What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-07 · 217 added, 69 removed, 353 unchanged (45% of the section changed)

38 unchanged sentences

the risks associated with current global economic conditions and general economic factors on us or our business partners such as inflation, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits, and insurance, interest rates, tax rates, tariffs, geopolitical tensions or conflicts, and uncertainty surrounding a new presidential administration, the impact of seasonal contagious illness or other contagious disease in the markets in which we operate;

actions of activist stockholders, including a proxy contest;

actions of activist stockholders;

as well as other risks detailed from time to time in our filings with the Securities and Exchange Commission ("SEC"), including those set forth under "Item 1A.

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Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect management's views as of the date of this Quarterly Report on Form 10-Q.

We cannot guarantee future results, levels of activity, performance or achievements, and, except as

required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.

We cannot guarantee future results, levels of activity, performance or achievements, and, except as required by law, we expressly

disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.

Unless otherwise specified, references to "Brookdale," "we," "us," "our," or "the Company" in this Quarterly Report on Form 10-Q mean Brookdale Senior Living Inc.

together with its consolidated subsidiaries.

We are the nation's premier operator of senior living communities, operating and managing 647 communities in 41 states as of March 31, 2025, with the ability to serve approximately 58,000 residents.

We are the nation's premier operator of senior living communities, operating and managing 645 communities in 41 states as of June 30, 2025, with the ability to serve approximately 58,000 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").

As of March 31, 2025, we owned 383 communities (33,768 units), leased 236 communities (17,073 units), and managed 28 communities (4,256 units).

As of June 30, 2025, we owned 382 communities (33,728 units), leased 235 communities (16,903 units), and managed 28 communities (4,256 units).

Our senior living communities and our comprehensive network help to provide seniors with care, connection, and services in an environment that feels like home.

15 unchanged sentences

Our same community portfolio excludes the 55 communities leased from Ventas with a lease maturity in 2025.

We have continued execution on our ongoing capital recycling program through which we have exited non-strategic or underperforming owned assets or leases.

Such activities completed during the three months ended June 30, 2025 included the sale of one owned community (42 units) and the disposal of one community (172 units) through lease termination.

During the next twelve months, we expect to close on the disposition of 12 owned communities (272 units) classified as held for sale as of June 30, 2025.

The closings of the sales of the communities are subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals.

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

Results of Operations

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

including through asset sales or lease terminations, 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.

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 including through asset sales or lease terminations, 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 components of executive compensation, 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.

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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 measure in accordance with generally accepted accounting principles in the United States ("GAAP").

Comparison of Three Months Ended March 31, 2025 and 2024

Comparison of Three Months Ended June 30, 2025 and 2024

Summary Operating Results

The following table summarizes our overall operating results for the three months ended March 31, 2025 and 2024.

The following table summarizes our overall operating results for the three months ended June 30, 2025 and 2024.

Three Months Ended

March 31, Increase (Decrease)

June 30, Increase (Decrease)

(in thousands) 2025 2024 Amount Percent

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The increase in resident fees was primarily attributable to a 4.8% increase in same community RevPAR, comprised of a 2.4% increase in same community RevPOR and a 190 basis point increase in same community weighted average occupancy.

The increase in facility operating expense was primarily attributable to a 3.2% increase in same community facility operating expense primarily resulting from wage rate increases and an increase in utilities expense, partially offset by an additional day of expense in the prior year period due to the leap year.

The increase in net loss was primarily attributable to the $32.8 million loss on extinguishment of a financing obligation during the three months ended March 31, 2025 for the reacquisition of three communities previously subject to sale-leaseback transactions for the amount by which the repurchase price exceeded the previously recognized financing obligation for such three communities, the increase in facility operating expense, and an increase in interest expense, partially offset by the increase in resident fees.

The increase in facility operating expense was primarily attributable to a 4.8% increase in same community facility operating expense primarily resulting from increases in wage rates, repairs and maintenance expense, estimated incentive compensation expense, and advertising expense.

The increase in net loss was primarily attributable to the increase in facility operating expense, a $10.4 million increase in transaction, legal, and organizational restructuring costs, and an increase in depreciation and amortization expense, partially offset by the increase in resident fees.

The increase in Adjusted EBITDA was primarily attributable to the increase in resident fees and a decrease in cash facility operating lease payments, partially offset by the increase in facility operating expense.

Operating Results - Senior Housing Segments

The following table summarizes the consolidated operating results and data of our three senior housing segments (Independent Living, Assisted Living and Memory Care, and CCRCs) for the three months ended March 31, 2025 and 2024, including operating results and data on a same community basis.

The following table summarizes the consolidated operating results and data of our three senior housing segments (Independent Living, Assisted Living and Memory Care, and CCRCs) for the three months ended June 30, 2025 and 2024, including operating results and data on a same community basis.

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

Three Months Ended

March 31, Increase (Decrease)

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

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Independent Living Segment

The following table summarizes the operating results and data for our Independent Living segment for the three months ended March 31, 2025 and 2024, including operating results and data on a same community basis.

The following table summarizes the operating results and data for our Independent Living segment for the three months ended June 30, 2025 and 2024, including operating results and data on a same community basis.

Three Months Ended

March 31, Increase (Decrease)

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

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The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 3.1% increase in same community RevPOR and a 130 basis point increase in same community weighted average occupancy.

The increase in the segment's same community RevPOR was primarily the result of the current year rate increase.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense due to wage rate increases and an increase in utilities expense, partially offset by an additional day of expense in the prior year period due to the leap year.

The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense primarily resulting from increases in wage rates, repairs and maintenance expense, estimated incentive compensation expense, and advertising expense.

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 three months ended March 31, 2025 and 2024, including operating results and data on a same community basis.

The following table summarizes the operating results and data for our Assisted Living and Memory Care segment for the three months ended June 30, 2025 and 2024, including operating results and data on a same community basis.

Three Months Ended

March 31, Increase (Decrease)

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

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RevPOR $ 6,700 $ 6,540 $ 160 2.4 %

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 3.1% increase in same community RevPOR and a 120 basis point increase in same community weighted average occupancy.

The increase in the segment's same community RevPOR was primarily the result of the current year rate increase.

The segment's same community facility operating expense for the three months ended March 31, 2025 and 2024 excludes $1.0 million and $2.3 million, respectively, of natural disaster expense.

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 200 basis point increase in same community weighted average occupancy and a 2.4% increase in same community RevPOR.

The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense primarily resulting from increases in wage rates, estimated incentive compensation expense, repairs and maintenance expense, and advertising expense.

CCRCs Segment

The following table summarizes the operating results and data for our CCRCs segment for the three months ended March 31, 2025 and 2024, including operating results and data on a same community basis.

The following table summarizes the operating results and data for our CCRCs segment for the three months ended June 30, 2025 and 2024, including operating results and data on a same community basis.

Three Months Ended

March 31, Increase (Decrease)

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

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RevPOR $ 7,823 $ 7,799 $ 24 0.3 %

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 250 basis point increase in same community weighted average occupancy, partially offset by a 0.3% decrease in the segment's same community RevPOR.

The decrease in the segment's same community RevPOR was primarily the result of lower skilled nursing revenue and an occupancy mix shift to more independent living residents, partially offset by the current year rate increase.

The increase in the segment's facility operating expense was primarily attributable to an increase in costs due to increased occupancy during the period, partially offset by an additional day of expense in the prior year period due to the leap year.

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 260 basis point increase in same community weighted average occupancy and a 0.3% increase in the segment's same community RevPOR.

The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase, partially offset by lower skilled nursing revenue and an occupancy mix shift to more independent living residents.

Operating Results - Other Income and Expense Items

The following table summarizes other income and expense items in our operating results for the three months ended March 31, 2025 and 2024.

The following table summarizes other income and expense items in our operating results for the three months ended June 30, 2025 and 2024.

Three Months Ended

March 31, Increase (Decrease)

June 30, Increase (Decrease)

(in thousands) 2025 2024 Amount Percent

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Depreciation and amortization 92,853 88,028 4,825 5.5 %

Asset impairment 577 — 577 NM

Loss (gain) on sale of communities, net (43) — 43 NM

Interest income 2,919 4,714 (1,795) (38.1) %

Interest expense 63,081 61,567 1,514 2.5 %

Gain (loss) on debt modification and extinguishment, net (115) — 115 NM

Non-operating gain (loss) on sale of assets, net — 199 (199) (100.0)%

Other non-operating income (loss) 2,060 199 1,861 NM

Benefit (provision) for income taxes 271 (449) 720 NM

General and Administrative Expense.

The increase in general and administrative expense was primarily attributable to $5.2 million of organizational restructuring costs related to our senior leadership change and $5.1 million of transaction costs for stockholder relations advisory matters in the current period.

General and administrative expense includes transaction, legal, and organizational restructuring costs of $10.5 million and $0.1 million for the three months ended June 30, 2025 and 2024, respectively.

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.

Legal costs include charges associated with putative class action litigation.

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 increase in facility operating lease expense was primarily due to the extension of the operating lease for 65 communities.

Depreciation and Amortization .

The increase in depreciation and amortization expense was primarily due to the acquisition of 36 communities previously subject to operating leases and the completion of capital expenditures at leased communities since the beginning of the prior year period.

Interest expense .

The increase in interest expense was primarily due to debt obtained to finance the acquisition of 36 communities previously subject to operating leases subsequent to the prior year period.

Benefit (Provision) for Income Taxes.

The difference between our effective tax rate for the three months ended June 30, 2025 and 2024 was primarily due to an increase in the benefit recorded on operating losses during the three months ended June 30, 2025.

We recorded an aggregate deferred federal, state, and local tax benefit of $9.1 million for the three months ended June 30, 2025, which was partially offset by an increase in the valuation allowance of $8.3 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.

Our valuation allowance as of June 30, 2025 and December 31, 2024 was $544.5 million and $521.5 million, respectively.

Comparison of Six Months Ended June 30, 2025 and 2024

Summary Operating Results

The following table summarizes our overall operating results for the six months ended June 30, 2025 and 2024.

Six Months Ended

June 30, Increase (Decrease)

(in thousands) 2025 2024 Amount Percent

Resident fees $ 1,553,068 $ 1,483,950 $ 69,118 4.7 %

Facility operating expense 1,119,304 1,080,057 39,247 3.6 %

Net income (loss) (108,032) (67,323) 40,709 60.5 %

Adjusted EBITDA 241,189 195,432 45,757 23.4 %

The increase in resident fees was primarily attributable to a 4.6% increase in same community RevPAR, comprised of a 2.6% increase in same community RevPOR and a 160 basis point increase in same community weighted average occupancy.

The increase in facility operating expense was primarily attributable to a 4.0% increase in same community facility operating expense, primarily resulting from increases in wage rates, repairs and maintenance expense, utilities expense, estimated incentive compensation expense, and advertising expense, partially offset by an additional day of expense in the prior year period due to the leap year.

The increase in net loss was primarily attributable to a $32.8 million loss on extinguishment of a financing obligation during the six months ended June 30, 2025 for the reacquisition of three communities previously subject to sale-leaseback transactions for the amount by which the repurchase price exceeded the previously recognized financing obligation for such three communities, the increase in facility operating expense, an $11.7 million increase in transaction, legal, and organizational restructuring costs, and an increase in depreciation and amortization expense, partially offset by the increase in resident fees.

Operating Results - Senior Housing Segments

The following table summarizes the operating results and data of our three senior housing segments (Independent Living, Assisted Living and Memory Care, and CCRCs) on a combined basis for the six months ended June 30, 2025 and 2024 including operating results and data on a same community basis.

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

Six Months Ended

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

Resident fees $ 1,553,068 $ 1,483,950 $ 69,118 4.7 %

Facility operating expense $ 1,119,304 $ 1,080,057 $ 39,247 3.6 %

Number of communities (period end) 617 619 (2) (0.3) %

Total average units 50,826 50,983 (157) (0.3) %

RevPAR $ 5,085 $ 4,844 $ 241 5.0 %

Weighted average occupancy 79.7 % 78.0 % 170 bps n/a

RevPOR $ 6,379 $ 6,211 $ 168 2.7 %

Same Community Operating Results and Data

Resident fees $ 1,376,438 $ 1,315,301 $ 61,137 4.6 %

Facility operating expense $ 982,581 $ 944,707 $ 37,874 4.0 %

Number of communities 547 547 — — %

Total average units 44,094 44,088 6 — %

RevPAR $ 5,203 $ 4,972 $ 231 4.6 %

Weighted average occupancy 80.4 % 78.8 % 160 bps n/a

RevPOR $ 6,473 $ 6,311 $ 162 2.6 %

Independent Living Segment

The following table summarizes the operating results and data for our Independent Living segment for the six months ended June 30, 2025 and 2024, including operating results and data on a same community basis.

Six Months Ended

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

Resident fees $ 315,252 $ 298,490 $ 16,762 5.6 %

Facility operating expense $ 207,422 $ 199,513 $ 7,909 4.0 %

Number of communities (period end) 68 68 — — %

Total average units 12,583 12,569 14 0.1 %

RevPAR $ 4,176 $ 3,958 $ 218 5.5 %

Weighted average occupancy 81.6 % 79.8 % 180 bps n/a

RevPOR $ 5,118 $ 4,961 $ 157 3.2 %

Same Community Operating Results and Data

Resident fees $ 224,631 $ 215,226 $ 9,405 4.4 %

Facility operating expense $ 147,390 $ 141,605 $ 5,785 4.1 %

Number of communities 53 53 — — %

Total average units 9,137 9,133 4 — %

RevPAR $ 4,097 $ 3,927 $ 170 4.3 %

Occupancy rate (weighted average) 82.7 % 81.7 % 100 bps n/a

RevPOR $ 4,956 $ 4,810 $ 146 3.0 %

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 3.0% increase in same community RevPOR and a 100 basis point increase in same community weighted average occupancy.

The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment’s same community facility operating expense, primarily resulting from increases in wage rates, repairs and maintenance expense, and utilities expense, partially offset by an additional day of expense in the prior year due to the leap year.

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 six months ended June 30, 2025 and 2024, including operating results and data on a same community basis.

Six Months Ended

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

Resident fees $ 1,064,697 $ 1,018,063 $ 46,634 4.6 %

Facility operating expense $ 772,437 $ 744,450 $ 27,987 3.8 %

Number of communities (period end) 532 534 (2) (0.4) %

Total average units 33,509 33,682 (173) (0.5) %

RevPAR $ 5,284 $ 5,027 $ 257 5.1 %

Weighted average occupancy 79.2 % 77.6 % 160 bps n/a

RevPOR $ 6,673 $ 6,478 $ 195 3.0 %

Same Community Operating Results and Data

Resident fees $ 989,667 $ 943,266 $ 46,401 4.9 %

Facility operating expense $ 705,226 $ 676,447 $ 28,779 4.3 %

Number of communities 478 478 — — %

Total average units 30,617 30,616 1 — %

RevPAR $ 5,387 $ 5,135 $ 252 4.9 %

Weighted average occupancy 79.8 % 78.2 % 160 bps n/a

RevPOR $ 6,747 $ 6,564 $ 183 2.8 %

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 2.8% increase in same community RevPOR and a 160 basis point increase in same community weighted average occupancy.

The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense, primarily resulting from increases in wage rates, utilities expense, repairs and maintenance expense, and advertising expense, partially offset by an additional day of expense in the prior year due to the leap year.

The segment's same community facility operating expense for the six months ended June 30, 2025 and 2024 excludes $1.2 million and $2.3 million, respectively, of natural disaster expense.

CCRCs Segment

The following table summarizes the operating results and data for our CCRCs segment for the six months ended June 30, 2025 and 2024, including operating results and data on a same community basis.

Six Months Ended

June 30, Increase (Decrease)

(in thousands, except communities, units, occupancy, RevPAR, and RevPOR) 2025 2024 Amount Percent

Resident fees $ 173,119 $ 167,397 $ 5,722 3.4 %

Facility operating expense $ 139,445 $ 136,094 $ 3,351 2.5 %

Number of communities (period end) 17 17 — — %

Total average units 4,734 4,732 2 — %

RevPAR $ 6,095 $ 5,896 $ 199 3.4 %

Weighted average occupancy 78.5 % 76.1 % 240 bps n/a

RevPOR $ 7,765 $ 7,750 $ 15 0.2 %

Same Community Operating Results and Data

Resident fees $ 162,140 $ 156,809 $ 5,331 3.4 %

Facility operating expense $ 129,965 $ 126,655 $ 3,310 2.6 %

Number of communities 16 16 — — %

Total average units 4,340 4,339 1 — %

RevPAR $ 6,227 $ 6,024 $ 203 3.4 %

Weighted average occupancy 79.2 % 76.7 % 250 bps n/a

RevPOR $ 7,857 $ 7,857 $ — — %

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, primarily resulting from a 250 basis point increase in same community weighted average occupancy.

The segment's same community RevPOR did not change as the impact of the current year annual rate increase was offset by lower skilled nursing revenue and an occupancy mix shift to more independent living residents.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expense, primarily resulting from an increase in wage rates, partially offset by an additional day of expense in the prior year due to the leap year.

Operating Results - Other Income and Expense Items

The following table summarizes other income and expense items in our operating results for the six months ended June 30, 2025 and 2024.

Six Months Ended

June 30, Increase (Decrease)

(in thousands) 2025 2024 Amount Percent

Management fees $ 5,243 $ 5,234 $ 9 0.2 %

Reimbursed costs incurred on behalf of managed communities 68,497 71,188 (2,691) (3.8) %

Costs incurred on behalf of managed communities 68,497 71,188 (2,691) (3.8) %

General and administrative expense 102,847 92,396 10,451 11.3 %

Facility operating lease expense 105,527 102,460 3,067 3.0 %

Depreciation and amortization 183,829 174,155 9,674 5.6 %

Asset impairment 2,364 1,708 656 38.4 %

Loss (gain) on sale of communities, net (43) — 43 NM

Interest income 6,567 9,492 (2,925) (30.8) %

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General and Administrative Expense.

The increase in general and administrative expense was primarily attributable to $1.6 million of transaction costs for stockholder relations advisory matters in the current period and an increase in non-cash stock-based compensation expense compared to the prior year period.

General and administrative expense includes transaction, legal, and organizational restructuring costs of $1.7 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively.

The increase in general and administrative expense was primarily attributable to $5.2 million of organizational restructuring costs related to our senior leadership change and $6.7 million of transaction costs for stockholder relations advisory matters in the current period.

General and administrative expense includes transaction, legal, and organizational restructuring costs of $12.2 million and $0.5 million for the six months ended June 30, 2025 and 2024, respectively.

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

For the three months ending June 30, 2025, we expect organizational restructuring costs related to our recent senior leadership change to be approximately $5.0 million and we expect to incur additional transaction costs related to stockholder relations advisory matters.

Facility Operating Lease Expense.

The increase in facility operating lease expense was primarily due to the extension of the operating lease for 65 communities.

Depreciation and Amortization.

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Interest Expense.

The increase in interest expense was primarily due to an increase in the fair value of interest rate derivatives in the prior year period and an increase in interest expense due to the acquisition of 36 communities previously subject to operating leases subsequent to the prior year period.

The increase in interest expense was primarily due to debt obtained to finance the acquisition of 36 communities previously subject to operating leases subsequent to the prior year period and an increase in the fair value of interest rate derivatives in the prior year period.

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

The increase in loss on debt modification and extinguishment, net was primarily due to a $32.8 million loss on extinguishment of a financing obligation for the reacquisition of three communities previously subject to sale-leaseback transactions.

The increase in loss on debt modification and extinguishment, net was primarily due to a $32.8 million loss on extinguishment of a financing obligation during the current period for the reacquisition of three communities previously subject to sale-leaseback transactions.

Benefit (Provision) for Income Taxes.

The difference between our effective tax rate for the three months ended March 31, 2025 and 2024 was primarily due to an increase in the benefit recorded on operating losses during the three months ended March 31, 2025.

We recorded an aggregate deferred federal, state, and local tax benefit of $15.9 million for the three months ended March 31, 2025, which was partially offset by an increase in the valuation allowance of $14.7 million.

Our valuation allowance as of March 31, 2025 and December 31, 2024 was $536.2 million and $521.5 million, respectively.

The difference between our effective tax rate for the six months ended June 30, 2025 and 2024 was primarily due to an increase in the benefit recorded on operating losses during the six months ended June 30, 2025.

We recorded an aggregate deferred federal, state, and local tax benefit of $24.9 million for the six months ended June 30, 2025, which was partially offset by an increase in the valuation allowance of $23.0 million.

We recorded an aggregate deferred federal, state, and local tax benefit of $16.7 million for the six months ended June 30, 2024, which was partially offset by an increase to the valuation allowance of $16.3 million.

Liquidity and Capital Resources

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

Three Months Ended

March 31, Increase (Decrease)

Six Months Ended

June 30, Increase (Decrease)

(in thousands) 2025 2024 Amount Percent

Net cash provided by (used in) operating activities $ 23,402 $ (1,146) $ 24,548 NM

Net cash provided by operating activities $ 106,966 $ 54,524 $ 52,442 96.2 %

Net cash provided by (used in) investing activities (377,154) (75,403) 301,751 NM

4 unchanged sentences

Adjusted Free Cash Flow $ 23,688 $ (31,813) $ 55,501 NM

The change in net cash provided by (used in) operating activities was primarily attributable to an increase in resident fees compared to the prior year period, partially offset by an increase in facility operating expense compared to the prior year period.

The increase in net cash used in investing activities was primarily attributable to $311.0 million of cash paid for the acquisition of formerly leased communities.

The increase in net cash provided by operating activities was primarily attributable to an increase in resident fees and a $10.0 million increase in lessor reimbursements for capital expenditures for operating leases compared to the prior year period, partially offset by an increase in facility operating expense compared to the prior year period.

The increase in net cash used in investing activities was primarily attributable to $311.0 million of cash paid for the acquisition of formerly leased communities in the current period.

The increase in net cash provided by financing activities was primarily attributable to a $239.5 million increase in debt proceeds compared to the prior year period, partially offset by a $54.3 million increase in repayment of debt and financing lease obligations compared to the prior year period.

The change in Adjusted Free Cash Flow was primarily attributable to the change in net cash provided by (used in) operating activities and a $9.5 million decrease in non-development capital expenditures, net compared to the prior year period, partially offset by a decrease in property and casualty insurance proceeds.

The change in Adjusted Free Cash Flow was primarily attributable to the increase in net cash provided by operating activities.

Our principal sources of liquidity have historically been from:

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

As of March 31, 2025, we had $4.3 billion of debt outstanding at a weighted average interest rate of 5.21%.

As of June 30, 2025, we had $4.3 billion of debt outstanding at a weighted average interest rate of 5.20%.

As of such date, 88.0%, or $3.8 billion, of our total debt obligations represented non-recourse property-level mortgage financings.

As of March 31, 2025, we had $1.3 billion of operating and financing lease obligations, and for the twelve months ending March 31, 2026, we will be required to make approximately $225.0 million of cash lease payments in connection with our existing operating and financing leases.

Total liquidity of $306.0 million as of March 31, 2025 included $239.7 million of unrestricted cash and cash equivalents (excluding restricted cash of $76.4 million) and $66.3 million of availability on our secured credit facility.

Total liquidity as of March 31, 2025 decreased $83.3 million from total liquidity of $389.3 million as of December 31, 2024.

The decrease was primarily attributable to cash paid for acquisitions, net of financing proceeds during the period.

As of March 31, 2025, our current liabilities exceeded current assets by $101.7 million.

As of June 30, 2025, we had $1.3 billion of operating and financing lease obligations, and for the twelve months ending June 30, 2026, we will be required to make approximately $215.0 million of cash lease payments in connection with our existing operating and financing leases (without giving effect to the potential early termination by Ventas of certain of our community leases with maturity dates of December 31, 2025).

Total liquidity of $350.0 million as of June 30, 2025 included $251.9 million of unrestricted cash and cash equivalents (excluding restricted cash of $71.7 million) and $98.1 million of availability on our secured credit facility (excluding $16.1 million of availability on our separate letter of credit facilities, which can be drawn only as letters of credit).

Total liquidity as of June 30, 2025 decreased $39.3 million from total liquidity of $389.3 million as of December 31, 2024.

The decrease was primarily attributable to cash paid for acquisitions, net of financing proceeds during the period, partially offset by a $37.6 million increase in availability on our secured credit facility and $23.7 million of Adjusted Free Cash Flow during the period.

As of June 30, 2025, our current liabilities exceeded current assets by $98.2 million.

Included in our current liabilities is $93.2 million of the current portion of operating and financing lease obligations, for which the associated right-of-use assets are excluded from current assets on our condensed consolidated balance sheets.

We currently estimate our historical principal sources of liquidity, primarily our cash flows from operations, together with cash balances on hand and cash equivalents and proceeds from financings and refinancings of various assets will be sufficient to fund our liquidity needs for at least the next 12 months.

We currently estimate our historical principal sources of liquidity, primarily our cash flows from operations, together with cash balances on hand and cash equivalents, availability on our secured credit facility, and proceeds from financings and refinancings of various assets will be sufficient to fund our liquidity needs for at least the next 12 months.

We continue to focus on increasing our RevPAR, maintaining appropriate expense discipline, continuing to refinance or exercise available extension options for maturing debt, continuing to evaluate our capital structure and the state of debt and equity markets, and monetizing non-strategic or underperforming owned assets.

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In addition, our inability to satisfy underwriting criteria for individual communities may limit our access to our historical lending sources for such communities, including Fannie Mae and Freddie Mac.

As of March 31, 2025, 9% of our owned communities were unencumbered by mortgage debt.

As of June 30, 2025, 9% of our owned communities were unencumbered by mortgage debt.

We have completed the refinancing of all of our mortgage debt maturities due in 2025.

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Development capital expenditures include community expansions, major community redevelopment and repositioning projects, and the development of new communities.

The following table summarizes our capital expenditures for the three months ended March 31, 2025 for our consolidated business.

The following table summarizes our capital expenditures for the six months ended June 30, 2025 for our consolidated business.

(in thousands)

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Amounts drawn under the facility will bear interest at the Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from 2.5% to 3.0% based upon the percentage of the total commitment drawn.

Additionally, a quarterly commitment fee of 0.25% per annum was applicable on the unused portion of the facility as of March 31, 2025.

Additionally, a quarterly commitment fee of 0.25% per annum was applicable on the unused portion of the facility as of June 30, 2025.

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 certain calculations related to the appraised value and performance of the communities securing the credit facility and the variable interest rate of the credit facility.

As of March 31, 2025, $33.7 million of letters of credit and no cash borrowings were outstanding under our $100.0 million secured credit facility and the facility had $66.3 million of availability.

We also had separate letter of credit facilities providing up to $37.0 million of letters of credit as of March 31, 2025 under which $35.7 million had been issued as of that date.

As of June 30, 2025, $1.9 million of letters of credit and no cash borrowings were outstanding under our $100.0 million secured credit facility and the facility had $98.1 million of availability.

We also had separate letter of credit facilities providing up to $85.0 million of letters of credit as of June 30, 2025 under which $68.9 million had been issued as of that date.

Long-Term Leases

As of March 31, 2025, we operated 236 communities under long-term leases (227 operating leases and 9 financing leases).

As of June 30, 2025, we operated 235 communities under long-term leases (226 operating leases and 9 financing leases).

The substantial majority of our lease arrangements are structured as master leases.

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

For the three months ended March 31, 2025, our cash lease payments for our operating leases were $58.8 million and for our financing leases were $5.9 million.

For the twelve months ending March 31, 2026, we will be required to make approximately $225.0 million of cash lease payments in connection with our existing operating and financing leases.

For the six months ended June 30, 2025, our cash lease payments for our operating leases were $118.4 million and for our financing leases were $7.9 million.

For the twelve months ending June 30, 2026, we will be required to make approximately $215.0 million of cash lease payments in connection with our existing operating and financing leases (without giving effect to the potential early termination by Ventas of certain of our community leases with maturity dates of December 31, 2025).

Debt and Lease Covenants

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These covenants include a requirement contained in certain of our long-term debt documents for us to maintain liquidity of at least $130.0 million at each quarter-end determination date.

As of March 31, 2025, our liquidity was $306.0 million.

As of June 30, 2025, our liquidity was $350.0 million.

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.

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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.

As of March 31, 2025, we are in compliance with the financial covenants of our debt agreements and long-term leases.

As of June 30, 2025, we are in compliance with the financial covenants of our debt agreements and long-term leases.

Non-GAAP Financial Measures

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Presentations of these non-GAAP financial measures are intended to aid investors in better understanding the factors and trends affecting our performance and liquidity.

However, investors should not consider these non-GAAP financial measures as a substitute for financial measures determined in accordance with GAAP, including net income (loss), income (loss) from operations, or net cash provided by (used in) operating activities.

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.

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and further adjusted to exclude income/expense associated with non-cash, non-operational, transactional, legal, 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 include non-cash impairment charges, operating lease expense adjustment, non-cash stock-based compensation expense, and transaction, legal, and organizational restructuring costs.

For the periods presented herein, such other items include non-cash impairment charges, operating lease expense adjustment, non-cash stock-based compensation expense, gain/loss on sale of communities, and transaction, legal, and organizational restructuring costs.

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Three Months Ended

June 30, Six Months Ended

(in thousands) 2025 2024 2025 2024

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Asset impairment 577 — 2,364 1,708

Loss (gain) on sale of communities, net (43) — (43) —

Operating lease expense adjustment (4,846) (13,483) (8,699) (26,572)

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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:

Adjusted Free Cash Flow is a non-GAAP liquidity measure that we define as net cash provided by 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 assets and liabilities for lease termination, cash paid/received for gain/loss on facility operating lease termination, and lessor capital expenditure reimbursements under operating leases;

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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 Adjusted Free Cash Flow from net cash provided by (used in) operating activities.

The table below reconciles Adjusted Free Cash Flow from net cash provided by operating activities.

Three Months Ended

June 30, Six Months Ended

(in thousands) 2025 2024 2025 2024

Net cash provided by (used in) operating activities $ 23,402 $ (1,146)

Net cash provided by operating activities $ 83,564 $ 55,670 $ 106,966 $ 54,524

Net cash provided by (used in) investing activities (50,399) (68,457) (377,154) (75,403)

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Net increase (decrease) in cash, cash equivalents, and restricted cash $ 7,406 $ (33,162) $ (56,278) $ 12,836

Net cash provided by (used in) operating activities $ 23,402 $ (1,146)

Net cash provided by operating activities $ 83,564 $ 55,670 $ 106,966 $ 54,524

Changes in prepaid insurance premiums financed with notes payable (7,298) (7,617) 15,094 15,702

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis