American Healthcare REIT, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The use of the words “we,” “us” or “our” refers to American Healthcare REIT, Inc. and its subsidiaries, including American Healthcare REIT Holdings, LP, except where otherwise noted. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to promote understanding of our results of operations and financial condition. 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 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. Forward-Looking Statements Certain statements contained in this report, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995 (collectively with the “Securities Act and Exchange Act, or the Acts”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the SEC. Any such forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, our management and involve uncertainties that could significantly affect our financial results. Such statements include, but are not limited to: (i) statements about our plans, strategies, initiatives and prospects, including any future capital-raising initiatives and planned or future acquisitions or dispositions of properties and other assets; and (ii) statements about our future results of operations, capital expenditures and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: changes in economic conditions generally and the real estate market specifically; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs, and regulations or proposed regulations governing the operations and sales of health care properties; the availability of capital; our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; changes in interest rates, and foreign currency risk; competition in the real estate industry; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs; the success of our investment strategy; cybersecurity incidents and information technology failures, including unauthorized access to our computer systems and/or our vendors’ computer systems and our third-party management companies’ computer systems and/or their vendors’ computer systems; our ability to retain our executive officers and key employees; 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. These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and undue reliance should not be placed on such statements. We undertake no obligation to update any such statements that may become untrue because of subsequent events. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC. 39 Table of Contents Overview and Background American Healthcare REIT, Inc., a Maryland corporation, is a self-managed REIT that acquires, owns and operates a diversified portfolio of clinical healthcare real estate properties, focusing primarily on senior housing, skilled nursing facilities, or SNFs, outpatient medical, or OM, buildings, and other healthcare-related facilities. 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, 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. We generally seek investments that produce current income; however, we have selectively developed, and may continue to selectively develop, healthcare real estate properties. We have elected to be taxed as a REIT for U.S. federal income tax purposes. We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, or the Code. Operating Partnership 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 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. Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer, President and director, and Mathieu B. Streiff, one of our non-executive directors; and (ii) a wholly owned subsidiary of Griffin Capital Company, LLC. 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. Real Estate Investments Portfolio We currently operate through four reportable business segments: 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 Our accompanying condensed consolidated financial statements are prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying footnotes. These estimates are made and evaluated on an ongoing basis using information that is currently available, as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions. The complete listing of our Critical Accounting Estimates was previously disclosed in our 2024 Annual Report on Form 10-K, as filed with the SEC on February 28, 2025, and there have been no material changes to our Critical Accounting Estimates as disclosed therein, except as included within Note 2, Summary of Significant Accounting Policies, to our accompanying condensed consolidated financial statements. Interim Unaudited Financial Data For a discussion of interim unaudited financial data, see Note 2, Summary of Significant Accounting Policies — Interim Unaudited Financial Data, to our accompanying condensed consolidated financial statements. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2024 Annual Report on Form 10-K, as filed with the SEC on February 28, 2025. Acquisitions and Dispositions in 2025 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. 40 Table of Contents Factors Which May Influence Results of Operations Other than the effects of inflation discussed below, as well as other national economic conditions affecting real estate generally, and as otherwise disclosed in our risk factors, we are not aware of any material trends or uncertainties that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, disposition, management and operation of our properties. 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. Inflation 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 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. These provisions include negotiated rental increases, which historically range from 2% to 3% per year, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements. However, due to the long-term nature of existing leases, among other factors, the leases may not reset frequently enough to cover inflation. In addition, inflation has also caused an increase in the cost of our variable-rate debt due to historically rising interest rates. See Item 3, Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk, of this Quarterly Report on Form 10-Q for a further discussion. Scheduled Lease Expirations 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 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 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. Our primary sources of revenue include rent generated by our leased, non-RIDEA properties and resident fees and services revenue from our RIDEA properties. Our primary expenses include property operating expenses and rental expenses. In general, we expect such revenues and expenses related to our portfolio of RIDEA properties to increase in the future due to an overall increase in occupancies, resident fees and pricing of care services provided. 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 June 30, 2025, we operated through four reportable business segments: ISHC, OM, SHOP and triple-net leased properties. 41 Table of Contents 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; and our acquisitions and dispositions of investments. Additional information behind the changes in our consolidated results of operations is discussed in more detail below. 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): June 30, 2025 2024 Number of Buildings/ Campuses Aggregate Contract Purchase Price Leased % (1) Number of Buildings/ Campuses Aggregate Contract Purchase Price Leased % (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 % SHOP 84 985,107 87.0 % 78 889,928 85.5 % Triple-net leased properties 20 373,165 100 % 28 469,965 100 % 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 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. Revenues 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 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. The amount of revenues generated by our non-RIDEA properties is dependent on our ability to maintain tenant occupancy rates of currently leased space and to lease available space at the then existing rental rates. Revenues by reportable segment consisted of the following for the periods presented below (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Resident Fees and Services Revenue ISHC $ 423,825 $ 393,774 $ 847,189 $ 786,896 SHOP 77,460 64,239 151,272 123,235 Total resident fees and services revenue 501,285 458,013 998,461 910,131 Real Estate Revenue OM 31,254 33,682 64,448 67,749 Triple-net leased properties 9,964 12,886 20,197 26,234 Total real estate revenue 41,218 46,568 84,645 93,983 Total revenues $ 542,503 $ 504,581 $ 1,083,106 $ 1,004,114 Resident Fees and Services Revenue 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 42 Table of Contents 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 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 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 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 % Total property operating expenses $ 426,285 85.0 % $ 402,564 87.9 % $ 858,708 86.0 % $ 806,193 88.6 % Rental Expenses OM $ 12,192 39.0 % $ 12,671 37.6 % $ 24,877 38.6 % $ 25,760 38.0 % Triple-net leased properties 798 8.0 % 652 5.1 % 1,756 8.7 % 1,290 4.9 % Total rental expenses $ 12,990 31.5 % $ 13,323 28.6 % $ 26,633 31.5 % $ 27,050 28.8 % 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. 43 Table of Contents 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 June 30, Six Months Ended June 30, 2025 2024 2025 2024 Interest expense: Lines of credit and term loan and derivative financial instruments $ 9,155 $ 13,714 $ 18,805 $ 30,924 Mortgage loans payable 10,529 13,219 21,176 27,695 Amortization of deferred financing costs: Lines of credit and term loan 304 731 930 1,364 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) Loss on debt extinguishments 1,298 — 1,806 1,280 Interest on finance lease liabilities 3 151 7 308 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 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 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 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. 44 Table of Contents 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 dispositions of real estate investments. For the next 12 months, our principal liquidity needs are to: (i) fund property operating expenses and general and administrative expenses; (ii) meet our debt service requirements (including principal and interest); (iii) fund the acquisition of real estate investments, development activities and capital expenditures; and (iv) make distributions to our stockholders, as required for us to continue to qualify as a REIT. We believe that the sources of liquidity described above will be sufficient to satisfy our cash requirements for the next 12 months and thereafter. We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources. Material Cash Requirements Capital Improvement Expenditures A capital plan for each investment is established upon acquisition that contemplates the estimated capital needs of that investment, including costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include operating cash generated by the investment, capital reserves, a line of credit or other loan established with respect to the investment, other borrowings or additional equity investments from us and joint venture partners. 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 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 The following table provides information with respect to: (i) the maturity and scheduled principal repayment of our secured mortgage loans payable and line of credit and term loan; (ii) interest payments on our mortgage loans payable and line of credit and term loan, excluding the effect of our interest rate swaps; (iii) operating lease obligations; and (iv) financing and other obligations as of June 30, 2025 (in thousands): Payments Due by Period 2025 2026-2027 2028-2029 Thereafter Total Principal payments — fixed-rate debt $ 17,392 $ 216,705 $ 156,926 $ 612,993 $ 1,004,016 Interest payments — fixed-rate debt 18,670 65,427 48,165 320,407 452,669 Principal payments — variable-rate debt — 550,000 — — 550,000 Interest payments — variable-rate debt (based on rates in effect as of June 30, 2025) 15,855 33,002 — — 48,857 Operating lease obligations 14,673 60,174 58,686 93,578 227,111 Financing and other obligations 2,113 8,072 35,651 91 45,927 Total $ 68,703 $ 933,380 $ 299,428 $ 1,027,069 $ 2,328,580 Distributions For information on distributions, see the “Distributions” section below. 45 Table of Contents Credit Facility We are party to a credit agreement, as amended, with an aggregate maximum principal amount up to $1,150,000,000, or the 2024 Credit Facility. See Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for a further discussion. 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. Cash Flows The following table sets forth changes in cash flows (in thousands): Six Months Ended June 30, 2025 2024 Cash, cash equivalents and restricted cash — beginning of period $ 123,301 $ 90,782 Net cash provided by operating activities 132,091 53,448 Net cash used in investing activities (94,862) (65,534) Net cash provided by financing activities 9,348 18,935 Effect of foreign currency translation on cash, cash equivalents and restricted cash 113 (29) Cash, cash equivalents and restricted cash — end of period $ 169,991 $ 97,602 The following summary discussion of our changes in our cash flows is based on our accompanying condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below. Operating Activities 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 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 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 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. 46 Table of Contents Distributions Our board shall authorize distributions, if any, on a quarterly basis, in such amounts as our board shall determine, and each quarterly record date for the purposes of such distributions shall be determined and authorized by our board in the last month of each calendar quarter until such time as our board changes our distribution policy. Our board has authorized a quarterly distribution equal to $0.25 per share to holders of our common stock, which we expect will continue to be paid in the future, though we cannot guarantee that our distributions will continue at the current value or at all. Such quarterly distributions were equal to an annualized distribution rate of $1.00 per share and paid in cash, only from legally available funds. 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. 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, to our accompanying condensed consolidated financial statements. Lines of Credit and Term Loan For a discussion of our lines of credit and term loan, see Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements. REIT Requirements In order to maintain our qualification as a REIT for U.S. federal income tax purposes, we are required to distribute to our stockholders a minimum of 90.0% of our REIT taxable income. Existing Internal Revenue Service, or IRS, guidance includes a safe harbor pursuant to which publicly offered REITs can satisfy the distribution requirement by distributing a combination of cash and stock to stockholders. In general, to qualify under the safe harbor, each stockholder must elect to receive either cash or stock, and the aggregate cash component of the distribution to stockholders must represent at least 20.0% of the total distribution . In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collection of receivables, we may seek to obtain capital to make distributions by means of unsecured and secured debt financing through one or more unaffiliated third parties. We may also make distributions with cash from capital transactions including, without limitation, the sale of one or more of our properties. Commitments and Contingencies For a discussion of our commitments and contingencies, see Note 10, Commitments and Contingencies, to our accompanying condensed consolidated financial statements. Debt Service Requirements A significant liquidity need is the payment of principal and interest on our outstanding indebtedness. 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 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. However, there can be no assurances that management will be able to effectively achieve such plans. 47 Table of Contents Funds from Operations and Normalized Funds from Operations Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, a non-GAAP financial measure, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. The use of funds from operations is recommended by the REIT industry as a supplemental performance measure, and our management uses FFO to evaluate our performance over time. FFO is not equivalent to our net income (loss) as determined under GAAP. We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on funds from operations approved by the Board of Governors of NAREIT, or the White Paper. The White Paper defines funds from operations as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets, gains or losses upon consolidation of a previously held equity interest, and impairment writedowns of certain real estate assets and investments, plus depreciation and amortization related to real estate, and after adjustments for unconsolidated partnerships and joint ventures. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that impairments are based on estimated future undiscounted cash flows. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations. Our FFO calculation complies with NAREIT’s policy described above. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate-related depreciation and amortization and impairments, provides a further understanding of our operating performance to investors, industry analysts and our management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net income (loss). We define normalized FFO attributable to controlling interest, or Normalized FFO, as FFO further adjusted for the following items included in the determination of GAAP net income (loss): expensed acquisition fees and costs, which we refer to as business acquisition expenses; amounts relating to changes in deferred rent and amortization of above- and below-market leases; the non-cash impact of changes to our equity instruments; non-cash or non-recurring income or expense; the non-cash effect of income tax benefits or expenses; capitalized interest; impairment of intangible assets and goodwill; amortization of closing costs on debt security investments; mark-to-market adjustments included in net income (loss); gains or losses included in net income (loss) from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan; and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect Normalized FFO on the same basis. However, FFO and Normalized FFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) as an indicator of our operating performance, GAAP cash flows from operations as an indicator of our liquidity or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and Normalized FFO measures and the adjustments to GAAP in calculating FFO and Normalized FFO. Presentation of this information is intended to provide useful information to investors, industry analysts and management as they compare the operating performance used by the REIT industry, although it should be noted that not all REITs calculate funds from operations and normalized funds from operations the same way, so comparisons with other REITs may not be meaningful. FFO and Normalized FFO should be reviewed in conjunction with other measurements as an indication of our performance. None of the SEC, NAREIT, or any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or Normalized FFO. In the future, the SEC, NAREIT, or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and we would have to adjust our calculation and characterization of FFO or Normalized FFO. 48 Table of Contents 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 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 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 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 Business acquisition expenses $ (79) $ 15 $ 1,758 $ 2,797 Amortization of above- and below-market leases 355 419 768 845 Amortization of closing costs — debt security investment 12 80 49 156 Change in deferred rent (720) (556) (1,392) (1,145) Non-cash impact of changes to equity instruments 3,190 2,765 5,741 4,700 Capitalized interest (345) (71) (442) (205) Loss on debt extinguishments 1,298 — 1,806 1,280 Loss (gain) in fair value of derivative financial instruments 629 (388) 1,379 (6,805) Foreign currency (gain) loss (2,742) (82) (4,158) 344 Adjustments for unconsolidated entities 5 (138) 5 (248) Adjustments for noncontrolling interests (22) (50) (72) 75 Normalized FFO attributable to controlling interest $ 68,377 $ 43,740 $ 128,119 $ 74,838 Net Operating Income Net operating income, or NOI, is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from properties before general and administrative expenses, business acquisition expenses, depreciation and amortization, interest expense, gain or loss in fair value of derivative financial instruments, gain or loss on dispositions of real estate investments, impairment of real estate investments, impairment of intangible assets and goodwill, income or loss from unconsolidated entities, gain on re-measurement of previously held equity interests, foreign currency gain or loss, other income or expense and income tax benefit or expense. NOI is not equivalent to our net income (loss) as determined under GAAP and may not be a useful measure in measuring operational income or cash flows. Furthermore, NOI should not be considered as an alternative to net income (loss) as an indication of our operating performance or as an alternative to cash flows from operations as an indication of our liquidity. NOI should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss). NOI should be reviewed in conjunction with other measurements as an indication of our performance. We believe that NOI is an appropriate supplemental performance measure to reflect the performance of our operating assets because NOI excludes certain items that are not associated with the operations of our properties. We believe that NOI is a widely accepted measure of comparative operating performance in the real estate community and is useful to investors in understanding the profitability and operating performance of our property portfolio. However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount. 49 Table of Contents 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 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 Business acquisition expenses (79) 15 1,758 2,797 Depreciation and amortization 41,941 45,264 83,055 88,031 Interest expense 22,632 30,596 45,577 67,034 Loss (gain) in fair value of derivative financial instruments 629 (388) 1,379 (6,805) Loss (gain) on dispositions of real estate investments, net 2,676 2 3,035 (2,261) Impairment of real estate investments 12,659 — 34,365 — Loss from unconsolidated entities 1,238 1,035 3,086 2,240 Foreign currency (gain) loss (2,742) (82) (4,158) 344 Other income, net (1,480) (3,106) (3,005) (4,969) Income tax expense 732 686 1,336 964 Net operating income $ 103,228 $ 88,694 $ 197,765 $ 170,871