448

Net cash used in investing activities (94,862) (65,534)

Net cash (used in) provided by financing activities (23,776) 44,962

Net cash provided by financing activities 9,348 18,935

Effect of foreign currency translation on cash, cash equivalents and restricted cash 113 (29)

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Operating Activities

For the three months ended March 31, 2025 and 2024, cash flows from operating activities were primarily related to property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness.

For the six months ended June 30, 2025 and 2024, cash flows from operating activities were primarily related to property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness.

In general, cash flows from operating activities are affected by the timing of cash receipts and payments, and have increased since 2024 primarily due to improved resident occupancy and expense management at our properties operated under a RIDEA structure.

The change from net cash used in operating activities to net cash provided by operating activities for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily driven by the increase in operating performance of our real estate investments in our integrated senior health campuses and SHOP segments, as well as a decrease in interest paid on our outstanding indebtedness as a result of mortgage payoffs and paydowns on our lines of credit using net proceeds from our equity offerings in 2024 and 2025.

The increase in net cash provided by operating activities for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily driven by the increase in operating performance of our real estate investments in our ISHC and SHOP segments, as well as a decrease in interest paid on our outstanding indebtedness as a result of mortgage loan payoffs and paydowns on our lines of credit using net proceeds from our equity offerings in 2024 and 2025.

See the “Results of Operations” section above for a further discussion.

Investing Activities

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, the increase in net cash used in investing activities was primarily due to a $16,090,000 increase in cash paid to acquire real estate investments, a $4,947,000 decrease in proceeds from dispositions of real estate investments and $3,355,000 in deposits paid in pursuit of future real estate investments.

For the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, the increase in net cash used in investing activities was primarily due to a $35,458,000 increase in cash paid to acquire real estate investments, a $9,702,000 increase in developments and capital expenditures, a $4,110,000 decrease in net principal repayments on real estate notes receivable and a $1,606,000 increase in deposits paid in pursuit of future real estate investments, partially offset by a $21,908,000 increase in proceeds from dispositions of real estate investments.

Financing Activities

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, the change from net cash provided by financing activities to net cash used in financing activities was primarily due to a $725,134,000 decrease in gross equity offering proceeds and a $22,952,000 increase in distributions paid.

Such amounts were partially offset by a $602,862,000 decrease in net payments on our lines of credit and mortgage loans payable primarily using the net proceeds from equity offerings, a $46,943,000 decrease in the payment of offering costs, a $5,579,000 decrease in deferred financing costs paid, as well as a $25,312,000 decrease in cash paid to redeem certain equity interests owned in Trilogy Investors, LLC.

For the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, the decrease in net cash provided by financing activities was primarily due to a $536,500,000 decrease in gross equity offering proceeds and a $29,831,000 increase in distributions paid.

Such amounts were partially offset by a $467,839,000 decrease in net payments on our lines of credit and mortgage loans payable primarily using the net proceeds from equity offerings, a $47,156,000 decrease in the payment of offering costs, a $36,083,000 decrease in cash paid to redeem certain equity interests owned in Trilogy Investors, LLC, as well as a $6,856,000 decrease in deferred financing costs paid.

Distributions

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The amount of the quarterly distributions paid to our common stockholders was determined by our board and was dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our qualification as a REIT under the Code.

The following tables reflect distributions we paid for the three months ended March 31, 2025 and 2024, and the sources of distributions as compared to cash flows from operations or funds from operations attributable to controlling interest, or FFO, a non-GAAP financial measure (dollars in thousands):

Three Months Ended March 31,

Distributions paid in cash $ 39,548 $ 16,596

Sources of distributions:

Cash flows from operations $ 39,548 100 % $ — — %

Proceeds from borrowings — — 16,596 100

$ 39,548 100 % $ 16,596 100 %

Three Months Ended March 31,

Distributions paid in cash $ 39,548 $ 16,596

Sources of distributions:

NAREIT FFO attributable to controlling interest $ 39,548 100 % $ 16,596 100 %

Proceeds from borrowings — — — —

$ 39,548 100 % $ 16,596 100 %

As of March 31, 2025, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and some portion of a distribution to our stockholders may have been paid from borrowings.

For a further discussion of FFO, including a reconciliation of our GAAP net loss to FFO, see “Funds from Operations and Normalized Funds from Operations” below.

As of June 30, 2025, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and some portion of a distribution to our stockholders may have been paid from borrowings.

Mortgage Loans Payable, Net

For a discussion of our mortgage loans payable, see Note 7, Mortgage Loans Payable, Net, to our accompanying condensed consolidated financial statements.

For a discussion of our mortgage loans payable, see Note 7, Mortgage Loans Payable, to our accompanying condensed consolidated financial statements.

Lines of Credit and Term Loan

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A significant liquidity need is the payment of principal and interest on our outstanding indebtedness.

As of March 31, 2025, we had $1,023,241,000 of fixed-rate mortgage loans payable outstanding secured by our properties.

As of March 31, 2025, we had $643,000,000 outstanding, and $507,000,000 remained available under our line of credit.

The weighted average effective interest rate on our outstanding debt, factoring in our interest rate swaps, was 4.39% per annum as of March 31, 2025.

See Note 7, Mortgage Loans Payable, Net, and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

As of June 30, 2025, we had $1,004,016,000 of fixed-rate mortgage loans payable outstanding secured by our properties.

As of June 30, 2025, we had $550,000,000 outstanding, and $600,000,000 remained available under our line of credit.

The weighted average effective interest rate on our outstanding debt, factoring in our interest rate swaps, was 4.33% per annum as of June 30, 2025.

See Note 7, Mortgage Loans Payable, and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

We are required by the terms of certain loan documents to meet various financial and non-financial covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ratios.

As of March 31, 2025, we were in compliance with all such covenants and requirements on our mortgage loans payable and our line of credit and term loan.

As of June 30, 2025, we were in compliance with all such covenants and requirements on our mortgage loans payable and our line of credit and term loan.

If any future covenants are violated, we anticipate seeking a waiver or amending the debt covenants with the lenders when and if such event should occur.

31 unchanged sentences

The following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to FFO and Normalized FFO for the periods presented below (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2025 2024 2025 2024

Net income (loss) $ 10,079 $ 2,926 $ 3,239 $ (78)

Depreciation and amortization related to real estate — consolidated properties 41,850 45,226 82,865 87,955

Depreciation and amortization related to real estate — unconsolidated entities 506 186 1,003 372

Impairment of real estate investment — consolidated properties 21,706 —

Impairment of real estate investments — consolidated properties 12,659 — 34,365 —

Loss (gain) on dispositions of real estate investments, net — consolidated properties 2,676 2 3,035 (2,261)

Net loss (income) attributable to noncontrolling interests 36 (888)

Depreciation, amortization, impairment and net gain/loss on dispositions — noncontrolling interests (892) (5,462)

Net income attributable to noncontrolling interests (171) (947) (135) (1,835)

Depreciation, amortization, impairments and net gain/loss on dispositions — noncontrolling interests (803) (5,647) (1,695) (11,109)

NAREIT FFO attributable to controlling interest $ 66,796 $ 41,746 $ 122,677 $ 73,044

22 unchanged sentences

To facilitate understanding of this financial measure, the following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to NOI for the periods presented below (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2025 2024 2025 2024

Net income (loss) $ 10,079 $ 2,926 $ 3,239 $ (78)

General and administrative 14,943 11,746 28,098 23,574

4 unchanged sentences

Loss (gain) on dispositions of real estate investments, net 2,676 2 3,035 (2,261)

Impairment of real estate investment 21,706 —

Impairment of real estate investments 12,659 — 34,365 —

Loss from unconsolidated entities 1,238 1,035 3,086 2,240

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis