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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-19 · 558 added, 430 removed, 409 unchanged (71% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with the information contained in "Item 6.

Selected Financial Data" and our historical consolidated financial statements and related notes contained in "Item 8.

This discussion and analysis should be read in conjunction with our historical consolidated financial statements and related notes contained in "Item 8.

Financial Statements and Supplementary Data." In addition to historical information, this discussion and analysis may contain forward-looking statements that involve risks, uncertainties, and assumptions, which could cause actual results to differ materially from management's expectations.

Please see additional risks and uncertainties described in "Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995" for more information.

See additional risks and uncertainties described in "Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995" for more information.

Factors that could cause such differences include those described in this section and "Item 1A.

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Executive Overview and Recent Developments

As of February 1, 2020, we are the largest operator of senior living communities in the United States based on total capacity, with 743 communities in 45 states and the ability to serve approximately 65,000 residents.

As of December 31, 2020, we are the largest operator of senior living communities in the United States based on total capacity, with 726 communities in 43 states and the ability to serve approximately 64,000 residents.

We offer our residents access to a broad continuum of services across the most attractive sectors of the senior living industry.

We operate and manage independent living,

assisted living, memory care, and continuing care retirement communities ("CCRCs").

We operate and manage independent living, assisted living, memory care, and CCRCs.

We also offer a range of home health, hospice, and outpatient therapy services to more than 17,000 patients as of that date.

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Our goal is to be the first choice in senior living by being the nation's most trusted and effective senior living provider and employer.

We believe there are significant opportunities to deliver stockholder value as we execute on our strategy to achieve this goal.

We continue to execute our core operational strategy that we initiated in early 2018, and we believe successful execution on that strategy provides the best opportunity for us to create stockholder value.

We have supplemented our operational strategy with initiatives intended to complement and enhance our core operational efforts and to position us for future growth and success as we encounter changes and trends in demographics, technology, and healthcare delivery methods.

We believe there are significant opportunities to create and deliver stockholder value as we execute on our strategy to achieve this goal.

Our refined strategy is focused on these priorities:

Continued Operational Improvement and Simplification.

We are focused on our core senior living communities and intend to continue to drive improvements in our senior living portfolio by winning locally.

• Continued Operational Improvement and Efficiency.

We are focused on our core senior living communities and intend to continue to drive operational improvements.

Through our "win locally" initiative, we intend to provide choices for high quality care and personalized service by caring associates while leveraging our industry-leading scale and experience.

Such efforts include improvements to our sales and marketing process, prioritizing communities with the most opportunities for improvement, and ensuring that our communities are ready for new competition.

We also continue to focus on attracting, engaging, developing, and retaining the best associates by maintaining a compelling value proposition in the areas of compensation, leadership, career development, and meaningful work.

We believe engaged associates lead to an enhanced resident experience, lower turnover, and, ultimately, improved operations.

Such efforts include optimizing our sales and marketing processes, prioritizing communities with the most opportunities for growth, and ensuring that our communities and their programming are competitive in the market.

We also continue to focus on attracting, engaging, developing, and retaining the best associates by maintaining a compelling value proposition in the areas of leadership, career development, and meaningful work.

We believe engaged associates lead to lower turnover, improved operations, and ultimately an enhanced resident experience that drives accelerated growth.

To sharpen our focus on our core senior living operations, we are (and have been) executing on initiatives to reduce the complexity of our business and to ensure appropriate risk-reward tradeoffs in our highly regulated product lines.

Such initiatives include exiting our entry fee CCRC business and continuing to optimize our management services business.

Such initiatives include exiting substantially all our entry fee CCRC business in 2020 (which also significantly reduced the number of skilled nursing facilities we operate) and continuing to optimize our management services business.

• Senior Living Portfolio.

Since initiating our operational turnaround strategy in early 2018, we have continued our portfolio optimization initiative through which we have disposed of owned and leased communities and restructured leases.

Such transactions have included restructuring our leases with our three largest landlords, sales of 36 owned communities, and dispositions of substantially all of our interests in unconsolidated ventures (including our equity interests in 14 entry fee CCRCs).

As we emerge from our disposition phase, we intend to (i) increase our ownership percentage in our senior housing portfolio through acquiring leased or managed communities and exiting underperforming leases when possible, (ii) expand our footprint and services in core markets where we have, or can achieve, a clear leadership position, (iii) formalize and execute an ongoing capital recycling program, including opportunistically selling certain communities to invest in expansion of our existing communities and the acquisition or development of newer communities with lower capital expenditure needs, and (iv) pivot back to portfolio growth through targeted development, investment, and acquisition opportunities such as de novo development and selective acquisitions of senior living communities and operating companies.

We will continue to invest in our development capital expenditures program through which we expand, renovate, reposition, and redevelop selected existing senior living communities where economically advantageous.

For 2020, we expect to continue to pursue non-development capital expenditures at higher-than-typical amounts, but at significantly less than 2019 amounts.

Beginning in 2021, we expect our annual community-level capital expenditures to be between $2,000 and $2,500 per weighted average unit.

Such transactions have included restructuring our leases with our three largest landlords, sales and conveyance of owned communities, and dispositions of substantially all of our remaining ownership interests in unconsolidated ventures, including our entry fee CCRC venture with Healthpeak.

As we move forward in 2021, we intend to continue to (i) expand our footprint and services in core markets where we have, or can achieve, a clear leadership position, (ii) execute an ongoing capital recycling program through acquiring leased or managed communities and exiting underperforming owned assets or leases when possible, and (iii) pivot back to portfolio growth through targeted development, investment, and acquisition opportunities.

• Expansion of Healthcare and Service Platform.

Our vision is to enable those we serve to live well by offering the most integrated and highest-quality healthcare and wellness platform in the senior living industry.

We intend to pilot a more integrated healthcare service model in certain markets in 2020.

We also intend to pursue initiatives designed to accelerate growth in our healthcare services business, primarily by growing our hospice and home health business lines, and to grow our private duty business.

Such initiatives may include further acquisitions of hospice agencies or certificates of need in our geographic footprint, further expansion of our services to seniors living outside our communities, implementation of improvements to our sales and marketing efforts associated with our healthcare services business, and pursuit of additional or expanded relationships with managed care providers.

We believe the successful execution of these initiatives will increase our revenues and improve the results of operations of our Health Care Services segment and that the overall implementation of our integrated

healthcare strategy will benefit our core senior housing business by increasing move-ins, improving resident health and wellbeing, and increasing our average length of stay and occupancy.

Our vision is to enable those we serve to live well by offering our residents the highest-quality healthcare and wellness platform in the senior living industry.

We intend to further integrate our healthcare service model in certain markets in 2021.

We also intend to pursue initiatives designed to accelerate growth in our healthcare services offered to residents within our communities and private duty services business.

Such initiatives may include implementation of improvements to our sales and marketing efforts associated with our healthcare services, pursuit of additional or expanded relationships with managed care providers, and further development of healthcare relationships to capitalize on growth opportunities.

We believe the successful execution of these initiatives and our healthcare strategy will drive incremental revenue by increasing move-ins, improving resident health and wellbeing, and as a result extend residents' average length of stay and increase occupancy.

We also believe that we will improve the results of operations as we further develop as a partner of choice for healthcare service or payor organizations seeking to provide services within our communities and/or improve health outcomes at an overall lower cost of care.

• Driving Innovation and Leveraging Technology.

We are engaged in a variety of innovation initiatives and over time plan to pilot and test new ideas, technologies, and operating models in order to enhance our residents' experience, improve outcomes, and increase average length of stay and occupancy.

With our technology platform, we also expect to identify solutions to reduce complexity, increase productivity, lower costs, and increase our ability to partner with third parties.

We are engaged in a variety of innovation initiatives and over time plan to pilot and test new ideas, technologies, and operating models in order to enhance our residents' engagement and experience, improve outcomes, and increase average length of stay and occupancy.

With our technology platform, we also expect to identify solutions to reduce complexity, increase productivity, lower costs, and increase our ability to collaborate with third parties.

COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted, and likely will continue to adversely impact the senior living industry and our business.

Due to the average age and prevalence of chronic medical conditions among our residents and patients, they generally are at disproportionately higher risk of hospitalization and adverse outcomes if they contract COVID-19.

to serve and care for seniors at our communities and their homes through the pandemic.

A significant portion of our corporate support associates have worked from home since March 2020.

The health and wellbeing of our residents, patients, and associates is and has been our highest priority.

We initiated our COVID-19 preparation efforts in January 2020.

Our response efforts center on infection prevention and control protocols, including following requirements and guidance of federal, state, and local governments and agencies, including the CDC and the CMS.

We have enhanced and reinforced training our associates in such protocols and continue to actively monitor government requirements and guidance and adapt our policies, procedures, and response efforts when applicable.

Upon confirmation of positive COVID-19 exposure at a community, we take actions intended to minimize further exposure, including associates' adhering to personal protection protocols, isolating residents or finding placement in an alternate care setting to best address their care needs, and in some cases, restricting new resident admissions, as directed by local health authorities.

Seeking to prevent the introduction of COVID-19 into our communities, and to help control further exposure to infections within communities, in March 2020 we began restricting visitors at all our communities to essential healthcare personnel and certain compassionate care situations, screening associates and permitted visitors, suspending group outings, modifying communal dining and programming to comply with social distancing guidelines and, in most cases, implementing in-room only dining and activities programming, requesting that residents refrain from leaving the community unless medically necessary, and requiring new residents and residents returning from a hospital or nursing home to isolate in their apartment for fourteen days.

These restrictions were in place across our portfolio for the three months ended June 30, 2020.

We have adopted a framework for determining when to ease restrictions at each of our communities based on several criteria, including regulatory requirements and guidance, completion of baseline testing at the community, and the presence of current confirmed positive COVID-19 cases.

Under this framework, we began easing restrictions on a community-by-community basis in July 2020 where regulatory requirements and guidance allowed, which easing may have included permitting outdoor, and in some cases, indoor visits with families, reduced capacity or socially distanced communal dining, limited communal activities programming, and in-person prospective resident visits.

Although we are hopeful that administration of the vaccine to our residents and associates will enable us to further ease restrictions at our communities, those restrictions may continue for some time, and we may revert to more restrictive measures if the pandemic worsens, as necessary to comply with regulatory requirements, or at the direction of state or local health authorities.

In April 2020, we proactively commenced a resident and associate testing program for our communities.

We undertook the program to identify positive, including asymptomatic, individuals, to better understand how our infection protocols are working, to help minimize the exposure to residents and associates of someone known to be COVID-19 positive, and in some cases to comply with state and local testing requirements.

In July 2020, we completed baseline testing at all of our communities, and we have continued testing residents and associates at many of our communities.

We also continue to utilize rapid point of care antigen test kits supplied by HHS at those of our communities with CLIA waivers.

Our testing program has accumulated approximately 320,000 test results.

Approximately 1.2% of our residents were known to have current COVID-19 positive test results on February 22, 2021.

Further testing, whether undertaken proactively, as a result of regulatory requirements, or at the direction of state or local health authorities, may result in significant additional expense, additional temporary restrictions on move-ins at affected communities, continued need for isolating positive residents, increased use of PPE by our associates, and increased employee-related costs.

In December 2020, two COVID-19 vaccines received emergency use authorization from the U.S.

Food and Drug Administration.

We elected to work with CVS Health Corporation, with whom we have a longstanding relationship to provide flu shot clinics in our communities, to administer vaccinations on site to our eligible residents and associates through the Pharmacy Partnership for Long-Term Care Program offered through the CDC.

Our work to prepare for and host vaccine clinics includes extensive planning, gathering insurance information, obtaining consents, scheduling appointments, holding educational sessions with residents, families, and associates and detailed coordination of traffic flow and observation areas.

We hosted our first clinics on December 18, 2020 and by January 22, 2021 had hosted over 500 community vaccine clinics.

As of February 22, 2021, first dose vaccine clinics had been completed for residents and associates at 100% of our communities and approximately 85% of our communities have had second dose vaccine clinics.

The pandemic, including the related restrictions at our communities, have significantly disrupted demand for senior living communities and the sales process, which typically includes in-person prospective resident visits within communities.

We believe potential residents and their families are more cautious regarding moving into senior living communities while the pandemic continues, and such caution may persist for some time.

In response to these developments, we have redesigned our sales process to include virtual tours, video engagement, and outdoor prospective resident meetings, enhanced and adapted our marketing programs to address the social distancing environment, and sought to strengthen our relationships with referral sources.

During the third quarter of 2020, we returned to using in-person prospective resident visits for a majority of our communities.

However, several large markets continue with virtual-only prospective resident visits as of December 31, 2020.

We have placed restrictions on move-ins at our communities when circumstances warrant, including at the direction of state or local health authorities.

Although these restrictions began to ease considerably in August 2020, restrictions on move-ins

escalated throughout the fourth quarter of 2020 due to the resurgence of the virus.

At the end of the second, third, and fourth quarters of 2020, 86%, 98%, and 89% of our communities, respectively, were accepting new move-ins.

As of February 22, 2021, 97% of our communities were accepting new move-ins.

We cannot predict with reasonable certainty whether or when demand for senior living communities will return to pre-COVID-19 levels or the extent to which the pandemic’s effect on demand may adversely affect the amount of resident fees we are able to collect from our residents.

The pandemic, including the related restrictions at our communities, began to adversely impact our occupancy and resident fee revenue significantly during March 2020, as new resident leads, visits (including virtual visits), and move-in activity declined significantly compared to typical levels.

The year-over-year decrease in monthly move-ins of our same community portfolio has moderated from 64.2% in April 2020 to 26.5% in December 2020.

Our consolidated senior housing portfolio's weighted average occupancy has declined in each month of the pandemic, from 82.7% in March 2020 to 71.5% in December 2020, and was 70.0% in January 2021.

We estimate that the pandemic, including the related restrictions at our communities, resulted in $281.1 million of lost resident fee revenue for the year ended December 31, 2020, including $228.5 million of lost resident fee revenue in our consolidated senior housing portfolio.

Further deterioration of our resident fee revenue will result from lower move-in activity and the resident attrition inherent in our business, which may increase due to the impacts of COVID-19.

Our home health average daily census also began to decrease in March 2020 due to lower occupancy in our communities and fewer elective medical procedures and hospital discharges, resulting in a 14.6% year-over-year decline in home health average daily census for the year ended December 31, 2020.

We expect home health average daily census to continue to gradually recover sequentially with increased elective medical procedures and hospital discharges and senior housing occupancy.

We estimate that the pandemic, including the related restrictions at our communities, resulted in $52.6 million of lost resident fee revenue for the Health Care Services segment for the year ended December 31, 2020 .

Facility operating expense for the year ended December 31, 2020 includes $125.5 million of incremental direct costs to prepare for and respond to the pandemic, including costs for:

acquisition of additional PPE, medical equipment, and cleaning and disposable food service supplies;

enhanced cleaning and environmental sanitation;

increased employee-related costs, including labor, workers compensation, and health plan expense;

increased expense for general liability claims;

and COVID-19 testing of residents and associates where not otherwise covered by government payor or third-party insurance sources.

We are not able to reasonably predict the total amount of costs we will incur related to the pandemic, and such costs may continue to be substantial.

We also recorded non-cash impairment charges in our operating results of $105.6 million for the year ended December 31, 2020 for our operating lease right-of-use assets and property, plant and equipment and leasehold intangibles, primarily due to the COVID-19 pandemic and lower than expected operating performance at communities with impaired assets.

We have taken, and continue to take, actions to enhance and preserve our liquidity in response to the pandemic.

During the year ended December 31, 2020, we completed our financing plans in the regular course of business, including refinancing substantially all of our 2020 and 2021 maturities.

In addition, on August 31, 2020, we terminated our $250 million revolving credit facility and obtained $266.9 million of non-recourse mortgage financing on 16 communities, most of which had secured the credit facility prior to its termination.

During the year ended December 31, 2020, we accepted $109.8 million of cash for grants under the Provider Relief Fund and $87.5 million of accelerated/advanced Medicare payments, and we deferred $72.7 million of the employer portion of social security payroll taxes.

These programs were created or expanded under the CARES Act, as described below.

We also delayed or canceled a number of elective capital expenditure projects, resulting in an approximate $67 million reduction to our pre-pandemic full-year 2020 capital expenditure plans, and suspended repurchases under our existing share repurchase program.

On July 26, 2020, we restructured our 120 community triple-net master lease with Ventas in a multipart transaction.

The components included, among other things, reducing our initial annual minimum rent to $100 million, representing a reduction of approximately $86 million over the twelve months ending June 30, 2021, and removal of the prior requirements that we satisfy financial covenants and maintain a security deposit with Ventas.

We paid a $119.2 million one-time cash lease payment to Ventas in connection with our lease restructuring transaction effective July 26, 2020.

As of December 31, 2020, our total liquidity was $575.5 million, consisting of $380.4 million of unrestricted cash and cash equivalents, $172.9 million of marketable securities, and $22.2 million of availability on our secured credit facility.

We continue to seek opportunities to enhance and preserve our liquidity, including through maintaining expense discipline, continuing to evaluate our financing structure and the state of debt markets, seeking further government-sponsored financial relief related to the COVID-19 pandemic, and completing the pending sale of 80% of the equity in our Health Care Services segment.

There is no assurance that debt financing will continue to be available on terms consistent with our expectations or at all, that our efforts will be successful in seeking further government-sponsored financial relief or regarding the amount of, or conditions required to qualify for, any such relief, or that the closing of the pending transaction will be completed in accordance with our expectations, or at all, or generate cash proceeds to us in the amount we anticipate.

The CARES Act, signed into law on March 27, 2020, and Paycheck Protection Program and Health Care Enhancement Act, signed into law on April 24, 2020, provide liquidity and financial relief to certain businesses, among other things.

The impacts to us of certain provisions of the CARES Act are summarized below.

• During the year ended December 31, 2020, we accepted $109.8 million of cash for grants from the Provider Relief Fund under which grants have been made available to eligible healthcare providers for healthcare related expenses or lost revenues attributable to COVID-19.

The accepted grants were made available pursuant to the following distributions from the Provider Relief Fund:

• $101.7 million pursuant to General Distributions, with the aggregate amount ultimately determined based on a percentage of our year-over-year changes in patient care revenue and certain operating and other expenses for the first and second quarters of 2020.

• $4.6 million pursuant to the Skilled Nursing Facility Targeted Distribution, which generally related to our certified skilled nursing facilities.

• $3.5 million pursuant to the Nursing Home Infection Control Distribution, including incentive payments, which related to our skilled nursing care provided through our CCRCs.

Grants received from the Provider Relief Fund are subject to the terms and conditions of the program, including that such funds may only be used to prevent, prepare for, and respond to COVID-19 and will reimburse only for healthcare related expenses or lost revenues that are attributable to COVID-19 and have not been reimbursed from other sources or that other sources are not obligated to reimburse.

The permissible uses of grants from the Nursing Home Infection Control Distribution are further limited to certain infection control expenses.

The program requires us to report to HHS on our use of the grants, and our reporting is subject to audit.

During the year ended December 31, 2020, we recognized $109.8 million of the grants as other operating income based upon our estimates of our satisfaction of the conditions of the grants during such period.

HHS continues to evaluate future allocations of, and regulation and guidance regarding, grants made under the Provider Relief Fund.

We intend to pursue additional funding that may become available.

However, there can be no assurance that we will qualify for, or receive, grants in the amount we expect, that additional restrictions on the permissible uses or terms and conditions of the grants will not be imposed by HHS, or that future funding programs will be made available for which we qualify.

• During the year ended December 31, 2020, we received $87.5 million under the Accelerated and Advance Payment Program administered by CMS, which was temporarily expanded by the CARES Act.

Approximately $75.2 million related to our Health Care Services segment and the remainder related to our CCRCs segment.

Under the program, we requested acceleration/advancement of 100% of our Medicare payment amount for a three-month period.

The Continuing Appropriations Act, 2021 and Other Extensions Act, enacted on October 1, 2020, amended the repayment terms for accelerated/advanced payments.

As amended, recoupment of accelerated/advanced payments will begin one year after payments were issued.

Payments will be recouped at a rate of 25% of Medicare payments for the first eleven months following the anniversary of issuance and at a rate of 50% of Medicare payments for the next six months.

Any outstanding balance of accelerated/advanced payments will be due following such recoupment period.

Pursuant to the Purchase Agreement we expect to repay the then outstanding balance of such accelerated/advance payments related to our Health Care Services segment at the closing of the sale of 80% of our equity in our Health Care Services segment.

• Under the CARES Act, we have elected to defer payment of the employer portion of social security payroll taxes incurred from March 27, 2020 through December 31, 2020.

One-half of such deferral amount will become due on each of December 31, 2021 and December 31, 2022.

As of December 31, 2020, we have deferred payment of $72.7 million under the program.

• The CARES Act temporarily suspended the 2% Medicare sequestration for the period May 1, 2020 to December 31, 2020, which primarily benefited our Health Care Services segment.

This suspension had a favorable impact of $4.0 million on the segment’s resident fee revenue for the year ended December 31, 2020.

The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, extended the sequestration suspension through March 31, 2021.

• We are eligible to claim the employee retention tax credit for certain of our associates under the CARES Act.

The refundable tax credit for 2020 is available to employers that fully or partially suspend operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19, and is equal to 50% of qualified wages paid after March 12, 2020 through December 31, 2020 to qualified employees, with a maximum credit of $5,000 per employee.

We estimate that we will be eligible to claim tax credits of

approximately $10 million for 2020.

The credit was modified and extended for wages paid from January 1, 2021 through June 30, 2021 by the Consolidated Appropriations Act, 2021, and we are assessing our eligibility to claim such credit.

There can be no assurance that we will qualify for, or receive, tax credits in the amount we expect.

In addition to the grants described above, we have received and recognized $5.9 million of other operating income from grants from other government sources.

We cannot predict with reasonable certainty the impacts that COVID-19 ultimately will have on our business, results of operations, cash flow, and liquidity, and our response efforts may continue to delay or negatively impact our strategic initiatives, including plans for future growth.

The ultimate impacts of COVID-19 will depend on many factors, some of which cannot be foreseen, including the duration, severity, and breadth of the pandemic and any resurgence of the disease;

the impact of COVID-19 on the nation’s economy and debt and equity markets and the local economies in our markets;

the development, availability, utilization, and efficacy of COVID-19 testing, therapeutic agents, and vaccines and the prioritization of such resources among businesses and demographic groups;

government financial and regulatory relief efforts that may become available to business and individuals, including our ability to qualify for and satisfy the terms and conditions of financial relief;

perceptions regarding the safety of senior living communities during and after the pandemic;

changes in demand for senior living communities and our ability to adapt our sales and marketing efforts to meet that demand;

the impact of COVID-19 on our residents’ and their families’ ability to afford our resident fees, including due to changes in unemployment rates, consumer confidence, housing markets, and equity markets caused by COVID-19;

changes in the acuity levels of our new residents;

the disproportionate impact of COVID-19 on seniors generally and those residing in our communities;

the duration and costs of our response efforts, including increased equipment, supplies, labor, litigation, testing, vaccination clinic, and other expenses;

the impact of COVID-19 on our ability to complete financings, refinancings, or other transactions (including dispositions) or to generate sufficient cash flow to cover required interest and lease payments and to satisfy financial and other covenants in our debt and lease documents;

increased regulatory requirements, including unfunded, mandatory testing;

increased enforcement actions resulting from COVID-19;

government action that may limit our collection or discharge efforts for delinquent accounts;

and the frequency and magnitude of legal actions and liability claims that may arise due to COVID-19 or our response efforts.

2021 Pending Sale of Health Care Services

On February 24, 2021, we entered into the Purchase Agreement with affiliates of HCA Healthcare providing for the sale of 80% of our equity in our Health Care Services segment for a purchase price of $400 million in cash, subject to certain adjustments set forth in the Purchase Agreement, including a reduction for the remaining outstanding balance as of the closing of Medicare advance payments and deferred payroll tax payments related to the Health Care Services segment, which were $75.2 million and $8.2 million, respectively, as of December 31, 2020.

We expect our net cash proceeds at the closing will be approximately $300 million, subject to the timing of closing with respect to the adjustments set forth in the Purchase Agreement.

The Purchase Agreement also contains certain agreed upon indemnities for the benefit of the purchaser.

The closing of the sale transaction is anticipated to occur in the late first half or early second half of 2021, subject to receipt of applicable regulatory approvals and satisfaction of other customary closing conditions set forth in the Purchase Agreement.

Pursuant to the Purchase Agreement, at closing of the transaction, we will retain a 20% equity interest in the business.

Upon closing, we expect that the results and financial position of our Health Care Services segment will be deconsolidated from our financial statements and that our interest in the joint venture will be accounted for under the equity method of accounting.

We anticipate that the sale transaction will utilize a portion of our federal net operating loss carryforwards to offset the expected taxable gain on such transaction.

Transaction Activity and Impact of Dispositions on Results of Operations

Since launching our core operational strategy in February 2018, we have continued our portfolio optimization initiative through which we have disposed of owned and leased communities and restructured leases.

We undertook this initiative to simplify and streamline our business, increase the quality and durability of our cash flow, improve our liquidity, reduce our debt and lease leverage, and to increase our ownership in our consolidated community portfolio.

Such activities included our transactions with Ventas and Welltower announced during 2018 and our transactions with Healthpeak announced on October 1, 2019.

As a result of these initiatives and other lease restructuring, expiration, and termination activity, and other transactions, since January 1, 2018 through February 1, 2020 we have:

restructured our triple-net lease portfolios with our three largest lessors;

terminated our triple-net lease obligations on an aggregate of 99 communities;

acquired 32 formerly-leased or managed communities;

disposed of an aggregate of 36 owned communities generating $288.3 million of proceeds, net of related debt and transaction costs;

sold substantially all of our interests in unconsolidated ventures, including our entry fee CCRC venture;

reduced our management of communities on behalf of former unconsolidated ventures and third parties.

As of February 1, 2020, we owned 356 communities, representing a majority of our consolidated community portfolio, and leased 307 communities.

We also managed 77 communities on behalf of third parties and three communities for which we have an equity interest.

The charts below show the foregoing changes in our portfolio from January 1, 2018 to February 1, 2020.

During the remainder of the year ending December 31, 2020, we expect to close on the dispositions of three owned communities ( 495 units) classified as held for sale as of December 31, 2019 and the termination of our lease obligation on three communities ( 205 units) for which we have provided notice of non-renewal.

We also anticipate terminations of certain of our management arrangements with third parties as we transition to new operators our management on certain former unconsolidated ventures in which we sold our interest and our interim management on formerly leased communities.

During 2020, we continued execution on our portfolio optimization initiative through which we have disposed of owned and leased communities and restructured leases.

Such activities during 2020 included restructuring our lease arrangements with Ventas announced on July 27, 2020 and closing the multi-part transaction with Healthpeak announced on October 1, 2019.

As a result of these initiatives and other lease restructuring, expiration, and termination activity, and other transactions, during the year ended December 31, 2020 we:

• Terminated our triple-net lease obligations on an aggregate of 32 communities, including through the acquisition of 27 formerly leased communities;

• Disposed of an aggregate of seven owned communities;

• Sold substantially all of our remaining ownership interests in unconsolidated ventures, including our entry fee CCRC venture with Healthpeak;

• Reduced our management of communities on behalf of former unconsolidated ventures and third parties, representing a net reduction of 25 managed communities during the year.

As of December 31, 2020, we owned 350 communities, representing a majority of our consolidated community portfolio, and leased 301 communities.

We also managed 75 communities on behalf of third parties or ventures for which we have an equity interest.

The charts below show the foregoing changes in our portfolio from December 31, 2019 to December 31, 2020.

During the year ending December 31, 2021, we expect to close on the dispositions of three owned communities (249 units) classified as held for sale as of December 31, 2020 and terminations of a substantial portion of our management arrangements.

The closings of the various pending and expected transactions are, or will be, subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals.

However, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

There can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Summaries of the foregoing transactions, and their impact on our results of operations, are below.

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Financial Statements and Supplementary Data" for more information about the transactions.

Completed and Planned Dispositions of Owned Communitie s

During the year ended December 31, 2019 , we completed the sale of 14 owned communities (1,629 units) for cash proceeds of $85.4 million , net of transaction costs.

We utilized a portion of the cash proceeds from the asset sales to repay approximately $5.1 million of associated mortgage debt and debt prepayment penalties.

Completed Dispositions of Owned Communitie s

In addition to the conveyance of five communities to Ventas, during the year ended December 31, 2020, described below, we completed the sale of two owned communities (375 units) for cash proceeds of $38.1 million, net of transaction costs.

During the year ended December 31, 2019, we completed the sale of 14 owned communities (1,768 units) for cash proceeds of $85.4 million, net of transaction costs.

We utilized a portion of the cash proceeds from the asset sales to repay approximately $5.1 million of associated mortgage debt and debt prepayment penalties.

During the year ended December 31, 2017 , we completed the sale of three owned communities ( 311 units) for cash proceeds of $8.2 million , net of transaction costs.

As of December 31, 2019 , three communities were classified as held for sale, resulting in $42.7 million being recorded as assets held for sale and $28.9 million of associated mortgage debt being included in the current portion of long-term debt within the consolidated balance sheet.

2020 Ventas Lease Restructuring

On July 26, 2020 (the "Effective Date"), we entered into definitive agreements with Ventas in connection with the restructuring of our lease arrangements with Ventas, including a Master Transaction Letter Agreement (the "Master Agreement").

Pursuant to the Master Agreement:

• On the Effective Date the parties entered into the Amended and Restated Master Lease and Security Agreement (the "Master Lease") and Amended and Restated Guaranty (the "Guaranty"), which amended and restated the prior Master Lease and Security Agreement and prior Guaranty, each dated as of April 26, 2018 and as amended from time to time.

Pursuant to the Master Lease, we continue to lease 120 communities (10,174 units) for an aggregate initial annual minimum rent of approximately $100 million, which reflects a reduction of approximately $83 million of annual minimum rent in effect prior to the transaction.

Effective on January 1 of each lease year, beginning January 1, 2022, the annual minimum rent will be subject to a 3% escalator.

The initial term of the Master Lease ends December 31, 2025, with two 10-year extension options available to us.

The annual minimum rent for the initial lease year of any such renewal term will be the greater of the fair market rental of the communities or the increased annual minimum rent for such lease year applying the foregoing 3% escalator.

The Master Lease removed the prior provision that would have automatically extended the initial term in the event of the consummation of a change of control transaction by us.

The Master Lease

requires us to spend (or escrow with Ventas) a minimum of $1,500 per unit on a community-level basis and $3,600 per unit on an aggregate basis of all communities, in each case per 24-month period ending December 31 during the lease term, commencing with the 24-month period ending December 31, 2021.

In addition, Ventas agreed to fund costs associated with certain pre-approved capital expenditure projects in the aggregate amount of up to $37.8 million.

Upon disbursement of such expenditures, the annual minimum rent under the Master Lease will increase by the amount of the disbursement multiplied by 50% of the sum of the then current 10-year treasury note rate and 4.5%.

The transaction agreements with Ventas further provide that the Master Lease and certain other agreements between the parties will be cross-defaulted.

Our subsidiaries’ obligations under the Master Lease are guaranteed at the parent level pursuant to the Guaranty.

The Guaranty removed the prior requirements that we satisfy, at the parent level, financial covenants and that we maintain a security deposit with Ventas.

The Guaranty also removed the prior right of Ventas to terminate the Master Lease on the basis of parent level financial covenants.

Pursuant to the terms of the Guaranty, we may consummate a change of control transaction without the need for consent of Ventas so long as certain objective conditions are satisfied, including the post-transaction guarantor’s maintaining a minimum tangible net worth of at least $600.0 million, having minimum levels of operational experience and reputation in the senior living industry, and paying a change of control fee of $25.0 million to Ventas.

The Guaranty removed the prior provisions that would have required that such post-transaction guarantor satisfy a maximum leverage ratio level, that we fund additional capital expenditures, and that we extend the term upon the occurrence of the change in control transaction.

Under the terms of the Guaranty, commencing January 1, 2024 (and until such time (if any) as we exercise our lease term extension option with respect to the Master Lease), Ventas shall have the right to terminate the Master Lease (with respect to one or more communities), provided that the trailing twelve month coverage ratio of each such community is less than 0.9x and provided further that the removal and termination of any such communities does not result in a portfolio coverage ratio with respect to the remaining communities in the Master Lease that is less than the portfolio coverage ratio prior to such removal and termination.

• On the Effective Date, we entered into a Second Amended and Restated Omnibus Agreement with Ventas, which provides that if a default occurs and is continuing under certain other material leases or under certain material financings and if the same continues beyond the permitted cure period or the applicable landlord or lender exercises any material remedies, Ventas shall have the right to transition all or a portion of the communities from the Master Lease to a management arrangement with us pursuant to a market management agreement (which is terminable by either party).

Notwithstanding the foregoing, Ventas may only transition one or more communities from the Master Lease to a management arrangement if such transition does not result in a portfolio coverage ratio with respect to the remaining communities in the Master Lease that is less than the portfolio coverage ratio prior to such transition.

• On the Effective Date, we conveyed five owned communities (471 units) to Ventas in full release and satisfaction of $78.4 million principal amount of indebtedness secured by the communities.

Upon closing, the parties entered into new terminable, market rate management agreements pursuant to which we manage the communities.

We also paid to Ventas $115.0 million in cash, released all security deposits to Ventas under the former guaranty (which included the release of a $42.4 million deposit held by Ventas and the payment of $4.2 million in cash as settlement of the amount of letters of credit), and issued a $45.0 million unsecured interest-only promissory note to Ventas.

The initial interest rate of the promissory note is 9.0% per annum and will increase by 0.50% on each anniversary of the date of issuance.

We may prepay the outstanding principal amount in whole or in part at any time without premium or penalty.

The promissory note matures on the earlier of December 31, 2025 or the occurrence of a change of control transaction (as defined in the Guaranty).

• On the Effective Date, we issued to Ventas a warrant (the "Warrant") to purchase 16.3 million shares of our common stock, $0.01 par value per share, at a price per share of $3.00.

The Warrant is exercisable at Ventas’ option at any time and from time to time, in whole or in part, until December 31, 2025.

The exercise price and the number of shares issuable on exercise of the Warrant are subject to certain anti-dilution adjustments, including for cash dividends, stock dividends, stock splits, reclassifications, non-cash distributions, certain repurchases of common stock and business combination transactions.

To the extent that the number of shares owned by Ventas (including shares underlying the Warrant) would be more than 9.6% of the total combined voting power of all our classes of capital stock or of the total value of shares of all our classes of capital stock (the "Ownership Cap") (other than as a result of actions taken by Ventas), we would generally be required to repurchase the number of shares necessary to avoid Ventas exceeding the Ownership Cap unless Ventas makes an election to require us to pay Ventas cash in lieu of issuing shares pursuant to the Warrant in excess of the Ownership Cap.

The Warrant and the shares issuable upon exercise thereof have not been registered under the Securities Act of 1933, as amended, and were issued in a private placement pursuant to Section 4(a)(2) thereof.

On the Effective Date, the parties entered into a Registration Rights Agreement, pursuant to which Ventas and its permitted transferees are entitled to certain registration rights.

Pursuant to the terms of the agreement, we filed a shelf registration statement with the SEC with respect to the shares of common stock underlying the Warrant, which was declared effective on August 17, 2020.

Ventas is entitled

to customary underwritten offering, piggyback, and additional demand registration rights with respect to the shares underlying the Warrant.

2019 Healthpeak CCRC Venture and Master Lease Transactions

On October 1, 2019, we entered into definitive agreements, including a Master Transactions and Cooperation Agreement (the "MTCA") and an Equity Interest Purchase Agreement (the "Purchase Agreement"), providing for a multi-part transaction with Healthpeak.

The parties subsequently amended the agreements to include one additional entry fee CCRC community as part of the sale of our interest in our unconsolidated entry fee CCRC venture with Healthpeak (the "CCRC Venture") (rather than removing the CCRC from the CCRC Venture for joint marketing and sale).

The components of the multi-part transaction include:

The parties subsequently amended the agreements to include one additional entry fee CCRC community as part of the sale of our interest in our unconsolidated entry fee CCRC venture with Healthpeak (the "CCRC Venture") (rather than removing the community from the CCRC Venture for joint marketing and sale).

The components of the multi-part transaction included:

• CCRC Venture Transaction.

Pursuant to the Purchase Agreement, on January 31, 2020, Healthpeak acquired our 51% ownership interest in the CCRC Venture, which held 14 entry fee CCRCs (6,383 units) for a total purchase price of $295.2 million (representing an aggregate valuation of $1.06 billion less portfolio debt, subject to a net working capital adjustment), which remains subject to a post-closing net working capital adjustment.

At the closing, the parties terminated our existing management agreements with the 14 entry fee CCRCs, Healthpeak paid us a $100.0 million management agreement termination fee, and we transitioned operations of the entry fee CCRCs to a new operator.

Prior to the January 31, 2020 closing, the parties moved two entry fee CCRCs (889 units) into a new unconsolidated venture on substantially the same terms as the CCRC Venture to accommodate the sale of such two communities at a future date.

Pursuant to the Purchase Agreement, on January 31, 2020, Healthpeak acquired our 51% ownership interest in the CCRC Venture, which held 14 entry fee CCRCs (6,383 units) for a total purchase price of $289.2 million, net of a $5.9 million post-closing net working capital adjustment paid to Healthpeak during the three months ended June 30, 2020 (representing an aggregate valuation of $1.06 billion less portfolio debt, subject to a net working capital adjustment).

We recognized a $369.8 million gain on sale of assets for year ended December 31, 2020, and we derecognized the net equity method liability for the sale of the ownership interest in the CCRC Venture.

At the closing, the parties terminated the existing management agreements on the 14 entry fee CCRCs, Healthpeak paid us a $100.0 million management agreement termination fee, and we transitioned operations of the entry fee CCRCs to a new operator.

We recognized $100.0 million of management fee revenue for the three months ended March 31, 2020 for the management termination fee.

The sale of our interest in the CCRC Venture and the $100.0 million of management termination fees generated approximately $579.0 million of taxable income in three months ended March 31, 2020.

We will utilize any 2020 operating losses generated and tax loss carryforwards (including our capital loss carryforward that was generated in 2018) to offset the taxable gain on this transaction.

Prior to the January 31, 2020 closing, the parties moved the remaining two entry fee CCRCs (889 units) into a new unconsolidated venture on substantially the same terms as the CCRC Venture to accommodate the sale of such two communities.

Subsequent to these transactions, we will have exited substantially all of our entry fee CCRC operations.

• Master Lease Transactions.

Pursuant to the MTCA, on January 31, 2020, the parties amended and restated our existing master lease pursuant to which we continue to lease 25 communities (2,711 units) from Healthpeak, and we acquired 18 communities (2,014 units) from Healthpeak, at which time the 18 communities were removed from the master lease.

Pursuant to the MTCA, on January 31, 2020, the parties amended and restated our existing master lease pursuant to which we continued to lease 25 communities (2,711 units) from Healthpeak, and we acquired 18 formerly leased communities (2,014 units) from Healthpeak, at which time the 18 communities were removed from the master lease.

At the closing, we paid $405.5 million to acquire such communities and to reduce our annual rent under the amended and restated master lease.

We funded the community acquisitions with $192.6 million of non-recourse mortgage financing and the proceeds from the multi-part transaction.

The Company expects to obtain approximately $30.0 million of additional non-recourse mortgage financing on the communities.

In addition, Healthpeak has agreed to transition one leased community (159 units) to a successor operator.

With respect to the continuing 24 communities (2,552 units), the amended and restated master lease:

In addition, Healthpeak agreed to terminate the lease for one leased community (159 units), which occurred during December 2020.

With respect to the continuing 24 communities (2,552 units), our amended and restated master lease:

(i) has an initial term to expire on December 31, 2027, subject to two extension options at our election for ten years each, which must be exercised with respect to the entire pool of leased communities;

(ii) the initial annual base rent for the 24 communities is approximately $41.7 million and is subject to an escalator of 2.4% per annum on April 1st of each year;

and (iii) Healthpeak has agreed to make available up to $35 million for capital expenditures for a five-year period related to the 24 communities at an initial lease rate of 7.0%.

We anticipate that the sale of our interest in the CCRC Venture will utilize a portion of our carryforward tax losses to shield the expected taxable investment gain on such transaction.

The net proceeds will improve the Company's capital structure flexibility and may be used, among other uses, for opportunistic share repurchases, to pursue potential lease restructuring opportunities that we identify, and to fund investments to support our strategy.

We expect the sales of the two remaining entry fee CCRCs to occur over the next 15 months;

however, there can be no assurance that the transactions will close or, if they do, when the actual closings will occur.

Subsequent to these transactions, we will have exited substantially all of our entry fee CCRC operations.

(ii) the initial annual base rent for the 24 communities is $41.7 million and is subject to an escalator of 2.4% per annum on April 1st of each year;

and (iii) Healthpeak agreed to make available up to $35.0 million for capital expenditures for a five-year period related to the 24 communities at an initial lease rate of 7.0%.

As a result of the community acquisition transaction, we recognized a $19.7 million gain on debt extinguishment during the year ended December 31, 2020 and derecognized the $105.1 million carrying amount of financing lease obligations for eight communities which were previously subject to sale-leaseback transactions in which we were deemed to have continuing involvement.

During March 2020, we obtained $30.0 million of additional non-recourse mortgage financing on the acquired communities.

2018 Welltower Lease and RIDEA Venture Restructuring

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1,128 units).

In addition, the parties separately agreed to allow us to terminate leases with respect to, and to remove from the remaining Welltower leased portfolio, a number of communities with annual aggregate base rent up to $5.0 million upon Welltower's sale of such communities, and we would receive a corresponding 6.25% rent credit on Welltower's disposition proceeds.

As of December 31, 2019, no leases have been terminated in accordance with the agreement.

As of February 1, 2020, we continue to operate 74 communities ( 3,683 units) under triple-net leases with Welltower, and our remaining lease agreements with Welltower contain an objective change of control standard that allows us to engage in certain change of control and other transactions without the need to obtain Welltower's consent, subject to the satisfaction of certain conditions.

As of December 31, 2020, we continue to operate 74 communities (3,674 units) under triple-net leases with Welltower, and our remaining lease agreements with Welltower contain an objective change of control standard that allows us to engage in certain change of control and other transactions without the need to obtain Welltower's consent, subject to the satisfaction of certain conditions.

2018 Ventas Lease Portfolio Restructuring

On April 26, 2018, we entered into several agreements to restructure a portfolio of 128 communities ( 10,567 units) we leased from Ventas as of such date, including a Master Lease and Security Agreement (the "Ventas Master Lease").

The Ventas Master Lease amended and restated prior leases comprising an aggregate portfolio of 107 communities ( 8,459 units) into the Ventas Master Lease.

Under the Ventas Master Lease and other agreements entered into on April 26, 2018, the 21 additional communities ( 2,107 units) leased by us from Ventas pursuant to separate lease agreements have been or will be combined automatically into the Ventas Master Lease upon the first to occur of Ventas' election or the repayment of, or receipt of lender consent with respect to, mortgage debt underlying such communities (18 of which have been and three of which will be combined into the Ventas Master Lease).

We and Ventas agreed to observe, perform, and enforce such separate leases as if they had been combined into the Ventas Master Lease effective April 26, 2018, to the extent not in conflict with any mortgage debt underlying such communities.

The transaction agreements with Ventas further provide that the Ventas Master Lease and certain other agreements between us and Ventas are subject to cross-default provisions.

The initial term of the Ventas Master Lease ends December 31, 2025 , with two 10 -year extension options available to us.

In the event we consummate a change of control transaction on or before December 31, 2025, the initial term of the Ventas Master Lease will be extended automatically through December 31, 2029.

The Ventas Master Lease and separate lease agreements with Ventas, which are guaranteed at the parent level by us, provided for total rent in 2018 of $175.0 million for the 128 communities, including the pro-rata portion of an $8.0 million annual rent credit for 2018.

We received an annual rent credit of $8.0 million in 2019.

We will receive an annual rent credit of $7.0 million in 2020 and $5.0 million thereafter;

provided, that if we consummate a change of control transaction prior to 2021, the annual rent credit will be reduced to $5.0 million .

Effective on January 1, 2019 and in succeeding years, the annual minimum rent is subject to an escalator equal to the lesser of 2.25% or four times the Consumer Price Index ("CPI") increase for the prior year (or zero if there was a CPI decrease).

The Ventas Master Lease requires us to spend (or escrow with Ventas) a minimum of $2,000 per unit per 24 -month period commencing with the 24 -month period ended December 31, 2019 and thereafter each 24 -month period ending December 31 during the lease term, subject to annual increases commensurate with the escalator beginning with the second lease year of the first extension term (if any).

If we consummate a change of control transaction, we will be required within 36 months following the closing of such transaction to invest (or escrow with Ventas) an aggregate of $30.0 million in the communities for revenue-enhancing capital projects.

Under the definitive agreements with Ventas, we, at the parent level, must satisfy certain financial covenants (including tangible net worth and leverage ratios) and may consummate a change of control transaction without the need for consent of Ventas so long as certain objective conditions are satisfied, including the post-transaction guarantor's satisfying certain enhanced minimum tangible net worth and maximum leverage ratio, having minimum levels of operational experience and reputation in the senior living industry, and paying a change of control fee of $25.0 million to Ventas.

Pursuant to the Ventas Master Lease, we have exercised our right to direct Ventas to market for sale certain communities.

Ventas is obligated to use commercially reasonable, diligent efforts to sell such communities on or before December 31, 2020 (subject to extension for regulatory purposes);

provided, that Ventas' obligation to sell any such community will be subject to Ventas' receiving a purchase price in excess of a mutually agreed upon minimum sale price and to certain other customary closing conditions.

Upon any such sale, such communities will be removed from the Ventas Master Lease, and the annual minimum rent under the Ventas Master Lease will be reduced by the amount of the net sale proceeds received by Ventas multiplied by 6.25% .

During 2019, seven communities ( 358 units) were sold by Ventas and removed from the Ventas Master Lease, and the annual minimum rent under the Ventas Master Lease was prospectively reduced by $1.7 million .

We recognized a $125.7 million non-cash loss on lease modification in the year ended December 31, 2018, primarily for the extensions of the triple-net lease obligations for communities with lease terms that are unfavorable to us given current market conditions on the amendment date in exchange for modifications to the change of control provisions and financial covenant provisions of the community leases.

2017 Healthpeak Multi-Part Transaction

We entered into definitive agreements for a multi-part transaction with Healthpeak effective November 1, 2017, including an Amended and Restated Master Lease and Security Agreement (the "Former Healthpeak Master Lease”).

Pursuant to such agreements, we and Healthpeak amended and restated triple-net leases covering substantially all of the communities we leased from Healthpeak as of November 1, 2017 into the Former Healthpeak Master Lease.

During the year ended December 31, 2018, we acquired two communities ( 208 units) that were formerly leased from Healthpeak for an aggregate purchase price of $35.4 million , and leases with respect to 33 communities ( 3,123 units) were terminated, and such communities were removed from the Former Healthpeak Master Lease.

The continuing 43 leased communities under the Former Healthpeak Master Lease had the same lease rates and expiration and renewal terms as the applicable prior instruments, except that effective January 1, 2018, we received a $2.5 million annual rent reduction for two communities.

The Former Healthpeak Master Lease also provided that we may engage in certain change in control and other transactions without the need to obtain Healthpeak's consent, subject to the satisfaction of certain conditions.

In addition, pursuant to the multi-part transaction agreement, Healthpeak acquired our 10% ownership interest in one of our RIDEA ventures with Healthpeak in December 2017 for $32.1 million and our 10% ownership interest in the remaining RIDEA venture with Healthpeak in March 2018 for $62.3 million .

We provided management services to 59 communities ( 9,585 units) on behalf of the two RIDEA ventures as of November 1, 2017.

Pursuant to the multi-part transaction agreement, we acquired one managed community ( 137 units) for an aggregate purchase price of $32.1 million in January 2018 and three managed communities ( 650 units) for an aggregate purchase price of $207.4 million in April 2018 and retained management of 18 of such communities ( 3,276 units) for a term set to expire in 2030, subject to certain early termination rights.

Healthpeak transitioned operations and/or management of 37 of such communities since November 2017.

Additional Healthpeak Lease Terminations

During the year ended December 31, 2017, triple-net leases with respect to 26 communities (2,128 units) were terminated pursuant to agreements we entered into with Healthpeak on November 1, 2016.

Blackstone Venture

On March 29, 2017, we and affiliates of Blackstone Real Estate Advisors VIII L.P.

(collectively, "Blackstone") formed a venture (the "Blackstone Venture") that acquired 64 senior housing communities for a purchase price of $1.1 billion .

We had previously leased the 64 communities from Healthpeak under long-term lease agreements with a remaining average lease term of approximately 12 years.

At the closing, the Blackstone Venture purchased the 64 -community portfolio from Healthpeak subject to the existing leases, and we contributed our leasehold interests for 62 communities and a total of $179.2 million in cash to purchase a 15% equity interest in the Blackstone Venture, terminate leases, and fund our share of closing costs.

As of the formation date, we continued to operate two of the communities under lease agreements and began managing 60 of the communities on behalf of the venture under a management agreement with the venture.

Two of the communities were managed by a third party for the venture.

During the third quarter of 2018, leases for the two communities owned by the Blackstone Venture were terminated, and we sold our 15% equity interest in the Blackstone Venture to Blackstone.

We paid Blackstone an aggregate fee of $2.0 million to complete the multi-part transaction.

On April 26, 2018, we entered into several agreements to restructure a portfolio of 128 communities (10,567 units) we leased from Ventas as of such date, including a Master Lease and Security Agreement (the "Former Ventas Master Lease"), which was subsequently amended and restated on July 26, 2020 as described above.

The Former Ventas Master Lease amended and restated prior leases comprising an aggregate portfolio of 107 communities (8,459 units) into the Former Ventas Master Lease and Ventas agreed to observe, perform, and enforce separate leases for 21 additional communities (2,107 units) as if they had been combined into the Former Ventas Master Lease effective April 26, 2018, to the extent not in conflict with any mortgage debt underlying such communities.

The transaction agreements with Ventas further provided that the Former Ventas Master Lease and certain other agreements between us and Ventas were subject to cross-default provisions.

The Former Ventas Master Lease had an initial term ending December 31, 2025 and provided us with two 10-year extension options.

The transaction agreements provided that if we had consummated a change of control transaction on or before December 31, 2025, the initial term of the Former Ventas Master Lease would be extended automatically through December 31, 2029.

The Former Ventas Master Lease and separate lease agreements with Ventas, which were guaranteed at the parent level by us, provided for total rent in 2018 of $175.0 million for the 128 communities, including the pro-rata portion of an $8.0 million annual rent credit for 2018.

We received an annual rent credit of $8.0 million in 2019 and an annual rent credit of $7.0 million in 2020, prior to giving effect to the reduction from the agreements on July 26, 2020 as described above.

The annual minimum rent was subject to an escalator equal to the lesser of 2.25% or four times the Consumer Price Index ("CPI") increase for the prior year (or zero if there was a CPI decrease).

The Former Ventas Master Lease required us to spend (or escrow with Ventas) a minimum of $2,000 per unit per 24-month period commencing with the 24-month period ended December 31, 2019 and thereafter each 24-month period ending December 31 during the lease term, subject to annual increases commensurate with the escalator beginning with the second lease year of the first extension term (if any), and provided that if we had consummated a change of control transaction, we would have been required within 36 months to invest (or escrow with Ventas) an aggregate of $30.0 million in the communities for revenue-enhancing capital projects.

Under the definitive agreements with Ventas, we, at the parent level, were required to satisfy certain financial covenants (including tangible net worth and leverage ratios) and may have consummated a change of control transaction without the need for consent of Ventas so long as certain objective conditions were satisfied, including the post-transaction guarantor's satisfying certain enhanced minimum tangible net worth and maximum leverage ratio, having minimum levels of operational experience and reputation in the senior living industry, and paying a change of control fee of $25.0 million to Ventas.

Pursuant to the Former Ventas Master Lease, we exercised our right to direct Ventas to use its commercially reasonable, diligent efforts to market for sale certain communities.

During 2019, seven communities (358 units) were sold by Ventas and removed from the Former Ventas Master Lease, and the annual minimum rent was prospectively reduced by $1.7 million.

During 2020, one community (32 units) was sold by Ventas and removed from the Former Ventas Master Lease, and the annual minimum rent was prospectively reduced by $0.1 million.

We recognized a $125.7 million non-cash loss on lease modification during the year ended December 31, 2018, primarily for the extensions of the triple-net lease obligations for communities with lease terms that are unfavorable to us given market conditions on the amendment date in exchange for modifications to the change of control provisions and financial covenant provisions of the community leases.

Additional Acquisitions Pursuant to Purchase Option

On January 22, 2020, we acquired eight leased communities (336 units) from National Health Investors, Inc.

("NHI") pursuant to our exercise of a purchase option for a purchase price of $39.3 million.

We funded the community acquisitions with cash on hand and expect to obtain approximately $28.0 million of non-recourse mortgage financing on the communities.

Summary of Financial Impact of Completed and Planned Dispositions

The following tables set forth, for the periods indicated, the amounts included within our consolidated financial data for the 243 communities that we disposed through sales and lease terminations during the years ended December 31, 2019 , 2018 , and 2017 through the respective disposition dates:

Year Ended December 31, 2019

(in thousands)

Actual Results

Amounts Attributable to Completed Dispositions

Actual Results Less Amounts Attributable to Completed Dispositions

Resident fees

Independent Living

Assisted Living and Memory Care

Senior housing resident fees

Facility operating expense

Independent Living

Assisted Living and Memory Care

Senior housing facility operating expense

Cash lease payments

On January 22, 2020, we acquired eight formerly leased communities (336 units) from National Health Investors, Inc.

pursuant to our exercise of a purchase option for a purchase price of $39.3 million.

We funded the community acquisitions with cash on hand.

During the three months ended March 31, 2020, we obtained $29.2 million of non-recourse mortgage financing, primarily secured by the acquired communities.

On August 31, 2020, we acquired one formerly leased community (103 units) pursuant to our exercise of a purchase option for a purchase price of $25.0 million and funded the acquisition with cash on hand and non-recourse mortgage financing secured by the acquired community.

Summary of Financial Impact of Completed Dispositions

The following table sets forth, for the periods indicated, the amounts included within our consolidated financial data for the 36 communities that we disposed through sales, conveyances, and lease terminations during the years ended December 31, 2020 and 2019, through the respective disposition dates.

Year Ended December 31, 2020

(in thousands)

Actual Results

Amounts Attributable to Completed Dispositions

Actual Results Less Amounts Attributable to Completed Dispositions

(in thousands) Actual Results Amounts Attributable to Completed Dispositions Actual Results Less Amounts Attributable to Completed Dispositions

Resident fees

1 unchanged sentence

Assisted Living and Memory Care 1,691,276 14,080 1,677,196

CCRCs 321,883 20,495 301,388

Senior housing resident fees $ 2,525,757 $ 34,575 $ 2,491,182

2 unchanged sentences

Assisted Living and Memory Care 1,325,260 13,008 1,312,252

CCRCs 287,157 19,997 267,160

Senior housing facility operating expense $ 1,954,025 $ 33,005 $ 1,921,020

1 unchanged sentence

Year Ended December 31, 2019

(in thousands)

Actual Results

Amounts Attributable to Completed Dispositions

Actual Results Less Amounts Attributable to Completed Dispositions

(in thousands) Actual Results Amounts Attributable to Completed Dispositions Actual Results Less Amounts Attributable to Completed Dispositions

Resident fees

1 unchanged sentence

Assisted Living and Memory Care 1,815,938 50,775 1,765,163

CCRCs 402,175 64,791 337,384

Senior housing resident fees $ 2,762,671 $ 115,566 $ 2,647,105

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Assisted Living and Memory Care 1,297,302 43,880 1,253,422

CCRCs 330,103 58,813 271,290

Senior housing facility operating expense $ 1,968,222 $ 102,693 $ 1,865,529

Cash lease payments $ 377,714 $ 9,011 $ 368,703

The following table sets forth the number of communities and units in our senior housing segments disposed through sales and lease terminations during the years ended December 31, 2019 , 2018 , and 2017 :

The following table sets forth the number of communities and units in our senior housing segments disposed through sales, conveyances, and lease terminations during the years ended December 31, 2020 and 2019:

Years Ended December 31,

Number of communities

Independent Living

Assisted Living and Memory Care 10 20

Independent Living

Assisted Living and Memory Care 827 1,600

The results of operations of the three communities classified as held for sale as of December 31, 2019 are reported in the following segments within the consolidated financial statements:

Assisted Living and Memory Care ( one community;

78 units) and CCRCs ( two communities;

The following table sets forth the amounts included within our consolidated financial data for these three communities for the year ended December 31, 2019 :

(in thousands)

Amounts Attributable to Planned Dispositions

Resident fees

Assisted Living and Memory Care

Senior housing resident fees

Facility operating expense

Assisted Living and Memory Care

Senior housing facility operating expense

CCRCs 456 827

Total 1,283 2,427

Other Recent Developments

Impact of New Lease Accounting Standard

We adopted ASC 842 effective January 1, 2019.

Adoption of the new lease standard and its application to residency agreements and costs related thereto resulted in the recognition of additional resident fees and facility operating expense for the year ended December 31, 2019 , which were non-cash and are non-recurring in future years.

The result was a non-cash net impact to net income (loss) and Adjusted EBITDA of negative $23.1 million , with an offsetting positive impact in changes in working capital for the year ended December 31, 2019 .

Adoption of the new lease standard had no impact on the amount of net cash provided by (used in) operating activities and Adjusted Free Cash Flow for the year ended December 31, 2019 .

Increased Competitive Pressures

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During and since 2016, we have experienced an elevated rate of competitive new openings, with significant new competition opening in many markets, which has adversely affected our occupancy, revenues, results of operations, and cash flow.

Elevated rates of competitive new openings and pressures on our occupancy and rate growth continued through 2019.

On an industry basis, data from NIC shows that net absorption of units, a marker of demand, for the third quarter of 2019 was the highest single quarter since 2006.

Projections from NIC, as applied to our product mix, suggest that annual absorption will be around equilibrium with new supply during 2020.

We believe that a number of trends will contribute to the continued growth of the senior living industry in coming years.

In 2020, competitive new openings remained elevated, but declined from 2019.

Beginning in early 2020, the COVID-19 pandemic resulted in additional occupancy pressure for our industry.

NIC data shows that senior housing occupancy decreased for three consecutive quarters between March 31, 2020 and December 31, 2020, with nearly all markets falling to record low occupancy by the fourth quarter of 2020.

Capital Expenditures

During 2018, we completed an intensive review of our community-level capital expenditure needs with a focus on ensuring that our communities are in appropriate physical condition to support our strategy and determining what additional investments are needed to protect the value of our community portfolio.

Our total community-level capital expenditures were $238.7 million for 2019, which was an increase of $97.7 million from 2018, and $34.8 million of which was reimbursed by our lessors.

In the aggregate, we expect our full-year 2020 non-development capital expenditures, net of anticipated lessor reimbursements, to be approximately $190 million, which includes a decrease of approximately $50 million in our community-level capital expenditures relative to 2019, as we have completed a significant portion of the major building infrastructure projects identified in our 2018 review.

During 2019, we made continued progress on our development capital expenditure program through which we expand, renovate, reposition, and redevelop selected existing senior living communities where economically advantageous.

For the year ended December 31, 2019 , we invested $24.6 million in our development capital expenditure program, which included the completion of eleven expansion or conversion projects to generate 61 net new units.

We currently have seven development capital expenditure projects that have been approved, most of which have begun construction and are expected to generate 26 net new units.

Our planned full-year 2020 development capital expenditures are approximately $30 million, net of anticipated lessor reimbursements.

We anticipate that our 2020 capital expenditures will be funded from cash on hand, cash flows from operations, reimbursements from lessors, and, if necessary, amounts drawn on our secured credit facility.

On December 22, 2017, the President signed the Tax Cuts and Jobs Act ("Tax Act") into law.

The Tax Act reformed the United States corporate income tax code, including a reduction to the federal corporate income tax rate from 35% to 21% effective January 1, 2018.

The Tax Act also eliminated alternative minimum tax ("AMT") and the 20-year carryforward limitation for net operating losses incurred after December 31, 2017, and imposes a limit on the usage of net operating losses incurred after such date equal to 80% of taxable income in any given year.

The 80% usage limit will not have an economic impact on the Company until its current net operating losses are either utilized or expired.

In addition, the Tax Act limits the annual deductibility of a corporation's net interest expense unless it elects to be exempt from such deductibility limitation under the real property trade or business exception.

The Company elected the real property trade or business exception with the 2018 tax return.

As such, the Company is required to apply the alternative depreciation system ("ADS") to all current and future residential real property and qualified improvement property assets.

This change impacts the current and future tax depreciation deductions and impacted the Company's valuation allowance accordingly.

Additional information that may affect the Company's provisional amounts would include further clarification and guidance on how the Internal Revenue Service will implement tax reform and further clarification and guidance on how state taxing authorities will implement tax reform and the related effect on the Company's state and local income tax returns, state and local net operating losses and corresponding valuation allowances.

Our total community-level capital expenditures were $140.1 million for 2020, which was a decrease of $98.6 million from 2019, and $27.8 million of which was reimbursed by our lessors.

The decrease in community-level capital expenditures was partially due to our approximate $48 million reduction to our pre-pandemic full-year 2020 community-level capital expenditure plans as we delayed or canceled a number of elective capital expenditure projects in response to the pandemic.

In the aggregate, we expect our full-year 2021 non-development capital expenditures, net of anticipated lessor reimbursements, to be approximately $140 million.

In addition, we expect our full-year 2021 development capital expenditures to be approximately $10 million, net of anticipated lessor reimbursements, and such projects include those for expansion, repositioning, redeveloping, and major renovation of selected existing senior living communities.

We anticipate that our 2021 capital expenditures will be funded from cash on hand, cash equivalents, marketable securities, cash flows from operations, and reimbursements from lessors.

Results of Operations

As of December 31, 2020, our total operations included 726 communities with a capacity to serve approximately 64,000 residents.

As of that date we owned 330 communities ( 30,160 units), leased 333 communities ( 24,021 units), managed 17 communities ( 7,307 units) for which we have an equity interest, and managed 83 communities ( 10,779 units) on behalf of third parties.

As of that date we owned 350 communities (31,853 units), leased 301 communities (21,129 units), and managed 75 communities (10,129 units).

The following discussion should be read in conjunction with our consolidated financial statements and the related notes, which are included in "Item 8.

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The results of operations for any particular period are not necessarily indicative of results for any future period.

Transactions completed during the period of January 1, 2018 to December 31, 2019 significantly affect the comparability of our results of operations, and summaries of such transactions and their impact on our results of operations are discussed above in "Transaction Activity and Impact of Dispositions on Results of Operations."

This section uses the operating measures defined below.

Our adoption and application of the new lease accounting standard has impacted our results for the year ended December 31, 2019 due to our recognition of additional resident fee revenue and facility operating expense, which is non-cash and is non-recurring in future years.

Transactions completed during the period of January 1, 2019 to December 31, 2020 affect the comparability of our results of operations, and summaries of such transactions and their impact on our results of operations are discussed above in "Transaction Activity and Impact of Dispositions on Results of Operations."

We use the operating measures described below in connection with operating and managing our business and reporting our results of operations.

Our adoption and application of the new lease accounting standard impacted our results for the year ended December 31, 2019 due to our recognition of additional resident fee revenue and facility operating expense, which are non-cash

and are non-recurring in years subsequent to December 31, 2019.

To aid in comparability between periods, presentations of our results on a same community basis, and RevPAR and RevPOR, exclude the impact of the lease accounting standard.

Operating results and data presented on a same community basis reflect results and data of the same store communities (utilizing our methodology for determining same store communities which generally excludes assets held for sale, acquisitions, and dispositions since the beginning of the prior year, and certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects) and, for the 2019 period, exclude the additional resident fee revenue and facility operating expense recognized as a result of application of ASC 842.

RevPAR , or average monthly senior housing resident fee revenue per available unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 period, the additional resident fee revenue recognized as a result of the application of ASC 842), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

RevPOR , or average monthly senior housing resident fee revenue per occupied unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 period, the additional resident fee revenue recognized as a result of the application of ASC 842), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

• Senior housing operating results and data presented on a same community basis reflect results and data of a consistent population of communities by excluding the impact of changes in the composition of our portfolio of communities.

The operating results exclude hurricane and natural disaster expense and related insurance recoveries, and for the 2019 period, exclude the additional resident fee revenue and facility operating expense recognized as a result of the application of the lease accounting standard ASC 842.

We define our same community portfolio as communities consolidated and operational for the full period in both comparison years.

Consolidated communities excluded from the same community portfolio include communities acquired or disposed of since the beginning of the prior year, communities classified as assets held for sale, certain communities planned for disposition, certain communities that have undergone or are undergoing expansion, redevelopment, and repositioning projects, and certain communities that have experienced a casualty event that significantly impacts their operations.

Our management uses same community operating results and data for decision making, and we believe such results and data provide useful information to investors, because it enables comparisons of revenue, expense, and other operating measures for a consistent portfolio over time without giving effect to the impacts of communities that were not consolidated and operational for the comparison periods, communities acquired or disposed during the comparison periods (or planned for disposition), and communities with results that are or likely will be impacted by completed or in-process development-related capital expenditure projects.

As presented herein, same community results include the direct costs incurred to prepare for and respond to the COVID-19 pandemic.

• RevPAR , or average monthly senior housing resident fee revenue per available unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 period, the additional resident fee revenue recognized as a result of the application of the lease accounting standard ASC 842), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period.

We measure RevPAR at the consolidated level, as well as at the segment level with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments.

Our management uses RevPAR for decision making, and we believe the measure provides useful information to investors, because the measure is an indicator of senior housing resident fee revenue performance that reflects the impact of both senior housing occupancy and rate.

• RevPOR , or average monthly senior housing resident fee revenue per occupied unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding Health Care Services segment revenue and entrance fee amortization, and, for the 2019 period, the additional resident fee revenue recognized as a result of the application of the lease accounting standard ASC 842), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period.

We measure RevPOR at the consolidated level, as well as at the segment level with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments.

Our management uses RevPOR for decision making, and we believe the measure provides useful information to investors, because it reflects the average amount of senior housing resident fee revenue we derive from an occupied unit per month without factoring occupancy rates.

RevPOR is a significant driver of our senior housing revenue performance.

• Weighted average occupancy rate reflects the percentage of units at our owned and leased communities being utilized by residents over a reporting period.

We measure occupancy rates with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments, and also measure this metric both on a consolidated senior housing and a same community basis.

Our management uses weighted average occupancy, and we believe the measure provides useful information to investors, because it is a significant driver of our senior housing revenue performance.

This section includes the non-GAAP performance measure Adjusted EBITDA.

See "Non-GAAP Financial Measures" below for our definition of the measure and other important information regarding such measure, including reconciliations to the most comparable GAAP measures.

During the first quarter of 2019, we modified our definition of Adjusted EBITDA to exclude transaction and organizational restructuring costs, and amounts for all periods herein reflect application of the modified definition.

Discussion of our financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019 is presented below.

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The following table summarizes our overall operating results for the years ended December 31, 2020 and 2019.

Increase (Decrease)

(in thousands)

Total revenue

December 31, Increase (Decrease)

(in thousands) 2020 2019 Amount Percent

Total resident fees and management fees revenue $ 3,023,257 $ 3,267,039 (243,782) (7.5) %

Other operating income 115,749 — 115,749 NM

Facility operating expense 2,341,859 2,390,495 (48,636) (2.0) %

Net income (loss)

Net income (loss) 81,945 (268,492) 350,437 NM

Adjusted EBITDA 264,387 401,169 (136,782) (34.1) %

The decrease in total revenue was primarily attributable to the disposition of 135 communities through sales of owned communities and lease terminations since the beginning of the prior year, which resulted in $336.5 million less in resident fees during the year ended December 31, 2019 compared to the prior year.

Additionally, Management Services segment revenue, including management fees and reimbursed costs incurred on behalf of managed communities, decreased $235.1 million primarily due to terminations of management agreements subsequent to the beginning of the prior year.

The decrease in total revenue was partially offset by a 1.9% increase in same community resident fee revenue and RevPAR, resulting from a 2.9% increase in same community RevPOR and an 80 basis points decrease in same community weighted average occupancy.

The decrease in facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year, which resulted in $234.2 million less in facility operating expense during the year ended December 31, 2019 .

The decrease was partially offset by a 5.1% increase in same community facility operating expense, which was primarily due to an increase in labor expense arising from planned wage rate increases and an increase in employee benefit expense and increases in insurance and advertising costs compared to the prior year.

In addition to the foregoing factors, we recognized incremental resident fee revenue and facility operating expense of approximately $26.4 million and $49.5 million , respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense excludes approximately $23.8 million and $45.0 million , respectively, of such revenue and expenses, which was non-cash and is non-recurring in subsequent years.

The improvement to net income (loss) was primarily attributable to a decrease in non-cash goodwill and asset impairment charges recorded and a decrease in loss on facility lease termination and modification compared to the prior year, offset by a decrease in net gain on sale of assets and the revenue and facility operating expense factors previously discussed.

Goodwill and asset impairment expense was $49.3 million for the year ended December 31, 2019 compared to $489.9 million for the prior year when we impaired Assisted Living and Memory Care segment goodwill for $351.7 million.

We recognized a loss on lease termination and modification of $162.0 million for the year ended December 31, 2018 primarily as a result of the restructuring or termination of community leases with Ventas and Welltower compared to a loss of $3.4 million for the year ended December 31, 2019.

Net gain on sale of assets was $7.2 million for the year ended December 31, 2019 compared to a net gain on sale of assets of $293.2 million for the prior year related to sales of communities, sales of investments in unconsolidated ventures, and termination of financing leases.

The decrease in Adjusted EBITDA was primarily attributable to the revenue and facility operating expense factors previously discussed, offset by $19.1 million, or 9.3%, less in general and administrative expenses (excluding non-cash stock-based compensation expense and transaction and organizational restructuring costs) and $35.8 million, or 11.0%, less in cash facility operating lease payments.

The decrease in total resident fees and management fees revenue was primarily attributable to a $317.4 million decrease in resident fees, including a 5.1% decrease in same community RevPAR, comprised of a 680 basis points decrease in same community weighted average occupancy and a 3.2% increase in same community RevPOR.

We estimate that the COVID-19 pandemic, including the related restrictions at our communities, resulted in $281.1 million of lost resident fee revenue for the year ended December 31, 2020, including $228.5 million and $52.6 million of lost resident fee revenue in our consolidated senior housing portfolio and Health Care Services segment, respectively.

Estimated lost resident fee revenue represents the difference between the actual revenue for the period and our expectations prior to estimating the effects of COVID-19.

Additionally, the disposition of 36 communities through sales and conveyances of owned communities and lease terminations since the beginning of the prior year resulted in $81.0 million less in resident fees during the year ended December 31, 2020 compared to the prior year.

Revenue for the Health Care Services segment decreased $80.5 million, as our home health average daily census began to decrease in March 2020 due to the COVID-19 pandemic and due to the implementation of the PDGM, an alternate home health case-mix adjustment methodology with a 30 day unit of payment, which became effective beginning January 1, 2020.

Management fee revenue increased $73.6 million primarily due to $100.0 million of management fee revenue during the year for the management termination fee payment from Healthpeak, partially offset by terminations of management agreements subsequent to the beginning of the prior year.

During the year ended December 31, 2020, we recognized $115.7 million of government grants as other operating income based on our estimates of our satisfaction of the conditions of the grants during the period.

The decrease in facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year, which resulted in $69.7 million less in facility operating expense during the year ended December 31, 2020 compared to the prior year.

Additionally, there was a decrease in labor costs for home health services as a result of the lower census and as we adjusted our home health services operational structure, to better align our facility operating expenses and business model in connection with PDGM.

The decrease was partially offset by a 6.0% increase in same community facility operating expense, which was primarily due to $107.5 million of incremental costs incurred in our same community portfolio during the year ended December 31, 2020 to respond to the COVID-19 pandemic.

The increase in same community facility operating expense was partially offset by repairs and maintenance cost decreases due to fewer move-ins during the current year and a decrease in supplies costs due to the reduced occupancy during the current year.

In addition to the foregoing factors, we recognized additional resident fee revenue and additional facility operating expense of $26.4 million and $49.5 million, respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense excludes approximately $24.1 million and $45.2 million, respectively, of such additional revenue and expenses.

The increase in net income was primarily attributable to a $367.3 million increase in net gain on sale of assets, resulting from the sale of our interest in the CCRC Venture, partially offset by the net impact of the revenue, other operating income, and facility operating expense factors previously discussed.

The decrease in Adjusted EBITDA was primarily attributable to the net impact of the revenue (including the $100.0 million management agreement termination fee payment received from Healthpeak), other operating income, and facility operating expense factors previously discussed and the $119.2 million one-time cash lease payment made to Ventas in connection with our lease restructuring transaction effective July 26, 2020, partially offset by a decrease in general and administrative expense.

Operating Results - Senior Housing Segments

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See management's discussion and analysis of the operating results on an individual segment basis on the following pages.

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)

Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) Years Ended

December 31, Increase (Decrease)

2020 2019 Amount Percent

Resident fees $ 2,525,757 $ 2,762,671 $ (236,914) (8.6) %

Other operating income $ 92,862 $ — $ 92,862 NM

Facility operating expense $ 1,954,025 $ 1,968,222 $ (14,197) (0.7) %

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Total average units 53,687 55,501 (1,814) (3.3) %

Occupancy rate (weighted average)

RevPAR $ 3,917 $ 4,106 $ (189) (4.6) %

Occupancy rate (weighted average) 77.5 % 83.9 % (640) bps n/a

RevPOR $ 5,054 $ 4,893 $ 161 3.3 %

Same Community Operating Results and Data

Resident fees $ 2,326,529 $ 2,451,352 $ (124,823) (5.1) %

Other operating income $ 84,265 $ — $ 84,265 NM

Facility operating expense $ 1,781,750 $ 1,680,424 $ 101,326 6.0 %

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Total average units 49,237 49,232 5 —

Occupancy rate (weighted average)

RevPAR $ 3,938 $ 4,149 $ (211) (5.1) %

Occupancy rate (weighted average) 77.8 % 84.6 % (680) bps n/a

RevPOR $ 5,063 $ 4,904 $ 159 3.2 %

Independent Living Segment

The following table summarizes the operating results and data for our Independent Living segment for the years ended December 31, 2020 and 2019, including operating results and data on a same community basis.

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)

Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) Years Ended

December 31, Increase (Decrease)

2020 2019 Amount Percent

Resident fees $ 512,598 $ 544,558 $ (31,960) (5.9) %

Other operating income $ 11,823 $ — $ 11,823 NM

Facility operating expense $ 341,608 $ 340,817 $ 791 0.2 %

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Total average units 12,533 12,474 59 0.5 %

Occupancy rate (weighted average)

RevPAR $ 3,408 $ 3,580 $ (172) (4.8) %

Occupancy rate (weighted average) 81.8 % 89.2 % (740) bps n/a

RevPOR $ 4,165 $ 4,014 $ 151 3.8 %

Same Community Operating Results and Data

Resident fees $ 482,200 $ 505,729 $ (23,529) (4.7) %

Other operating income $ 10,775 $ — $ 10,775 NM

Facility operating expense $ 318,471 $ 307,790 $ 10,681 3.5 %

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Total average units 11,704 11,695 9 0.1 %

Occupancy rate (weighted average)

The decrease in the segment's resident fees was primarily attributable to the disposition of 17 communities since the beginning of the prior year, which resulted in $81.3 million less in resident fees during the year ended December 31, 2019 .

The decrease in resident fees was partially offset by the increase in the segment's same community RevPAR, comprised of a 2.5% increase in same community RevPOR and a 10 basis points increase in same community weighted average occupancy.

RevPAR $ 3,433 $ 3,604 $ (171) (4.7) %

Occupancy rate (weighted average) 82.1 % 89.2 % (710) bps n/a

RevPOR $ 4,185 $ 4,042 $ 143 3.5 %

The decrease in the segment's resident fees was primarily attributable to a decrease in the segment's same community RevPAR, comprised of a 710 basis points decrease in same community weighted average occupancy and a 3.5% increase in same community RevPOR.

The decrease in the segment's same community weighted average occupancy primarily reflects the impact of reduced move-in activity related to the COVID-19 pandemic, including the related restrictions at our communities.

We estimate that the COVID-19 pandemic, including the related restrictions at our communities, resulted in $35.9 million of lost resident fee revenue on a same community basis for this segment for the year ended December 31, 2020.

The increase in the segment's same community RevPOR was primarily the result of in-place rent increases.

Additionally, the decrease in resident fees was partially offset by $2.8 million of incremental revenue for one community acquired subsequent to the beginning of the prior year.

The decrease in the segment's facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year, which resulted in $48.2 million less in facility operating expense during the year ended December 31, 2019 .

The decrease in facility operating expense was partially offset by an increase in the segment's same community facility operating expense, including an increase in labor expense arising from planned wage rate increases and an increase in employee benefit expense.

There was also an increase in property insurance and advertising costs compared to the prior year.

The decrease in facility operating expense was partially offset by $2.2 million of incremental facility operating expense for one community acquired subsequent to the beginning of the prior year.

In addition to the foregoing factors, we recognized incremental resident fee revenue and facility operating expense for this segment of approximately $8.7 million and $12.7 million , respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense for this segment excludes approximately $7.7 million and $11.2 million , respectively, of such revenue and expenses.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense, including $14.7 million of incremental direct costs to prepare for and respond to the COVID-19 pandemic.

These increases in the segment's same community facility operating expense were partially offset by decreases in repairs and maintenance costs due to fewer move-ins during the current year and supplies costs due to the reduced occupancy during the current year.

We recognized additional resident fee revenue and additional facility operating expense for this segment of $8.7 million and $12.7 million, respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense for this segment excludes approximately $8.2 million and $12.0 million, respectively, of such additional revenue and expenses.

Assisted Living and Memory Care Segment

The following table summarizes the operating results and data for our Assisted Living and Memory Care segment for the years ended December 31, 2020 and 2019, including operating results and data on a same community basis.

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)

Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) Years Ended

December 31, Increase (Decrease)

2020 2019 Amount Percent

Resident fees $ 1,691,276 $ 1,815,938 $ (124,662) (6.9) %

Other operating income $ 62,585 $ — $ 62,585 NM

Facility operating expense $ 1,325,260 $ 1,297,302 $ 27,958 2.2 %

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Total average units 35,530 36,560 (1,030) (2.8) %

Occupancy rate (weighted average)

RevPAR $ 3,967 $ 4,106 $ (139) (3.4) %

Occupancy rate (weighted average) 76.5 % 82.6 % (610) bps n/a

RevPOR $ 5,184 $ 4,971 $ 213 4.3 %

Same Community Operating Results and Data

Resident fees $ 1,632,470 $ 1,705,487 $ (73,017) (4.3) %

Other operating income $ 60,939 $ — $ 60,939 NM

Facility operating expense $ 1,275,032 $ 1,186,001 $ 89,031 7.5 %

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Total average units 33,921 33,925 (4) —

Occupancy rate (weighted average)

The decrease in the segment's resident fees was primarily attributable to the disposition of 111 communities since the beginning of the prior year, which resulted in $235.1 million less in resident fees during the year ended December 31, 2019 .

The decrease in resident fees was partially offset by the increase in the segment's same community RevPAR, comprised of a 3.3% increase in same community RevPOR and a 100 basis points decrease in same community weighted average occupancy.

RevPAR $ 4,010 $ 4,189 $ (179) (4.3) %

Occupancy rate (weighted average) 76.8 % 83.3 % (650) bps n/a

RevPOR $ 5,222 $ 5,032 $ 190 3.8 %

The decrease in the segment's resident fees was primarily attributable to a decrease in the segment's same community RevPAR, comprised of a 650 basis points decrease in same community weighted average occupancy and a 3.8% increase in same community RevPOR.

We estimate that the COVID-19 pandemic, including the related restrictions at our communities, resulted in $137.7 million of lost resident fee revenue on a same community basis for this segment for the year ended December 31, 2020.

The increase in the segment's same community RevPOR was primarily the result of in-place rent increases.

The decrease in the segment's same community weighted average occupancy reflects the impact of new competition in our markets.

The decrease in resident fees was partially offset by $3.0 million of incremental revenue for two communities acquired subsequent to the beginning of the prior year.

The decrease in the segment's facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year, which resulted in $169.2 million less in facility operating expense during the year ended December 31, 2019 .

There was also an increase in insurance and advertising costs compared to the prior year.

The decrease in facility operating expense was partially offset by $1.7 million of incremental facility operating expense for two communities acquired subsequent to the beginning of the prior year.

In addition to the foregoing factors, we recognized incremental resident fee revenue and facility operating expense for this segment of approximately $14.7 million and $31.6 million , respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense for this segment excludes approximately $13.9 million and $29.8 million , respectively, of such revenue and expenses.

Additionally, the disposition of 30 communities since the beginning of the prior year resulted in $36.7 million less in resident fees during the year ended December 31, 2020 compared to the prior year.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense, including $80.4 million of incremental direct costs to prepare for and respond to the COVID-19 pandemic, and an increase in labor expense arising from increased contract labor costs.

The increase in the segment's same community facility operating expense was partially offset by decreases in repairs and maintenance costs due to fewer move-ins during the current year.

The increase in the segment's facility operating expense was partially offset by the disposition of communities since the beginning of the prior year, which resulted in $30.9 million less in facility operating expense during the year ended December 31, 2020 compared to the prior year.

In addition to the foregoing factors, we recognized additional resident fee revenue and additional facility operating expense for this segment of approximately $14.7 million and $31.6 million, respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense for this segment excludes approximately $13.8 million and $29.7 million, respectively, of such additional revenue and expenses.

CCRCs Segment

The following table summarizes the operating results and data for our CCRCs segment for the years ended December 31, 2020 and 2019, including operating results and data on a same community basis.

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR)

Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) Years Ended

December 31, Increase (Decrease)

2020 2019 Amount Percent

Resident fees $ 321,883 $ 402,175 $ (80,292) (20.0) %

Other operating income $ 18,454 $ — $ 18,454 NM

Facility operating expense $ 287,157 $ 330,103 $ (42,946) (13.0) %

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Total average units 5,624 6,467 (843) (13.0) %

Occupancy rate (weighted average)

RevPAR $ 4,738 $ 5,123 $ (385) (7.5) %

Occupancy rate (weighted average) 74.2 % 81.3 % (710) bps n/a

RevPOR $ 6,389 $ 6,298 $ 91 1.4 %

Same Community Operating Results and Data

Resident fees $ 211,859 $ 240,136 $ (28,277) (11.8) %

Other operating income $ 12,551 $ — $ 12,551 NM

Facility operating expense $ 188,247 $ 186,633 $ 1,614 0.9 %

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Total average units 3,612 3,612 — —

Occupancy rate (weighted average)

The decrease in the segment's resident fees was primarily attributable to the disposition of seven communities since the beginning of the prior year period, which resulted in $20.0 million less in resident fees during the year ended December 31, 2019 .

Additionally, there was a decrease in the segment's same community RevPAR, comprised of a 2.1% increase in same community RevPOR, primarily the result of in-place rent increases, and a 180 basis points decrease in same community weighted average occupancy, reflecting the impact of new competition in our markets.

The decrease in resident fees was partially offset by $4.3 million of incremental revenue for one community acquired subsequent to the beginning of the prior year.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense, including an increase in labor expense arising from planned wage rate increases and an increase in employee benefit expense.

There was also an increase in insurance costs compared to the prior year and $3.1 million of additional facility operating expense for one community acquired subsequent to the beginning of the prior year period.

The increase in facility operating expense was partially offset by the disposition of communities since the beginning of the prior year, which resulted in $16.8 million less in facility operating expense during the year ended December 31, 2019 .

In addition to the foregoing factors, we recognized incremental resident fee revenue and facility operating expense for this segment of approximately $3.0 million and $5.3 million , respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense for this segment excludes approximately $2.2 million and $3.9 million , respectively, of such revenue and expenses.

RevPAR $ 4,888 $ 5,540 $ (652) (11.8) %

Occupancy rate (weighted average) 73.3 % 82.7 % (940) bps n/a

RevPOR $ 6,674 $ 6,704 $ (30) (0.4) %

The decrease in the segment's resident fees was primarily attributable to the disposition of six communities since the beginning of the prior year, which resulted in $44.3 million less in resident fees during the year ended December 31, 2020 compared to the prior year.

Additionally, there was a decrease in the segment's same community RevPAR, comprised of a 940 basis points decrease in same community weighted average occupancy and a 0.4% decrease in same community RevPOR.

We estimate that the COVID-19 pandemic, including the related restrictions at our communities, resulted in $36.4 million of lost resident fee revenue on a same community basis for this segment for the year ended December 31, 2020.

The decrease in the segment's same community RevPOR was primarily the result of a service mix shift from less skilled nursing services within the segment, partially offset by in-place rent increases.

The decrease in the segment's facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year, which resulted in $38.8 million less in facility operating expense during the year ended December 31, 2020 compared to the prior year.

The decrease in facility operating expense was partially offset by an increase in the segment's same community facility operating expense, including $12.4 million of incremental direct costs to prepare for and respond to the COVID-19 pandemic, partially offset by decreases in labor expense arising from fewer hours worked and healthcare supplies costs during the period as we intentionally scaled back such costs for the reduced occupancy.

In addition to the foregoing factors, we recognized additional resident fee revenue and additional facility operating expense for this segment of approximately $3.0 million and $5.3 million respectively, during the year ended December 31, 2019 as a result of the application of the new lease accounting standard effective January 1, 2019.

Same community resident fee revenue and facility operating expense for this segment excludes approximately $2.1 million and $3.6 million, respectively, of such additional revenue and expenses.

Operating Results - Health Care Services Segment

The following table summarizes the operating results and data for our Health Care Services segment for the years ended December 31, 2020 and 2019.

(in thousands, except census and treatment codes)

Increase (Decrease)

(in thousands, except census) Years Ended

December 31, Increase (Decrease)

2020 2019 Amount Percent

Resident fees $ 366,810 $ 447,260 $ (80,450) (18.0) %

Other operating income $ 22,887 $ — $ 22,887 NM

Facility operating expense $ 387,834 $ 422,273 $ (34,439) (8.2) %

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Hospice average daily census 1,658 1,580 78 4.9 %

Outpatient therapy treatment codes

The increase in the segment's resident fees was primarily attributable to an increase in volume for hospice services.

An increase in hospice revenue of $15.4 million was partially offset by a decrease in home health revenue of $4.6 million, primarily attributable to sales force turnover, customer relations issues related to the centralized intake initiative, unfavorable case-mix, and community dispositions.

The increase in the segment's facility operating expense was primarily attributable to an increase in labor costs arising from wage rate increases and the expansion of our hospice services.

On October 31, 2019, the Centers for Medicare and Medicaid Services ("CMS") issued a final rule that included routine updates to home health payment rates and sets forth the implementation of the Patient-Driven Grouping Model ("PDGM"), an alternate home health case-mix adjustment methodology with a 30-day unit of payment, which became effective beginning January 1, 2020.

The final rule also will phase out requests for anticipated payment ("RAP") over 2020 with the full elimination of RAPs in 2021.

We expect the implementation of PDGM to have a negative impact to revenue in 2020, which we expect will be largely offset by lower facility operating expenses.

The decrease in the segment's resident fees was primarily attributable to a decrease in revenue for home health services, as our home health average daily census also began to decrease in March 2020 due to the COVID-19 pandemic, which resulted in lower occupancy in our communities and fewer elective medical procedures and hospital discharges.

Additionally, the implementation of the PDGM resulted in a decrease in revenue for home health services.

We estimate that the COVID-19 pandemic, including the related restrictions at our communities, resulted in $52.6 million of lost resident fee revenue for this segment for the year ended December 31, 2020 .

The decrease in the segment's facility operating expense was primarily attributable to a decrease in labor costs for home health services as a result of the lower census and as we adjusted our home health services operational structure, to better align our facility operating expenses and business model in connection with PDGM.

The decrease in the segment's facility operating expense was partially offset by $8.2 million of incremental direct costs to prepare for and respond to the COVID-19 pandemic and an increase in labor costs for hospice services arising from wage rate increases and the expansion of our hospice services throughout 2019.

Upon closing, we expect that the results and financial position of our Health Care Services segment will be deconsolidated from our financial statements.

Operating Results - Management Services Segment

The following table summarizes the operating results and data for our Management Services segment for the years ended December 31, 2020 and 2019.

(in thousands, except communities, units, and occupancy)

Increase (Decrease)

Management fees

(in thousands, except communities and units) Year Ended

December 31, Increase (Decrease)

2020 2019 Amount Percent

Management fees $ 130,690 $ 57,108 $ 73,582 NM

Reimbursed costs incurred on behalf of managed communities $ 401,189 $ 790,049 $ (388,860) (49.2) %

Costs incurred on behalf of managed communities $ 401,189 $ 790,049 $ (388,860) (49.2) %

Number of communities (period end) 75 100 (25) (25.0) %

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Total average units 11,184 21,769 (10,585) (48.6) %

Occupancy rate (weighted average)

The decrease in management fees was primarily attributable to the transition of management arrangements on 129 net communities since the beginning of the prior year period, generally for interim management arrangements on formerly leased or owned communities and management arrangements on certain former unconsolidated ventures in which we sold our interest.

Management fees of $57.1 million for the year ended December 31, 2019 include $8.9 million of management fees attributable to communities for which our management agreements were terminated during such period and approximately $28.6 million of management fees attributable to communities that we expect the terminations of our management agreements to occur (or have occurred) during 2020, including management agreements on communities owned by the CCRC Venture, interim management arrangements on formerly leased communities, and management arrangements on certain former unconsolidated ventures in which we sold our

Pursuant to the MTCA with Healthpeak, on January 31, 2020, Healthpeak paid us a $100.0 million management agreement termination fee, and we transitioned operations of 14 entry fee CCRCs (6,383 units) to a new operator.

The decrease in reimbursed costs incurred on behalf of managed communities was primarily attributable to terminations of management agreements subsequent to the beginning of the prior year.

The increase in management fees was primarily attributable to $105.0 million of management termination fees recognized for the year ended December 31, 2020, including the $100.0 million management termination fee payment received from Healthpeak during the three months ended March 31, 2020.

We received an $8.6 million management termination fee payment during the three months ended December 31, 2020, of which $5.0 million of management fees were recognized for the three

months ended December 31, 2020.

As of December 31, 2020, we have completed the transition of management arrangements on 130 net communities since the beginning of the prior year, generally for interim management arrangements on former unconsolidated ventures in which we sold our interest and interim management arrangements on formerly leased or owned communities.

During 2021, we expect terminations of a substantial portion of our management arrangements.

Management fees of $130.7 million for the year ended December 31, 2020 include $104.1 million of management fees attributable to communities for which our management agreements were terminated during such period and approximately $18.0 million of management fees attributable to communities that we expect the terminations of our management agreements to occur (or have occurred) during 2021.

The decrease in reimbursed costs and costs incurred on behalf of managed communities was primarily attributable to terminations of management agreements subsequent to the beginning of the prior year.

Operating Results - Other Income and Expense Items

The following table summarizes other income and expense items in our operating results for the years ended December 31, 2020 and 2019.

(in thousands)

Increase (Decrease)

(in thousands) Years Ended

December 31, Increase (Decrease)

2020 2019 Amount Percent

General and administrative expense $ 206,575 $ 219,289 $ (12,714) (5.8) %

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Depreciation and amortization 359,226 379,433 (20,207) (5.3) %

Goodwill and asset impairment

Loss (gain) on facility lease termination and modification, net

Costs incurred on behalf of managed communities

Asset impairment 107,308 49,266 58,042 117.8 %

Loss (gain) on facility lease termination and modification, net (2,303) 3,388 (5,691) NM

Interest income 4,799 9,859 (5,060) (51.3) %

Interest expense (208,779) (248,341) (39,562) (15.9) %

Debt modification and extinguishment costs

Gain (loss) on debt modification and extinguishment, net

10,896 (5,247) 16,143 NM

Equity in earnings (loss) of unconsolidated ventures (2,107) (4,544) (2,437) (53.6) %

Gain (loss) on sale of assets, net

Gain (loss) on sale of assets, net 374,532 7,245 367,287 NM

Other non-operating income (loss) 5,648 14,765 (9,117) (61.7) %

Benefit (provision) for income taxes

Benefit (provision) for income taxes (5,352) 2,269 (7,621) NM

General and Administrative Expense.

The decrease in general and administrative expense was primarily attributable to a decrease in transaction and organizational restructuring costs, a reduction in our corporate associate headcount since the beginning of the prior year as we scaled our general and administrative costs in connection with community dispositions, and lower professional fees.

Transaction and organizational restructuring costs decreased $18.1 million compared to the prior period, to $10.0 million for the year ended December 31, 2019 primarily due to lower severance and retention costs.

Transaction costs include those directly related to acquisition, disposition, financing and leasing activity, our assessment of options and alternatives to enhance stockholder value, and stockholder relations advisory matters, and are primarily comprised of legal, finance, consulting, professional fees and other third party costs.

Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance and retention costs.

For the year ended December 31, 2019 , transaction costs related to stockholder advisory matters was $5.9 million.

The decrease in general and administrative expense was primarily attributable to a reduction in our travel costs due to the pandemic, a reduction in our corporate headcount, as we scaled our general and administrative costs in connection with community dispositions, and a reduction in our incentive compensation costs.

The decrease was partially offset by a $3.4 million increase in transaction and organizational restructuring costs compared to the prior year, to $13.4 million for the year ended December 31, 2020.

Transaction costs include those directly related to acquisition, disposition, financing and leasing activity, and stockholder relations advisory matters, and are primarily comprised of legal, finance, consulting, professional fees, and other third party costs.

Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance costs.

Facility Operating Lease Expense.

The decrease in facility operating lease expense was primarily due to lease termination activity since the beginning of the prior year.

The decrease in facility operating lease expense was primarily due to the Ventas lease portfolio restructuring during the current year and the acquisition of formerly leased communities and lease termination activity since the beginning of the prior year.

Depreciation and Amortization.

The decrease in depreciation and amortization expense was primarily due to disposition activity through sales and lease terminations since the beginning of the prior year.

Goodwill and Asset Impairment.

During the year ended December 31, 2019 , we recorded $49.3 million of non-cash impairment charges, of which $27.2 million related to property, plant and equipment and leasehold intangibles for certain communities and $10.2 million related to operating lease right-of-use assets, primarily within the Assisted Living and Memory Care segment.

The decrease in depreciation and amortization expense was primarily due to leasehold improvements for certain leased communities becoming fully depreciated and disposition activity since the beginning of the prior year.

Asset Impairment.

During the year ended December 31, 2020, we recorded $107.3 million of non-cash impairment charges, primarily for right-of-use assets for certain leased communities with decreased future cash flow estimates as a result of the COVID-19 pandemic.

During the prior year we recorded $49.3 million of non-cash impairment charges.

The prior year impairment charges primarily consisted of $351.7 million of goodwill impairment within the Assisted Living and Memory Care segment, $78.0 million of impairment of property, plant and equipment and leasehold intangibles for certain communities, primarily in the Assisted Living and Memory Care segment, $33.4 million of impairment of our investments in unconsolidated ventures, and $15.6 million for assets held for sale.

Loss (Gain) on Facility Lease Termination and Modification, Net.

During the year ended December 31, 2019 , we recorded a $3.4 million loss on facility lease termination and modification, net for the termination of leases for ten communities.

The $162.0 million loss on facility lease termination and modification, net during the year ended December 31, 2018 was primarily due to a $125.7 million loss on the restructuring of community leases with Ventas and $36.3 million of net losses on community lease termination activity.

Costs Incurred on Behalf of Managed Communities.

The decrease in costs incurred on behalf of managed communities was primarily due to terminations of management agreements subsequent to the beginning of the prior year period.

See Note 5 to the consolidated financial statements contained in "Item 8.

Financial Statements and Supplementary Data" for more information about the impairment charges.

Interest Expense.

The decrease in interest expense was primarily due to financing lease termination activity and a decrease in interest expense on long-term debt, reflecting the impact of the repayment of debt since the beginning of the prior year period and lower interest rates.

Equity in Earnings (Loss) of Unconsolidated Ventures.

The decrease in equity in loss of unconsolidated ventures was primarily due to the sale of investments in unconsolidated ventures since the beginning of the prior year period.

The decrease in interest expense was primarily due to interest expense on long-term debt, reflecting the impact of lower interest rates, and the acquisition of communities previously subject to financing leases since the beginning of the prior year.

Gain (Loss) on Debt Modification and Extinguishment, Net.

The increase in gain on debt modification and extinguishment was primarily due to a $19.7 million gain on debt extinguishment recognized during the year ended December 31, 2020 for the extinguishment of financing lease obligations for the acquisition from Healthpeak of eight communities which were previously subject to sale-leaseback transactions in which we were deemed to have continuing involvement.

Gain (Loss) on Sale of Assets, Net.

The decrease in gain on sale of assets, net was primarily due to fewer owned community and unconsolidated venture dispositions completed in 2019 compared to the prior year.

In 2018, we recognized gains of $293.2 million for sales of communities, sales of investments in unconsolidated ventures, and terminations of financing leases.

The increase in gain (loss) on sale of assets, net was primarily due to a $369.8 million gain on sale of assets recognized for the sale of our ownership interest in the CCRC Venture during the year ended December 31, 2020.

Benefit (Provision) for Income Taxes.

The difference between our effective tax rate for the years ended December 31, 2019 and 2018 was primarily due to the non-deductible impairment of goodwill that occurred in the year ended December 31, 2018 and the adjustment from stock-based compensation which was greater in the year ended December 31, 2018 compared to the year ended December 31, 2019 .

Offsetting these items was an increase in our valuation allowance that occurred in the year ended December 31, 2019 .

The difference between our effective tax rate for the years ended December 31, 2020 and 2019 was primarily due to the tax impact of the multi-part transaction with Healthpeak that occurred in the three months ended March 31, 2020.

The transaction created both federal and state taxable income in the 2020 tax year, requiring the use of all of our federal capital loss carryforwards and a portion of our net operating loss carryforwards reducing the valuation allowance accordingly.

This was slightly offset by an increase in state tax expense for the states in which we could not use, or did not have, net operating or capital losses to offset taxable income.

We recorded an aggregate deferred federal, state, and local tax expense of $22.1 million for the year ended December 31, 2020.

The expense includes $93.1 million as a result of the gain on the sale of our ownership interest in the CCRC Venture, offset by a benefit of $115.2 million as a result of the operating losses (exclusive of the CCRC Venture sale) for the year ended December 31, 2020.

The tax expense for the year ended December 31, 2020 is offset by a reduction in valuation allowance of $27.9 million.

We recorded an aggregate deferred federal, state, and local tax benefit of $63.0 million as a result of the operating loss for the year ended December 31, 2019, offset by an increase in the valuation allowance of $60.4 million.

The change in the valuation allowance for the year ended December 31, 2019 resulted from anticipated reversal of future tax liabilities offset by future tax deductions.

We recorded an aggregate deferred federal, state, and local tax benefit of $52.4 million as a result of the operating loss for the year ended December 31, 2018 , which included an increase in the valuation allowance of $0.3 million .

We evaluate our deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized.

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See "Non-GAAP Financial Measures" below for our definition of the measure and other important information regarding such measure, including reconciliations to the most comparable GAAP measures.

During the first quarter of 2019, we modified our definition of Adjusted Free Cash Flow to no longer adjust net cash provided by (used in) operating activities for changes in working capital items other than prepaid insurance premiums financed with notes payable and lease liability for lease termination and modification.

Amounts for all periods herein reflect application of the modified definition.

Liquidity and Indebtedness

The following is a summary of cash flows from operating, investing, and financing activities, as reflected in the consolidated statements of cash flows, and our Adjusted Free Cash Flow:

Year Ended December 31,

Increase (Decrease)

(in thousands)

Year Ended December 31, Increase (Decrease)

(in thousands) 2020 2019 Amount Percent

Net cash provided by (used in) operating activities $ 205,649 $ 216,412 $ (10,763) (5.0) %

Net cash provided by (used in) investing activities (425,111) (225,539) 199,572 88.5 %

Net cash provided by (used in) financing activities

Net cash provided by (used in) financing activities 382,913 (139,394) 522,307 NM

Net increase (decrease) in cash, cash equivalents, and restricted cash

163,451 (148,521) 311,972 NM

Cash, cash equivalents, and restricted cash at beginning of year 301,697 450,218 (148,521) (33.0) %

Cash, cash equivalents, and restricted cash at end of year $ 465,148 $ 301,697 $ 163,451 54.2 %

Adjusted Free Cash Flow

The increase in net cash provided by operating activities was primarily attributable to $54.6 million of cash paid to terminate community operating leases during the prior year and a $20.9 million increase in capital expenditure reimbursements from lessors for operating leases during 2019 .

These changes were partially offset by the impact of disposition activity, through sales and lease terminations, since the beginning of the prior year and an increase in same community facility operating expense during 2019.

The change in net cash provided by (used in) investing activities was primarily attributable to a $407.1 million decrease in net proceeds from the sale of assets, an increase of $171.4 million in purchases of marketable securities, a $159.3 million decrease in proceeds from sales and maturities of marketable securities, and a $78.6 million increase in cash paid for capital expenditures during 2019 .

These changes were partially offset by $271.3 million of cash paid for the acquisition of communities during 2018 and a $32.5 million increase in cash proceeds from notes receivable during 2019 .

The decrease in net cash used in financing activities was primarily attributable to a $468.8 million decrease in repayment of debt and financing lease obligations compared to 2018 , including the impact of our cash settlement of the aggregate principal amount of the $316.3 million of 2.75% convertible senior notes during June 2018, and $12.5 million of cash paid to terminate community financing leases during 2018 .

These changes were partially offset by a $284.9 million decrease in debt proceeds compared to 2018 and a $19.7 million increase in cash paid for share repurchases during 2019 .

The decrease in Adjusted Free Cash Flow was primarily attributable to a $53.5 million increase in non-development capital expenditures, net, and an increase in same community facility operating expense during 2019 .

Adjusted Free Cash Flow $ 24,181 $ (76,404) $ 100,585 NM

The decrease in net cash provided by operating activities was attributable primarily to $125.5 million of incremental direct costs to prepare for and respond to the COVID-19 pandemic during the current year, decreases in same community revenue and revenue for home health services compared to the prior year, and the $119.2 million one-time cash lease payment made to Ventas in connection with our lease restructuring transaction effective July 26, 2020.

These changes were partially offset by $115.7 million of government grants accepted, the $100.0 million management termination fee payment received from Healthpeak, $87.5 million of cash received under the Medicare accelerated and advance payment program, and $72.7 million of the employer portion of social security payroll taxes deferred during the current year.

The increase in net cash used in investing activities was primarily attributable to $472.2 million of cash paid for the acquisition of communities during the current year, a $192.0 million increase in purchases of marketable securities compared to the prior year, and a $28.7 million decrease in cash proceeds from notes receivable compared to the prior year.

These changes were partially offset by a $238.6 million increase in net proceeds from the sale of assets, a $141.0 million increase in proceeds from sales and maturities of marketable securities, and a $118.2 million decrease in cash paid for capital expenditures compared to the prior year.

The change in net cash provided by (used in) financing activities was primarily attributable to a $641.1 million increase in debt proceeds compared to the prior year.

This change was partially offset by a $110.9 million increase in repayment of debt and financing lease obligations compared to the prior year and a $12.3 million increase in cash paid during the current year for financing costs.

The increase in Adjusted Free Cash Flow was primarily attributable to a $96.2 million decrease in non-development capital expenditures, net compared to the prior year, partially offset by the decrease in net cash provided by operating activities.

Our principal sources of liquidity have historically been from:

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Over the longer-term, we expect to continue to fund our business through these principal sources of liquidity.

During 2020, we also received cash grants and advanced/accelerated Medicare payments under programs expanded or created under the CARES Act, and we have elected to utilize the CARES Act payroll tax deferral program, each as described above.

As described above, we expect to sell 80% of our equity in our Health Care Services segment pursuant to the Purchase Agreement with HCA Healthcare, which transaction is expected to occur in the late first half or early second half of 2021, for expected net cash proceeds of approximately $300 million, subject to the timing of closing with respect to the adjustments set forth in the

Purchase Agreement described above.

We are evaluating the use of the net proceeds from the pending Health Care Services transaction.

Our liquidity requirements have historically arisen from:

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• working capital;

operating costs such as employee compensation and related benefits, severance costs, general and administrative expense, and supply costs;

• operating costs such as employee compensation and related benefits, severance costs, general and administrative expense, and supply costs, including those related to the COVID-19 pandemic;

• debt service and lease payments;

• payment of deferred payroll taxes under the CARES Act;

• recoupment of payments received under the Accelerated and Advance Payment Program;

• acquisition consideration;

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• cash collateral required to be posted in connection with our financial instruments and insurance programs;

purchases of common stock under our share repurchase authorization;

• other corporate initiatives (including information systems and other strategic projects).

We are highly leveraged and have significant debt and lease obligations.

As of December 31, 2019 , we had two principal corporate-level debt obligations:

our secured credit facility providing commitments of $250.0 million and our separate unsecured facility providing for up to $47.5 million of letters of credit.

As of December 31, 2019 , we had $3.6 billion of debt outstanding, excluding lease obligations, at a weighted average interest rate of 4.7% .

As of such date, 95.5% , or $3.4 billion , of our total debt obligations represented non-recourse property-level mortgage financings, $89.4 million of letters of credit had been issued under our secured credit facility and separate unsecured letter of credit facility, and no balance was drawn on our secured credit facility.

As of December 31, 2019 , the current portion of long-term debt was $339.4 million , including $28.9 million of mortgage debt related to three communities classified as held for sale as of December 31, 2019 .

As of December 31, 2019 , we had $1.5 billion and $834.6 million of operating and financing lease obligations, respectively.

For the year ending December 31, 2020 , we will be required to make approximately $294.5 million and $74.9 million of cash payments in connection with our existing operating and financing leases, respectively (after giving effect to the transactions with Healthpeak and NHI completed in January 2020).

Pursuant to the MTCA with Healthpeak, on January 31, 2020, we paid $405.5 million to acquire 18 communities and to reduce our annual rent under the amended and restated master lease.

We funded the community acquisitions with $192.6 million of non-recourse mortgage financing and a portion of the proceeds from the multi-part transaction, which included cash proceeds of $295.2 million for the sale of our equity interest in the CCRC Venture and a $100.0 million management agreement termination fee.

The Company expects to obtain approximately $30.0 million of additional non-recourse mortgage financing on the communities.

The remaining net proceeds will improve the Company's capital structure flexibility and may be used, among other uses, for opportunistic share repurchases, to pursue potential lease restructuring opportunities that we identify, and to fund investments to support our strategy.

On January 22, 2020, we acquired eight leased communities (336 units) from NHI pursuant to our exercise of a purchase option for a purchase price of $39.3 million.

We funded the community acquisitions with cash on hand and expect to obtain approximately $28.0 million of non-recourse mortgage financing on the communities.

As of December 31, 2020, we had $3.9 billion of debt outstanding, at a weighted average interest rate of 3.6%.

As of such date, 98.2%, or $3.8 billion, of our total debt obligations represented non-recourse property-level mortgage financings.

As of December 31, 2020, $1.4 billion of our long-term debt is variable rate debt subject to interest rate cap agreements.

The remaining $128.0 million of our long-term variable rate debt is not subject to any interest rate cap agreements.

As of December 31, 2020, $80.7 million of letters of credit had been issued under our secured credit facility and separate secured and unsecured letter of credit facilities and no balance was drawn on our secured credit facility.

As of December 31, 2020, we had $1.5 billion of operating and financing lease obligations.

For the year ending December 31, 2021, we will be required to make approximately $274.7 million of cash lease payments in connection with our existing operating and financing leases.

Total liquidity of $575.5 million as of December 31, 2020 included $380.4 million of unrestricted cash and cash equivalents (excluding restricted cash and lease security deposits of $87.9 million in the aggregate), $172.9 million of marketable securities, and $22.2 million of availability on our secured credit facility.

Total liquidity as of December 31, 2019 decreased $111.2 million from total liquidity of $592.5 million as of December 31, 2018 .

The decrease was primarily attributable to our $97.7 million in additional investments in our communities in 2019 and $24.0 million paid for share repurchases.

As of December 31, 2019 , our current liabilities exceeded current assets by $450.8 million .

Our current liabilities include $339.4 million of the current portion of long-term debt and we have historically refinanced or extended maturities of debt obligations as they become current liabilities.

Our current liabilities also include $256.7 million of operating and financing lease obligations

recognized on our consolidated balance sheet, including $193.6 million for the current portion of operating lease obligations recognized on our consolidated balance sheet as a result of the application of ASC 842.

Excluding the current portion of these long-term obligations, our current assets exceeded current liabilities by $145.3 million.

Our operations generally result in a very low level of current assets primarily stemming from our deployment of cash to pay down long-term liabilities, to fund capital expenditures, and to pursue transaction opportunities.

Capital Expenditures

Total liquidity as of December 31, 2020 increased $94.2 million from total liquidity of $481.3 million as of December 31, 2019.

The increase was primarily attributable to temporary liquidity relief under the CARES Act, the transactions with Healthpeak completed in 2020, including the impact of the related financing transaction, and proceeds from mortgage debt financing, partially offset by the $119.2 million one-time cash lease payment made to Ventas in connection with our lease restructuring transaction effective July 26, 2020.

We continue to seek opportunities to enhance and preserve our liquidity, including through maintaining expense discipline and increasing occupancy, continuing to evaluate our financing structure and the state of debt markets, seeking further government-sponsored financial relief related to the COVID-19 pandemic, and completing the pending sale of 80% of our equity interest in our Health Care Services segment.

We currently estimate that our cash flows from operations, including estimates for stabilizing and growing occupancy in 2021, together with cash balances on hand, cash equivalents, marketable securities, amounts available under our secured credit facility, and proceeds from anticipated dispositions of owned communities, and financings and refinancings of various assets, will be sufficient to fund our liquidity needs for at least the next 12 months, assuming the economy and our industry do not further deteriorate substantially as a result of the continuing impacts of the pandemic.

Our actual liquidity and capital funding requirements depend on numerous factors, including our operating results, our actual level of capital expenditures, general economic conditions, and the cost of capital, as well as other factors described in "Item 1A.

Risk Factors".

Disruptions in the financial markets may have an adverse impact on our liquidity by making it more difficult for us to obtain financing or refinancing.

Since the amount of mortgage financing available for our communities is generally dependent on their appraised values and performance, decreases in their appraised values, including due to adverse changes in real estate market conditions, or their performance, could result in available mortgage refinancing amounts that are less than the communities’ maturing indebtedness.

If we are unable to obtain refinancing proceeds sufficient to cover maturing indebtedness, our liquidity could be adversely impacted and we may seek alternative sources of financing, which may be less attractive or unavailable.

Shortfalls in cash flows from estimated operating results or other principal sources of liquidity may have an adverse impact on our ability to fund our planned capital expenditures, or to pursue any acquisition, investment, development, or potential lease restructuring opportunities that we identify, or to fund investments to support our strategy.

In order to continue some of these activities at historical or planned levels, we may incur additional indebtedness or lease financing to provide additional funding.

There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

Our capital expenditures are comprised of community-level, corporate, and development capital expenditures.

Community-level capital expenditures include recurring expenditures (routine maintenance of communities over $1,500 per occurrence, including for unit turnovers (subject to a $500 floor)) and community renovations, apartment upgrades, and other major building infrastructure projects.

Community-level capital expenditures include recurring expenditures (routine maintenance of communities over $1,500 per occurrence and for unit turnovers over $500 per unit) and community renovations, apartment upgrades, and other major building infrastructure projects.

Corporate capital expenditures include those for information technology systems and equipment, the expansion of our support platform and healthcare services programs, and the remediation or replacement of assets as a result of casualty losses.

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Community-level capital expenditures, net (1)

Corporate (2)

Corporate capital expenditures, net (2)

Non-development capital expenditures, net (3)

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(1) Reflects the amount invested, net of lessor reimbursements of $27.8 million .

Includes $6.1 million of remediation costs at our communities resulting from hurricanes and $5.3 million for the acquisition of emergency power generators at certain Florida communities during 2019 in order to comply with legislation adopted in Florida requiring skilled nursing homes and assisted living and memory care communities to obtain generators and fuel necessary to sustain operations and maintain comfortable temperatures in the event of a power outage.

(2) Includes $4.1 million of remediation costs at our communities resulting from hurricanes and other natural disasters and for the acquisition of emergency power generators at our impacted Florida communities.

(3) Amount is included in Adjusted Free Cash Flow.

Our total community-level capital expenditures were $238.7 million for 2019, which was an increase of $97.7 million from 2018, and $34.8 million of which was reimbursed by our lessors.

For the year ended December 31, 2019, we invested $24.6 million in our development capital expenditure program, which included the completion of 11 expansion or conversion projects to generate 61 net new units.

We currently have seven development capital expenditure projects that have been approved, most of which have begun construction and are expected to generate 26 net new units.

Our planned full-year 2020 development capital expenditures are approximately $30 million, net of anticipated lessor reimbursements.

In response to the COVID-19 pandemic, we delayed or canceled a number of elective capital expenditure projects.

As a result, our full-year 2020 non-development capital expenditures, net of lessor reimbursements, and development capital expenditures reflect a $50.4 million and $16.3 million reduction to our pre-pandemic plans for 2020, respectively.

In the aggregate, we expect our full-year 2021 non-development capital expenditures, net of anticipated lessor reimbursements, to be approximately $140 million.

We anticipate that our 2021 capital expenditures will be funded from cash on hand, cash equivalents, marketable securities, cash flows from operations, and reimbursements from lessors.

Funding our planned capital expenditures, pursuing any acquisition, investment, development, or potential lease restructuring opportunities that we identify, or funding investments to support our strategy may require additional capital.

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If we are unable to raise additional funds or obtain them on terms acceptable to us, we may have to delay or abandon our plans.

We currently estimate that our existing cash flows from operations, together with cash on hand, amounts available under our secured credit facility, and proceeds from anticipated dispositions of owned communities and financings, and refinancings of various assets, will be sufficient to fund our liquidity needs for at least the next 12 months, assuming a relatively stable macroeconomic environment.

Volatility in the credit and financial markets may have an adverse impact on our liquidity by making it more difficult for us to obtain financing or refinancing.

Shortfalls in cash flows from operating results or other principal sources of liquidity may have an adverse impact on our ability to fund our planned capital expenditures, or to pursue any acquisition, investment, development, or potential lease restructuring opportunities that we identify, or to fund investments to support our strategy.

In order to continue some of these activities at historical or planned levels, we may incur additional indebtedness or lease financing to provide additional funding.

There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

Credit Facilities

On December 5, 2018, we entered into a Fifth Amended and Restated Credit Agreement with Capital One, National Association, as administrative agent, lender, and swingline lender and the other lenders from time to time parties thereto (the "Credit Agreement").

The Credit Agreement provides commitments for a $250 million revolving credit facility with a $60 million sublimit for letters of credit and a $50 million swingline feature.

We have a one-time right under the Credit Agreement to increase commitments on the revolving credit facility by an additional $100 million, subject to obtaining commitments for the amount of such increase from acceptable lenders.

The Credit Agreement provides us a one-time right to reduce the amount of the revolving credit commitments, and we may terminate the revolving credit facility at any time, in each case without payment of a premium or penalty.

The Credit Agreement matures on January 3, 2024.

Amounts drawn under the facility bear interest at 90-day LIBOR plus an applicable margin.

The applicable margin varies based on the percentage of the total commitment drawn, with a 2.25% margin at utilization equal to or lower than 35%, a 2.75% margin at utilization greater than 35% but less than or equal to 50%, and a 3.25% margin at utilization greater than 50%.

A quarterly commitment fee is payable on the unused portion of the facility at 0.25% per annum when the outstanding amount of obligations (including revolving credit and swingline loans and letter of credit obligations) is greater than or equal to 50% of the revolving credit commitment amount or 0.35% per annum when such outstanding amount is less than 50% of the revolving credit commitment amount.

The credit facility is secured by first priority mortgages on certain of our communities.

In addition, the Credit Agreement permits us to pledge the equity interests in subsidiaries that own other communities and grant negative pledges in connection therewith (rather than mortgaging such communities), provided that not more than 10% of the borrowing base may result from communities subject to negative pledges.

Availability under the revolving credit facility will vary from time to time based on borrowing base calculations related to the appraised value and performance of the communities securing the credit facility and our consolidated fixed charge coverage ratio.

During 2019, we entered into an amendment to the Credit Agreement that provides for availability calculations to be made at additional consolidated fixed charge coverage ratio thresholds.

The Credit Agreement contains typical affirmative and negative covenants, including financial covenants with respect to minimum consolidated fixed charge coverage and minimum consolidated tangible net worth.

Amounts drawn on the credit facility may be used for general corporate purposes.

On August 31, 2020, we terminated our Fifth Amended and Restated Credit Agreement with Capital One, National Association, as administrative agent, lender, and swingline lender and the other lenders from time to time parties thereto (as amended, the "Credit Agreement").

The Credit Agreement had provided commitments for a $250 million revolving credit facility with a $60 million sublimit for letters of credit and a $50 million swingline feature.

The credit facility was secured by first priority mortgages on certain of our communities, and availability varied from time to time based on borrowing base calculations related to the appraised value and performance of the communities securing the credit facility and our consolidated fixed charge coverage ratio.

The Credit Agreement was terminated in connection with our obtaining approximately $266.9 million of non-recourse mortgage financing on 16 communities on August 31, 2020, most of which had secured the Credit Agreement prior to its termination.

At the closing, we repaid the $166.4 million outstanding principal amount under the Credit Agreement, together with accumulated interest, and without payment of any termination fee or penalty.

On December 11, 2020, we entered into a revolving credit agreement with Capital One, National Association, as administrative agent and lender and the other lenders from time to time parties thereto.

The agreement provides a commitment amount of $80 million which can be drawn in cash or as letters of credit.

The agreement matures on January 15, 2024.

Amounts drawn under the facility will bear interest at 30-day LIBOR plus an applicable margin which was 2.75% as of December 31, 2020.

Additionally, a quarterly commitment fee of 0.25% per annum was applicable on the unused portion of the facility as of December 31, 2020.

The revolving credit facility is currently secured by first priority mortgages and negative pledges on certain of our communities.

Available capacity under the facility will vary from time to time based upon borrowing base calculations related to the appraised value and performance of the communities securing the credit facility.

As of December 31, 2020, no borrowings were outstanding on the revolving credit facility, $40.4 million of letters of credit were outstanding, and the revolving credit facility had $22.2 million of availability.

We also had a separate unsecured letter of credit facility providing for up to $47.5 million of letters of credit as of December 31, 2019 under which $47.5 million had been issued as of that date.

We also had separate secured and unsecured letter of credit facilities providing for up to $51.6 million of letters of credit as of December 31, 2020 under which $40.3 million had been issued as of that date.

Long-Term Leases

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The lease terms generally provide for renewal or extension options from 5 to 20 years, and, in some instances, purchase options.

The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions, and financial covenants, such as those requiring us to maintain prescribed minimum net worth and stockholders' equity levels and lease coverage ratios, and not to exceed prescribed leverage ratios as further described below.

In addition, our lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements.

The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions, and financial covenants, such as those requiring us to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and lease coverage ratios.

In addition, our lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

Certain leases contain cure provisions, which generally allow us to post an additional lease security deposit if the required covenant is not met.

In addition, certain of our master leases and management agreements contain radius restrictions, which limit our ability to own, develop, or acquire new communities within a specified distance from certain existing communities covered by such agreements.

In addition, certain of our master leases contain radius restrictions, which limit our ability to own, develop, or acquire new communities within a specified distance from certain existing communities covered by such agreements.

These radius restrictions could negatively affect our ability to expand, develop, or acquire senior housing communities and operating companies.

For the year ended December 31, 2020, our cash lease payments for our financing leases and operating leases were $67.4 million and $379.6 million, respectively.

For the year ending December 31, 2020 , we will be required to make approximately $74.9 million and $294.5 million of cash lease payments in connection with our existing financing leases and our operating leases, respectively (after giving effect to the transactions with Healthpeak and NHI completed in January 2020).

Our capital expenditure plans for 2020 include required minimum spend of approximately $17 million for capital expenditures under certain of our community leases.

Additionally, we are required to spend an average of approximately $17 million per year for each of the following four years and approximately $33 million thereafter under the initial lease terms of such leases.

For the year ending December 31, 2021, we will be required to make approximately $274.7 million of cash lease payments in connection with our existing financing and operating leases.

Debt and Lease Covenants

Certain of our debt and lease documents contain restrictions and financial covenants, such as those requiring us to maintain prescribed minimum net worth and stockholders' equity levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis.

Certain of our debt and lease documents contain restrictions and financial covenants, such as those requiring us to maintain prescribed minimum liquidity, net worth, and stockholders' equity levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis.

Net worth is generally calculated as stockholders' equity as calculated in accordance with GAAP, and in certain circumstances, reduced by intangible assets or liabilities or increased by deferred gains from sale-leaseback transactions and deferred entrance fee revenue.

The debt service and lease coverage ratios are generally calculated as revenues less operating expenses, including an implied management fee and a reserve for capital expenditures, divided by the debt (principal and interest) or lease payment.

In addition, our debt and lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements.

In addition, our debt and lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

Our failure to comply with applicable covenants could constitute an event of default under the applicable debt or lease documents.

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Therefore, if an event of default has occurred under any of our debt or lease documents, subject to cure provisions in certain instances, the respective lender or lessor would have the right to declare all the related outstanding amounts of indebtedness or cash lease obligations immediately due and payable, to foreclose on our mortgaged communities, to terminate our leasehold interests, to foreclose on other collateral securing the indebtedness and leases, to discontinue our operation of leased communities, and/or to pursue other remedies available to such lender or lessor.

Further, an event of default could trigger cross-default provisions

in our other debt and lease documents (including documents with other lenders or lessors).

Further, an event of default could trigger cross-default provisions in our other debt and lease documents (including documents with other lenders or lessors).

We cannot provide assurance that we would be able to pay the debt or lease obligations if they became due upon acceleration following an event of default.

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Derivative Instruments

In the normal course of business, we enter into interest rate agreements with major financial institutions to effectively manage our risk above certain interest rates on variable rate debt.

In the normal course of business, we enter into interest rate agreements with major financial institutions to manage our risk above certain interest rates on variable rate debt.

As of December 31, 2020, $1.4 billion of our debt is variable rate debt subject to interest rate cap agreements.

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Contractual Commitments

The following table presents a summary of our material indebtedness, including the related interest payments, lease, and other contractual commitments, as of December 31, 2019 (before giving effect to the transactions with Healthpeak and NHI completed in January 2020).

The following table presents a summary of our material indebtedness, including the related interest payments, lease, and other contractual commitments, as of December 31, 2020.

Payments Due during the Year Ending December 31,

(in millions)

(in millions) Total 2021 2022 2023 2024 2025 Thereafter

Contractual Obligations:

Long-term debt and line of credit obligations (1)

Principal on long-term debt (1)

$ 3,943.5 $ 73.7 $ 352.4 $ 234.4 $ 304.2 $ 293.0 $ 2,685.8

Interest on long-term debt (2)

885.0 143.3 133.3 121.7 116.4 104.4 265.9

Long-term debt 4,828.5 217.0 485.7 356.1 420.6 397.4 2,951.7

Financing lease obligations (3)

431.3 64.9 65.5 66.3 67.5 57.5 109.6

Operating lease obligations (4)

1,257.2 209.8 192.8 192.4 192.0 190.0 280.2

Total contractual obligations $ 6,517.0 $ 491.7 $ 744.0 $ 614.8 $ 680.1 $ 644.9 $ 3,341.5

Total commercial construction commitments

Includes contractual interest for all fixed-rate obligations and assumes interest on variable rate instruments at the December 31, 2019 rate.

(1) Excludes debt discount and deferred financing costs of $27.5 million as of December 31, 2020.

(2) Represents contractual interest for all fixed-rate obligations and assumes interest on variable rate instruments at the December 31, 2020 rate.

(3) Reflects future cash lease payments after giving effect to fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the applicable index or rate as of December 31, 2020.

The cash payments for financing lease obligations exclude $556.7 million of financing lease obligations recognized on our consolidated balance sheet for purchase option liabilities (for which $39.3 million of cash was paid on January 22, 2020 for the acquisition of eight leased communities pursuant to our exercise of a purchase option) and for sale-leaseback transactions in which we have not transferred control of the underlying asset.

The cash payments for financing lease obligations exclude $413.4 million of financing lease obligations recognized on our consolidated balance sheet for purchase option liabilities and for sale-leaseback transactions in which we have not transferred control of the underlying asset.

(4) Reflects future cash payments after giving effect to fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the applicable index or rate as of December 31, 2020.

Pursuant to the MTCA with Healthpeak, on January 31, 2020, we paid $405.5 million to acquire 18 communities and to reduce our annual rent under the amended and restated master lease.

Additionally, the parties amended and restated our existing master lease pursuant to which we continue to lease 25 communities (2,711 units) from Healthpeak.

We funded the community acquisitions with $192.6 million of non-recourse mortgage financing and the proceeds from the multi-part transaction.

As a result of the MTCA transactions with Healthpeak that closed January 31, 2020, we eliminated future cash lease payments of $28.7 million, $30.1 million, $26.8 million, $21.7 million, $8.4 million, and $117.8 million for each of the years ending December 31, 2020, 2021, 2022, 2023, and 2024, and thereafter, respectively.

Additionally, our expected long-term debt obligations (including related interest payments) increased by $6.0 million, $7.1 million, $7.1 million, $7.1 million, $7.2 million, and $227.9 million for each of the years ending December 31, 2020, 2021, 2022, 2023, and 2024, and thereafter, respectively, for the $192.6 million of non-recourse mortgage financing used to fund a portion of our acquisition of 18 communities from Healthpeak on January 31, 2020.

The impact of these transactions completed in January 2020 are not reflected within the table above as of December 31, 2019.

Our capital expenditure plans for 2021 include required minimum spend of approximately $18 million for capital expenditures

under certain of our community leases.

Additionally, we are required to spend an average of approximately $26 million per year for each of the following four years and approximately $17 million thereafter under the initial lease terms of such leases.

The foregoing amounts exclude outstanding letters of credit aggregating to $80.7 million as of December 31, 2020.

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The impairment loss is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value.

In estimating the recoverability of property, plant and equipment and leasehold intangibles and lease right-of-use assets for purposes of our impairment testing, we utilize future cash flow projections that are generally developed internally.

In estimating the recoverability of asset groups for purposes of our long-lived asset impairment testing, we utilize future cash flow projections that are generally developed internally.

Any estimates of future cash flow projections necessarily involve predicting unknown future circumstances and events and require significant management judgments and estimates.

In arriving at our cash flow projections, we consider our historic operating results, approved budgets

and business plans, future demographic factors, expected growth rates, estimated asset holding periods, and other factors.

In arriving at our cash flow projections, we consider our historic operating results, approved budgets and business plans, future demographic factors, expected growth rates, estimated asset holding periods, and other factors.

In estimating the future cash flows of asset groups for purposes of our long-lived asset impairment test, we make certain key assumptions.

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Significant adverse changes in our future revenues and/or operating margins, significant changes in the market for senior housing, or the valuation of the real estate of senior living communities, as well as other events and circumstances, including, but not limited to, increased competition and changing economic or market conditions, could result in changes in estimated future cash flows and the determination that additional assets are impaired.

During 2020, we evaluated long-lived depreciable assets and lease right-of-use assets and determined that the carrying amount of these assets exceeded the undiscounted cash flows for certain of our communities.

Estimated fair values were determined for

these certain communities and we recorded asset impairment charges of $29.3 million for property, plant and equipment and leasehold intangibles and $76.3 million for operating lease right-of-use assets during the year ended in December 31, 2020.

These impairment charges are primarily due to the COVID-19 pandemic and lower than expected operating performance at these communities and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value.

During 2020, there was a wide range of possible outcomes as a result of the pandemic, as there was a high degree of uncertainty about its ultimate impacts.

In arriving at our cash flow projections, we considered our estimates of the impacts of the pandemic.

Management’s estimates of the impacts of the pandemic are highly dependent on variables that are difficult to predict, as further described in Note 3 to the consolidated financial statements contained in "Item 8.

Financial Statements and Supplementary Data".

Future events may indicate differences from management's current judgments and estimates which could, in turn, result in future impairments.

During 2019, we evaluated long-lived depreciable assets and lease right-of-use assets and determined that the undiscounted cash flows exceeded the carrying amount of these assets for all except a small number of communities.

Estimated fair values were determined for these certain properties and we recorded asset impairment charges of $27.2 million for property, plant and equipment and leasehold intangibles and $10.2 million for operating lease right-of-use assets during the year ended in December 31, 2019.

These impairment charges are primarily due to our decision to dispose of assets, either through sales or lease terminations, or lower than expected performance of the underlying communities and equal the amount by which the carrying amounts of the assets exceed the estimated fair value.

During 2018 and 2017, we evaluated long-lived depreciable assets and determined in each year that the undiscounted cash flows exceeded the carrying amount of these assets for all except a small number of communities.

Estimated fair values were determined for these certain properties and we recorded asset impairment charges of $78.0 million and $164.4 million for 2018 and 2017, respectively, for property, plant and equipment, and leasehold intangibles.

During 2018, we evaluated long-lived depreciable assets and determined in each year that the undiscounted cash flows exceeded the carrying amount of these assets for all except a small number of communities.

Estimated fair values were determined for these certain properties and we recorded asset impairment charges of $78.0 million for 2018, for property, plant and equipment, and leasehold intangibles.

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As of December 31, 2020, we had a goodwill balance of $154.1 million.

Goodwill recorded in connection with business combinations is allocated to the respective reporting unit and included in our application of the provisions of ASC 350, Intangibles – Goodwill and Other ("ASC 350").

We test goodwill for impairment annually during our fourth quarter, or more frequently if indicators of impairment arise.

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Any estimates of future cash flow projections necessarily involve predicting unknown future circumstances and events and require significant management judgments and estimates.

In arriving at our cash flow projections, we consider our historic operating results, approved budgets and business plans, future demographic factors, expected growth rates, and other factors.

In using the income approach to estimate the fair value of reporting units for purposes of our goodwill impairment testing, we make certain key assumptions.

In arriving at our cash flow projections, we consider our historic operating results, approved budgets and business plans, future demographic factors, expected revenue and expense growth rates, and other factors, including the COVID-19 pandemic.

In using the income approach to estimate the fair value of reporting units for purposes of our goodwill

impairment testing, we make certain key assumptions.

Those assumptions include future revenues, facility operating expenses, and cash flows, including sales proceeds that we would receive upon a sale of the assets, using estimated capitalization rates in the case of communities.

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Goodwill allocated to our Independent Living and Health Care Services reporting units is $27.3 million and $126.8 million as of December 31, 2020, respectively.

Our annual goodwill impairment analysis did not result in any impairment charges during the year ended December 31, 2019 .

Based on the results of the 2019 annual quantitative goodwill impairment test, we estimated that the fair value of our Health Care Services reporting unit exceeded its carrying amount by approximately 19%.

Our annual and interim goodwill impairment analyses did not result in any impairment charges during the year ended December 31, 2020.

Based on the results of our goodwill impairment analysis, we estimated that the fair value of our Independent Living reporting unit exceeded its carrying amount by approximately 25% as of December 31, 2020.

Due to the COVID-19 pandemic, we performed an interim quantitative goodwill impairment analysis as of March 31, 2020, which included reduced estimates of projected future cash flows as a result of changes to significant assumptions using information known or knowable about the COVID-19 pandemic, including current industry and economic trends, changes in business plans, and changes in expected revenue and facility operating expense growth rates.

Additionally, we considered the additional risk within the future cash flow estimates when selecting risk-adjusted discount rates.

During 2020, there was a wide range of possible outcomes as a result of the COVID-19 pandemic, as there was a high degree of uncertainty about its ultimate impacts.

Management’s estimates of the impacts of the pandemic are highly dependent on variables that are difficult to predict, as described above.

Future events may indicate differences from management's current judgments and estimates which could, in turn, result in future impairments.

During 2018, we identified qualitative indicators of impairment of our goodwill, including a significant decline in our stock price and market capitalization for a sustained period during the three months ended March 31, 2018.

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As a result, we recorded a non-cash impairment charge of $351.7 million to goodwill within the Assisted Living and Memory Care segment for the three months ended March 31, 2018.

During the three months ended September 30, 2017, we identified qualitative indicators of impairment of our goodwill, including a significant decline in our stock price and market capitalization for a sustained period since the last testing date, significant underperformance relative to historical and projected operating results, and an increased competitive environment in the senior living industry.

Based upon our qualitative assessment, we performed an interim quantitative goodwill impairment test as of September 30, 2017, which included a comparison of the estimated fair value of each reporting unit to which the goodwill has been assigned with the reporting unit's carrying amount.

Based on the results of the quantitative goodwill impairment test, we determined that the carrying amount of our Assisted Living and Memory Care reporting unit exceeded its estimated fair value by $205.0 million as of September 30, 2017.

As a result, we recorded a non-cash impairment charge of $205.0 million to goodwill within the Assisted Living and Memory Care operating segment for the three months ended September 30, 2017.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions that are unpredictable and inherently uncertain.

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Subsequent changes in actual experience are monitored and estimates are updated as information becomes available.

As of December 31, 2019 we accrued reserves of $155.8 million for these programs.

During the years ended December 31, 2019 , 2018 , and 2017 , we reduced our estimate of the amount of accrued liabilities for these programs based on recent claims experience.

The reductions in these accrued reserves decreased operating expenses by $11.3 million , $14.6 million , and $9.9 million , for the years ended December 31, 2019 , 2018 , and 2017 respectively.

As of December 31, 2020, we accrued reserves of $127.9 million for general liability, professional liability, and workers compensation programs.

During the years ended December 31, 2020, 2019, and 2018, we reduced our estimate of the amount of aggregate accrued liabilities for these programs based on recent claims experience, resulting in decreases to operating expenses by $4.2 million, $11.3 million, and $14.6 million, for the years ended December 31, 2020, 2019, and 2018 respectively.

New Accounting Pronouncements

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We caution investors that amounts presented in accordance with our definitions of these non-GAAP financial measures may not be comparable to similar measures disclosed by other companies because not all companies calculate non-GAAP measures in the same manner.

We urge investors to review the reconciliations included below of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.

We urge investors to review the following reconciliations of these non-GAAP financial measures from the most comparable financial measures determined in accordance with GAAP.

Adjusted EBITDA

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and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, cost reduction, or organizational restructuring items that management does not consider as part of our underlying core operating performance and that management believes impact the comparability of performance between periods.

For the periods presented herein, such other items included non-cash impairment charges, gain/loss on facility lease termination and modification, operating lease expense adjustment, amortization of deferred gain, change in future service obligation, non-cash stock-based compensation expense, and transaction and organizational restructuring costs.

Transaction costs include those directly related to acquisition, disposition, financing, and leasing activity, our assessment of options and alternatives to enhance stockholder value, and stockholder relations advisory matters, and are primarily comprised of legal, finance, consulting, professional fees, and other third party costs.

Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance and retention costs.

For the periods presented herein, such other items include non-cash impairment charges, gain/loss on facility lease termination and modification, operating lease expense adjustment, amortization of deferred gain, change in future service obligation, non-cash stock-based compensation expense, and transaction and organizational restructuring costs.

Transaction costs include those directly related to acquisition, disposition, financing, and leasing activity, and stockholder relations advisory matters, and are primarily comprised of legal, finance, consulting, professional fees, and other third party costs.

Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance.

We believe that presentation of Adjusted EBITDA as a performance measure is useful to investors because (i) it is one of the metrics used by our management for budgeting and other planning purposes, to review our historic and prospective core operating performance, and to make day-to-day operating decisions;

to our financing and capital structure and other items that management does not consider as part of our underlying core operating performance and that management believes impact the comparability of performance between periods;

(ii) it provides an assessment of operational factors that management can impact in the short-term, namely revenues and the controllable cost structure of the organization, by eliminating items related to our financing and capital structure and other items that management does not consider as part of our underlying core operating performance and that management believes impact the comparability of performance between

and (iii) we believe that this measure is used by research analysts and investors to evaluate our operating results and to value companies in our industry.

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(ii) excluded depreciation, amortization, and impairment charges may represent the wear and tear and/or reduction in value of our communities, goodwill, and other assets and may be indicative of future needs for capital expenditures;

and (iii) we may incur income/expense similar to those for which adjustments are made, such as gain/loss on sale of assets or facility lease termination and modification, debt modification and extinguishment costs, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect our operating results.

The table below reconciles Adjusted EBITDA from our net income (loss).

and (iii) we may incur income/expense similar to those for which adjustments are made, such as gain/loss on sale of assets, facility lease termination and modification, or debt modification and extinguishment, non-cash stock-based compensation expense, and transaction and other costs, and such income/expense may significantly affect our operating results.

The table below reconciles Adjusted EBITDA from net income (loss).

Years Ended December 31,

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Equity in (earnings) loss of unconsolidated ventures 2,107 4,544

Debt modification and extinguishment costs

Loss (gain) on debt modification and extinguishment, net (10,896) 5,247

Loss (gain) on sale of assets, net (374,532) (7,245)

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Depreciation and amortization 359,226 379,433

Goodwill and asset impairment

Asset impairment 107,308 49,266

Loss (gain) on facility lease termination and modification, net (2,303) 3,388

Operating lease expense adjustment (136,276) (19,453)

Amortization of deferred gain

Non-cash stock-based compensation expense 20,747 23,026

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Adjusted EBITDA (1)

Adjusted EBITDA for the year ended December 31, 2019 includes a negative non-recurring net impact of $23.1 million from the application of the new lease accounting standard effective January 1, 2019.

$ 264,387 $ 401,169

(1) Adjusted EBITDA includes:

• $115.7 million benefit for the year ended December 31, 2020 of Provider Relief Funds and other government grants recognized in other operating income

• $119.2 million for the year ended December 31, 2020 for the one-time cash lease payment made to Ventas in connection with our lease restructuring transaction effective July 26, 2020

• $100.0 million benefit for the year ended December 31, 2020 for the management agreement termination fee payment received from Healthpeak

• $23.1 million of negative non-recurring net impact for the year ended December 31, 2019 from the application of the lease accounting standard effective January 1, 2019

Adjusted Free Cash Flow

Adjusted Free Cash Flow is a non-GAAP liquidity measure that we define as net cash provided by (used in) operating activities before:

distributions from unconsolidated ventures from cumulative share of net earnings, changes in prepaid insurance premiums financed with notes payable, changes in operating lease liability for lease termination and modification, cash paid/received for gain/loss on facility lease termination and modification, and lessor capital expenditure reimbursements under operating leases;

distributions from unconsolidated ventures from cumulative share of net earnings, changes in prepaid insurance premiums financed with notes payable, changes in operating lease liability for lease termination, cash paid/received for gain/loss on facility lease termination and modification, and lessor capital expenditure reimbursements under operating leases;

property insurance proceeds and proceeds from refundable entrance fees, net of refunds;

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Non-development capital expenditures are comprised of corporate and community-level capital expenditures, including those related to maintenance, renovations, upgrades, and other major building infrastructure projects for our communities and is presented net of lessor reimbursements.

Non-development capital expenditures do not include capital expenditures for community expansions, major community redevelopment and repositioning projects, and the development of new communities.

Non-development capital expenditures do not include capital expenditures for:

community expansions, major community redevelopment and repositioning projects, and the development of new communities.

We believe that presentation of Adjusted Free Cash Flow as a liquidity measure is useful to investors because (i) it is one of the metrics used by our management for budgeting and other planning purposes, to review our historic and prospective sources of operating liquidity, and to review our ability to service our outstanding indebtedness, pay dividends to stockholders, engage in share repurchases, and make capital expenditures, including development capital expenditures;

(ii) it is used as a metric in our performance-based compensation programs;

and (iii) it provides an indicator to management to determine if adjustments to current spending decisions are needed.

and (ii) it provides an indicator to management to determine if adjustments to current spending decisions are needed.

Adjusted Free Cash Flow has material limitations as a liquidity measure, including:

(i) it does not represent cash available for dividends, share repurchases, or discretionary expenditures since certain non-discretionary expenditures, including mandatory debt principal payments, are not reflected in this measure;

(ii) the cash portion of non-recurring charges related to gain/loss on facility lease termination and modification generally represent charges/gains that may significantly affect our liquidity;

(ii) the cash portion of non-recurring charges related to gain/loss on facility lease termination generally represent charges/gains that may significantly affect our liquidity;

and (iii) the impact of timing of cash expenditures, including the timing of non-development capital expenditures, limits the usefulness of the measure for short-term comparisons.

The table below reconciles our Adjusted Free Cash Flow from our net cash provided by (used in) operating activities.

The table below reconciles Adjusted Free Cash Flow from net cash provided by (used in) operating activities.

Years Ended December 31,

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Net increase (decrease) in cash, cash equivalents, and restricted cash

$ 163,451 $ (148,521)

Net cash provided by (used in) operating activities $ 205,649 $ 216,412

Distributions from unconsolidated ventures from cumulative share of net earnings (766) (3,472)

Changes in operating lease liability related to lease termination

Cash paid for loss on facility operating lease termination and modification, net

Changes in assets and liabilities for lessor capital expenditure reimbursements under operating leases (22,242) (31,305)

Non-development capital expenditures, net (139,592) (235,797)

Property insurance proceeds

Payment of financing lease obligations (18,868) (22,242)

Proceeds from refundable entrance fees, net of refunds

Adjusted Free Cash Flow $ 24,181 $ (76,404)

The calculation of Adjusted Free Cash Flow includes transaction and organizational restructuring costs of $10.0 million and $28.1 million for the years ended December 31, 2019 and 2018 , respectively.

(1) Adjusted Free Cash Flow includes transaction and organizational restructuring costs of $13.4 million and $10.0 million for the years ended December 31, 2020 and 2019, respectively.

Additionally, Adjusted Free Cash Flow for the year ended December 31, 2020 includes:

• $115.7 million benefit from Provider Relief Funds and other government grants accepted

• $119.2 million one-time cash lease payment made to Ventas in connection with our lease restructuring transaction effective July 26, 2020

• $100.0 million benefit from the management agreement termination fee payment received from Healthpeak

• $ 87.5 million benefit from accelerated/advanced Medicare payments received

• $ 72.7 million benefit from payroll taxes deferred

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-K

Item 7. Management’s Discussion and Analysis