Brookdale Senior Living Inc. 10-K

Item 8. Financial Statements and Supplementary Data BROOKDALE SENIOR LIVING INC. INDEX TO FINANCIAL STATEMENTS PAGE Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 62 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 64 Consolidated Balance Sheets as of December 31, 2025 and 2024 65 Consolidated Statements of Operations for the Years Ended December 31, 2025, 2024, and 2023 66 Consolidated Statements of Equity (Deficit) for the Years Ended December 31, 2025, 2024, and 2023 67 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024, and 2023 68 Notes to Consolidated Financial Statements 69 61 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Brookdale Senior Living Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Brookdale Senior Living Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, equity (deficit) and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 19, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 62 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets for impairment Description of the Matter As of December 31, 2025, the Company’s consolidated balance sheet included property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets of $4.3 billion and $1.0 billion, respectively. As discussed in Note 4 to the consolidated financial statements, property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets are routinely evaluated for indicators of impairment. For property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets with indicators of impairment, the Company compares the estimated undiscounted future cash flows of each long-lived asset group to its carrying amount. If the long-lived asset group’s carrying amount exceeds its estimated undiscounted future cash flows, the fair value of the long-lived asset group is then estimated by management and compared to its carrying amount. An impairment charge is recognized on these long-lived assets when carrying amount exceeds fair value. Auditing management’s evaluation of property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets for impairment was complex and involved a high degree of subjectivity due to the significant estimation required to determine the estimated undiscounted future cash flows of long-lived asset groups where indicators of impairment were determined to be present. In particular, the future cash flow estimates were sensitive to significant assumptions including the estimation of revenue and expense growth, which are affected by expectations about future market or economic conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to evaluate property, plant and equipment and leasehold intangibles, net and operating lease right-of-use assets for impairment, including controls over management’s review of the significant assumptions described above. To test the Company’s evaluation of long-lived asset groups for impairment, we performed audit procedures that included, among others, assessing the methodologies used to estimate future cash flows, testing the significant assumptions described above used to develop the estimates of future cash flows, and testing the completeness and accuracy of the underlying data used by the Company in its analysis. We compared the significant assumptions used by management to current industry and economic trends and evaluated whether changes to the Company’s business and other relevant factors would affect the significant assumptions. The evaluation of the Company’s methodology and key assumptions was performed with the assistance of our valuation specialists. We assessed the historical accuracy of the Company’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the undiscounted future cash flows of the long-lived asset groups that would result from changes in the key assumptions. /s/ Ernst & Young LLP We have served as the Company's auditor since 1993. Chicago, Illinois February 19, 2026 63 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Brookdale Senior Living Inc. Opinion on Internal Control Over Financial Reporting We have audited Brookdale Senior Living Inc.'s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Brookdale Senior Living Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, equity (deficit) and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 19, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Chicago, Illinois February 19, 2026 64 BROOKDALE SENIOR LIVING INC. CONSOLIDATED BALANCE SHEETS (In thousands, except stock amounts) December 31, 2025 2024 Assets Current assets Cash and cash equivalents $ 279,122 $ 308,925 Marketable securities — 19,879 Restricted cash 33,227 39,871 Accounts receivable, net 67,680 51,891 Assets held for sale 77,206 — Prepaid expenses and other current assets, net 96,705 92,371 Total current assets 553,940 512,937 Property, plant and equipment and leasehold intangibles, net 4,272,697 4,594,401 Operating lease right-of-use assets 1,032,140 1,133,837 Restricted cash 30,659 31,044 Goodwill 27,321 27,321 Other assets, net 35,486 36,022 Total assets $ 5,952,243 $ 6,335,562 Liabilities and Equity (Deficit) Current liabilities Current portion of long-term debt $ 77,492 $ 40,779 Current portion of financing lease obligations 1,211 37,007 Current portion of operating lease obligations 74,522 111,104 Trade accounts payable 75,099 65,515 Accrued expenses 273,394 264,384 Refundable fees and deferred revenue 66,207 60,974 Total current liabilities 567,925 579,763 Long-term debt, less current portion 4,215,005 4,022,008 Financing lease obligations, less current portion 24,353 266,895 Operating lease obligations, less current portion 1,123,539 1,174,204 Deferred tax liability 6,316 9,604 Other liabilities 58,482 69,183 Total liabilities 5,995,620 6,121,657 Preferred stock, $ 0.01 par value, 50,000,000 shares authorized at December 31, 2025 and 2024; no shares issued and outstanding — — Common stock, $ 0.01 par value, 400,000,000 shares authorized at December 31, 2025 and 2024; 248,274,011 and 210,547,351 shares issued and 237,746,486 and 200,019,826 shares outstanding (including 28,929 and 27,972 unvested restricted shares), respectively 2,483 2,105 Additional paid-in-capital 4,358,077 4,352,991 Treasury stock, at cost; 10,527,525 shares at December 31, 2025 and 2024 ( 102,774 ) ( 102,774 ) Accumulated deficit ( 4,302,539 ) ( 4,039,847 ) Total Brookdale Senior Living Inc. stockholders' equity (deficit) ( 44,753 ) 212,475 Noncontrolling interest 1,376 1,430 Total equity (deficit) ( 43,377 ) 213,905 Total liabilities and equity (deficit) $ 5,952,243 $ 6,335,562 See accompanying notes to consolidated financial statements. 65 BROOKDALE SENIOR LIVING INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) For the Years Ended December 31, 2025 2024 2023 Resident fees $ 3,042,712 $ 2,972,050 $ 2,857,270 Management fees 10,853 10,521 10,161 Reimbursed costs incurred on behalf of managed communities 140,501 142,916 139,325 Other operating income — — 9,073 Total revenue and other operating income 3,194,066 3,125,487 3,015,829 Facility operating expense (excluding facility depreciation and amortization of $ 336,897 , $ 330,664 , and $ 317,581 , respectively) 2,216,016 2,183,261 2,129,800 General and administrative expense (including non-cash stock-based compensation expense of $ 11,937 , $ 14,184 , and $ 11,985 , respectively) 195,141 185,850 178,894 Facility operating lease expense 200,263 200,587 202,410 Depreciation and amortization 355,527 357,788 342,712 Asset impairment 71,349 8,557 40,572 Loss (gain) on sale of communities, net ( 2,368 ) — ( 36,296 ) Loss (gain) on facility operating lease termination, net 4,139 — — Costs incurred on behalf of managed communities 140,501 142,916 139,325 Income (loss) from operations 13,498 46,528 18,412 Interest income 12,382 19,162 23,146 Interest expense: Debt ( 227,540 ) ( 215,525 ) ( 209,772 ) Financing lease obligations ( 10,797 ) ( 27,761 ) ( 21,950 ) Amortization of deferred financing costs ( 14,775 ) ( 9,723 ) ( 7,696 ) Change in fair value of derivatives ( 1,180 ) 434 1,144 Gain (loss) on debt modification and extinguishment, net ( 40,087 ) ( 20,762 ) ( 2,702 ) Equity in earnings (loss) of unconsolidated ventures — — ( 3,996 ) Non-operating gain (loss) on sale of assets, net — 923 1,441 Other non-operating income (loss) 3,802 9,376 21,687 Income (loss) before income taxes ( 264,697 ) ( 197,348 ) ( 180,286 ) Benefit (provision) for income taxes 1,951 ( 4,646 ) ( 8,784 ) Net income (loss) ( 262,746 ) ( 201,994 ) ( 189,070 ) Net (income) loss attributable to noncontrolling interest 54 59 59 Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders $ ( 262,692 ) $ ( 201,935 ) $ ( 189,011 ) Basic and diluted net income (loss) per share attributable to Brookdale Senior Living Inc. common stockholders $ ( 1.12 ) $ ( 0.89 ) $ ( 0.84 ) Weighted average shares used in computing basic and diluted net income (loss) per share 235,177 227,525 225,209 See accompanying notes to consolidated financial statements. 66 BROOKDALE SENIOR LIVING INC. CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (In thousands) For the Years Ended December 31, 2025 2024 2023 Total equity (deficit), balance at beginning of period $ 213,905 $ 405,153 $ 584,153 Common stock: Balance at beginning of period $ 2,105 $ 1,988 $ 1,978 Shares issued for settlement of prepaid stock purchase contracts 296 76 — Shares issued for warrant exercise 57 28 — Restricted stock and restricted stock units, net 34 19 16 Shares withheld for employee taxes ( 9 ) ( 6 ) ( 6 ) Balance at end of period $ 2,483 $ 2,105 $ 1,988 Additional paid-in-capital: Balance at beginning of period $ 4,352,991 $ 4,342,362 $ 4,332,302 Compensation expense related to restricted stock grants 11,937 14,184 11,985 Shares issued for settlement of prepaid stock purchase contracts ( 296 ) ( 76 ) — Shares issued for warrant exercise ( 57 ) ( 28 ) — Restricted stock and restricted stock units, net ( 34 ) ( 19 ) ( 16 ) Shares withheld for employee taxes ( 6,464 ) ( 3,432 ) ( 1,909 ) Balance at end of period $ 4,358,077 $ 4,352,991 $ 4,342,362 Treasury stock: Balance at beginning and end of period $ ( 102,774 ) $ ( 102,774 ) $ ( 102,774 ) Accumulated deficit: Balance at beginning of period $ ( 4,039,847 ) $ ( 3,837,912 ) $ ( 3,648,901 ) Net income (loss) attributable to Brookdale Senior Living Inc. common stockholders ( 262,692 ) ( 201,935 ) ( 189,011 ) Balance at end of period $ ( 4,302,539 ) $ ( 4,039,847 ) $ ( 3,837,912 ) Noncontrolling interest: Balance at beginning of period $ 1,430 $ 1,489 $ 1,548 Net income (loss) attributable to noncontrolling interest ( 54 ) ( 59 ) ( 59 ) Balance at end of period $ 1,376 $ 1,430 $ 1,489 Total equity (deficit), balance at end of period $ ( 43,377 ) $ 213,905 $ 405,153 Common stock share activity Outstanding shares of common stock: Balance at beginning of period 200,020 188,253 187,249 Shares issued for settlement of prepaid stock purchase contracts 29,636 7,550 — Shares issued for warrant exercise 5,702 2,879 — Restricted stock and restricted stock units, net 3,478 1,920 1,580 Shares withheld for employee taxes ( 1,090 ) ( 582 ) ( 576 ) Balance at end of period 237,746 200,020 188,253 See accompanying notes to consolidated financial statements. 67 BROOKDALE SENIOR LIVING INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Years Ended December 31, 2025 2024 2023 Cash Flows from Operating Activities Net income (loss) $ ( 262,746 ) $ ( 201,994 ) $ ( 189,070 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss (gain) on debt modification and extinguishment, net 40,087 20,762 2,702 Depreciation and amortization, net 370,302 367,511 350,408 Asset impairment 71,349 8,557 40,572 Equity in (earnings) loss of unconsolidated ventures — — 3,996 Distributions from unconsolidated ventures from cumulative share of net earnings — — 430 Amortization of entrance fees — — ( 732 ) Proceeds from deferred entrance fee revenue — — 477 Deferred income tax (benefit) provision ( 3,288 ) 3,617 7,590 Operating lease expense adjustment ( 14,349 ) ( 48,793 ) ( 45,739 ) Change in fair value of derivatives 1,180 ( 434 ) ( 1,144 ) Loss (gain) on sale of assets, net ( 2,368 ) ( 923 ) ( 37,737 ) Loss (gain) on facility operating lease termination, net 4,139 — — Non-cash stock-based compensation expense 11,937 14,184 11,985 Property and casualty insurance income ( 3,875 ) ( 8,532 ) ( 18,920 ) Other non-operating (income) loss — — ( 2,542 ) Changes in operating assets and liabilities: Accounts receivable, net ( 15,788 ) ( 3,498 ) 7,380 Prepaid expenses and other assets, net ( 15,481 ) ( 21,560 ) 21,629 Trade accounts payable and accrued expenses 4,464 15,697 2,448 Refundable fees and deferred revenue 5,280 5,221 ( 654 ) Operating lease assets and liabilities for lessor capital expenditure reimbursements 32,187 16,362 9,844 Operating lease assets and liabilities for lease termination ( 5,000 ) — — Net cash provided by operating activities 218,030 166,177 162,923 Cash Flows from Investing Activities Purchase of marketable securities — ( 49,054 ) ( 174,476 ) Sale and maturities of marketable securities 20,000 60,000 197,100 Capital expenditures, net of related payables ( 201,525 ) ( 201,250 ) ( 233,205 ) Acquisition of assets, net of cash acquired ( 311,028 ) ( 108,411 ) ( 574 ) Investment in unconsolidated ventures — — ( 7,589 ) Proceeds from sale of assets, net 26,147 7,017 83,526 Property and casualty insurance proceeds 3,875 8,548 24,704 Change in lease acquisition deposits, net 5,000 ( 5,000 ) — Purchase of interest rate cap instruments ( 3,825 ) ( 10,149 ) ( 12,454 ) Proceeds from interest rate cap instruments 5,627 20,563 9,890 Other ( 222 ) ( 330 ) ( 286 ) Net cash provided by (used in) investing activities ( 455,951 ) ( 278,066 ) ( 113,364 ) For the Years Ended December 31, 2025 2024 2023 Cash Flows from Financing Activities Proceeds from debt 918,077 765,652 205,549 Repayment of debt and financing lease obligations ( 692,366 ) ( 594,997 ) ( 367,242 ) Payment of financing costs, net of related payables ( 18,149 ) ( 25,157 ) ( 10,831 ) Payments of employee taxes for withheld shares ( 6,473 ) ( 3,437 ) ( 1,915 ) Net cash provided by (used in) financing activities 201,089 142,061 ( 174,439 ) Net increase (decrease) in cash, cash equivalents, and restricted cash ( 36,832 ) 30,172 ( 124,880 ) Cash, cash equivalents, and restricted cash at beginning of period 379,840 349,668 474,548 Cash, cash equivalents, and restricted cash at end of period $ 343,008 $ 379,840 $ 349,668 See accompanying notes to consolidated financial statements. 68 BROOKDALE SENIOR LIVING INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business Brookdale Senior Living Inc. together with its consolidated subsidiaries ("Brookdale" or the "Company") is an operator of 584 senior living communities throughout the United States. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company operates and manages independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs"). The Company's senior living communities and its comprehensive network help to provide seniors with care, connection, and services in an environment that feels like home. As of December 31, 2025, the Company owned 370 communities, representing a majority of the Company's community portfolio, leased 178 communities, and managed 36 communities. 2. Summary of Significant Accounting Policies The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The significant accounting policies are summarized below: Principles of Consolidation The consolidated financial statements include the accounts of Brookdale and its consolidated subsidiaries. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation, and net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests. Use of Estimates The preparation of the consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, revenue, asset impairments, self-insurance liabilities, performance-based compensation, allowance for credit losses, depreciation and amortization, leasing transactions, income taxes, and other contingencies. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from the original estimates. Revenue Recognition Resident Fees Resident fee revenue is reported at the amount that reflects the consideration the Company expects to receive in exchange for the services provided. These amounts are due from residents or third-party payors and include variable consideration for retroactive adjustments from estimated reimbursements, if any, under reimbursement programs. Performance obligations are determined based on the nature of the services provided. Resident fee revenue is recognized as performance obligations are satisfied. Under the Company's senior living residency agreements, which are generally for a contractual term of 30 days to one year , the Company provides senior living services to residents for a stated daily or monthly fee. The Company has elected the lessor practical expedient within Accounting Standards Codification ("ASC") 842, Leases and recognizes, measures, presents, and discloses the revenue for services under the Company's senior living residency agreements based upon the predominant component, either the lease or nonlease component, of the contracts. The Company has determined that the services included under the Company's independent living, assisted living, and memory care residency agreements have the same timing and pattern of transfer and are performance obligations that are satisfied over time. The Company recognizes revenue under ASC 606, Revenue Recognition from Contracts with Customers ("ASC 606") for its independent living, assisted living, and memory care residency agreements for which it has estimated that the nonlease components of such residency agreements are the predominant component of the contract. The Company receives payment for services under various third-party payor programs which include Medicare, Medicaid, and other third-party payors. Estimates for settlements with third-party payors for retroactive adjustments from estimated reimbursements due to audits, reviews, or investigations are included in the determination of the estimated transaction price for providing services. The Company estimates the transaction price based on the terms of the contract with the payor, 69 correspondence with the payor, and historical payment trends. Changes to these estimates for retroactive adjustments are recognized in the period the change or adjustment becomes known or when final settlements are determined. Billings for services under third-party payor programs are recorded net of estimated retroactive adjustments, if any. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods or as final settlements are determined. Contractual or cost related adjustments from Medicare or Medicaid are accrued when assessed (without regard to when the assessment is paid or withheld). Subsequent adjustments to these accrued amounts are recorded in net revenues when known. Management Services The Company manages certain communities under contracts which provide periodic management fee payments to the Company and reimbursement for costs and expense related to such communities. Management fees are generally determined by an agreed upon percentage of gross revenues (as defined in the management agreement). Certain management contracts also provide for an annual incentive fee to be paid to the Company upon achievement of certain metrics identified in the contract. The Company has determined that all community management activities are a single performance obligation, which is satisfied over time as the services are rendered. The Company estimates the amount of incentive fee revenue expected to be earned, if any, during the annual contract period and revenue is recognized as services are provided. The Company's estimate of the transaction price for management services also includes the amount of reimbursement due from the owners of the communities for services provided and related costs incurred. Such revenue is included in reimbursed costs incurred on behalf of managed communities on the consolidated statements of operations. The related costs are included in costs incurred on behalf of managed communities on the consolidated statements of operations. Lease Accounting The Company, as lessee, recognizes a right-of-use asset and a lease liability on the Company's consolidated balance sheet for its long-term leases. As of the commencement date of a lease, a lease liability and corresponding right-of-use asset is established on the Company's consolidated balance sheet at the estimated present value of future minimum lease payments. The Company's community leases generally contain fixed annual rent escalators or annual rent escalators based on an index, such as the consumer price index. The future minimum lease payments recognized on the consolidated balance sheet include fixed payments (including in-substance fixed payments) and variable payments estimated utilizing the index or rate on the lease commencement date. The Company recognizes lease expense as incurred for additional variable payments. For the Company's leases for which the rate implicit in the lease is not readily determinable, the Company utilizes its estimated incremental borrowing rate to determine the present value of lease payments based on information available at commencement of the lease. The Company's estimated incremental borrowing rate reflects the fixed rate at which the Company could borrow a similar amount for the same term on a collateralized basis. For accounting purposes, renewal or extension options are included in the lease term at lease inception or modification when it is reasonably certain that the Company will exercise the option. The Company elected the short-term lease exception policy which permits leases with an initial term of 12 months or less to not be recorded on the Company's consolidated balance sheet. The Company, as lessee, makes a determination with respect to each of its leases as to whether each should be accounted for as an operating lease or financing lease. The classification criteria is based on estimates regarding the fair value of the leased asset, minimum lease payments, effective cost of funds, economic life of the asset, and certain other terms in the lease agreements. Lease right-of-use assets are reviewed for impairment whenever changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of right-of-use assets are assessed by a comparison of the carrying amount of the asset group to the estimated future undiscounted net cash flows expected to be generated by the asset group, calculated utilizing the lowest level of identifiable cash flows. If estimated future undiscounted net cash flows are less than the carrying amount of the asset group then the fair value of the asset is estimated. The impairment loss is determined by comparing the estimated fair value of the asset to its carrying amount, with any amount in excess of fair value recognized as an impairment loss in the current period. Undiscounted cash flow projections and estimates of fair value amounts are based on a number of assumptions such as revenue and expense growth rates and estimated lease coverage ratios (Level 3). Operating Leases The Company recognizes operating lease expense for actual rent paid, generally plus or minus a straight-line adjustment for estimated minimum lease escalators if applicable. The right-of-use asset is generally reduced each period by an amount equal to the difference between the operating lease expense and the amount of expense on the lease liability utilizing the effective interest method. Subsequent to the impairment of an operating lease right-of-use asset, the Company recognizes operating lease 70 expense consisting of the reduction of the right-of-use asset on a straight-line basis over the remaining lease term and the amount of expense on the lease liability utilizing the effective interest method. Financing Leases Financing lease right-of-use assets are recognized within property, plant and equipment and leasehold intangibles, net on the Company's consolidated balance sheets. The Company recognizes interest expense on the financing lease liabilities utilizing the effective interest method. The right-of-use asset is generally amortized to depreciation and amortization expense on a straight-line basis over the lease term unless the lease contains an option to purchase the underlying asset that the Company is reasonably certain to exercise. If the Company is reasonably certain to exercise the purchase option, the asset is amortized over the useful life. Sale-Leaseback Transactions For transactions in which an owned community is sold and leased back from the buyer (sale-leaseback transactions), the Company recognizes an asset sale and lease accounting is applied if the Company has transferred control of the community. For such transactions, the Company removes the transferred assets from the consolidated balance sheet and a gain or loss on the sale is recognized for the difference between the carrying amount of the asset and the transaction price for the sale transaction. For sale‑leaseback transactions in which the Company has not transferred control of the underlying asset, the Company does not recognize an asset sale or derecognize the underlying asset until control is transferred. For such transactions, the Company recognizes the underlying assets within assets under financing leases as a component of property, plant and equipment and leasehold intangibles, net on the consolidated balance sheets and continues to depreciate the assets over their useful lives. Additionally, the Company accounts for any amounts received as a financing lease liability and the Company recognizes interest expense on the financing lease liability utilizing the effective interest method with the interest expense limited to an amount that is not greater than the cash payments on the financing lease liability over the term of the lease. The Company reviews for sale accounting whenever events or changes in circumstances indicate that control may have been transferred and the Company recognizes an asset sale and lease accounting is applied if the Company has transferred control of the underlying asset. When an asset sale is recognized for such transactions, the Company removes the transferred assets and financing lease liability from the consolidated balance sheet and a gain or loss on the sale is recognized for the difference between the carrying amount of the asset and the financing lease liability. When the Company repurchases an asset subject to a sale-leaseback transaction in which the Company has not previously transferred control of the underlying asset, the Company recognizes a gain or loss on extinguishment of the financing obligation upon completion of the reacquisition transaction for the difference between the amount of the repurchase price and the previously recognized financing obligation. Gain (Loss) on Sale of Assets The Company regularly enters into real estate transactions which may include the disposition of certain communities, including the associated real estate. The Company recognizes a gain or loss from real estate sales when the transfer of control is complete. Purchase Accounting For the acquisition of assets that do not meet the definition of a business, the Company accounts for the transaction as an asset acquisition at the purchase price, including acquisition costs, allocated among the acquired assets and assumed liabilities, including identified intangible assets and liabilities, based upon the relative fair values using Level 3 inputs at the date of acquisition. For acquisitions of a business, the Company accounts for the transaction as a business combination pursuant to the acquisition method and assets acquired and liabilities assumed, including identified intangible assets and liabilities, are recorded at fair value. In determining the allocation of the purchase price of companies and communities to net tangible and identified intangible assets acquired and liabilities assumed, the Company makes estimates of fair value using information obtained as a result of pre-acquisition due diligence, marketing, leasing activities, and/or independent appraisals. In connection with a business combination, the excess of the fair value of liabilities assumed and common stock issued and cash paid over the fair value of identifiable assets acquired is allocated to goodwill. Transaction costs associated with business combinations are expensed as incurred. Deferred Financing Costs Costs and fees incurred with third parties that directly relate to obtaining new long-term debt (excluding the Company's line-of- 71 credit) are recorded as a direct adjustment to the carrying amount of long-term debt. The Company presents deferred financing costs related to line-of-credit facilities in other assets, net on the consolidated balance sheet. The Company amortizes deferred financing costs on a straight-line basis, which approximates the effective yield method over the term of the related debt arrangements. Stock-Based Compensation Measurement of the cost of employee services received in exchange for stock-based compensation is based on the grant-date fair value of the employee stock awards, which is based on the quoted price of the Company's common shares on the grant date for the majority of the Company's awards. The Company evaluates if grant-date fair value adjustments are necessary based on whether the Company is in possession of material non-public information at the grant date and the changes in the Company’s stock price subsequent to the release of such information and no adjustments were made. The Company recognizes forfeitures of stock-based awards as they occur and any previously recognized compensation expense is reversed for forfeited awards. Stock-based awards that vest over a requisite service period, other than those with performance or market conditions, generally vest ratably in annual installments over a period of three to four years . Incremental compensation costs arising from subsequent modifications of awards after the grant date are recognized when incurred. Certain of the Company's employee stock-based awards vest only upon the achievement of performance conditions. The Company recognizes compensation cost only when achievement of performance conditions is considered probable. Consequently, the Company’s determination of the amount of stock-based compensation expense requires judgment in estimating the probability of achievement of these performance conditions. Performance conditioned awards that vest dependent upon attainment of various levels of performance that equal or exceed threshold levels generally vest based upon performance at the end of a three-year performance period. The number of shares that ultimately vest can range from 0 % to 150 % of the stock-based awards granted depending on the level of achievement of the performance criteria. Certain of the Company's employee stock-based awards vest only upon the achievement of a market condition, where the measurement period is three years , and vesting of the awards is based on the Company's level of attainment of a specified total stockholder return relative to the percentage appreciation of a specified index of companies for the respective measurement period. Certain of the Company's employee stock-based awards vest only upon the achievement of a market condition, where the measurement date is three years from the grant date, and vesting of the awards is based on the Company's average closing stock price over the 20-trading days ending on (or if such date is not a trading date, the last trading day immediately prior to) the measurement date. Compensation expense for awards with market conditions is recognized over the service period, which is generally three to four years , and the actual achievement of the market condition does not impact expense recognition. The Company uses a Monte Carlo valuation model to estimate the grant date fair value of such awards. Depending on the results achieved, the number of shares that ultimately vest may range from 0 % to 300 % of the stock-based awards with market conditions that were outstanding as of December 31, 2025. The expected volatility of the Company's common stock at the date of grant is estimated based on a historical average volatility rate for the approximate three-year performance period and the estimated expected weighted average volatility was 58.2 %, 61.5 %, and 83.3 % for awards granted in 2025, 2024, and 2023, respectively. The risk-free interest rate assumption is based on observed interest rates consistent with the approximate three-year measurement period and the estimated weighted average risk free interest rate was 4.0 %, 4.4 % and 4.4 % for awards granted in 2025, 2024, and 2023, respectively. For all share-based awards with graded vesting other than performance conditioned awards, the Company records compensation expense for the entire award on a straight-line basis (or, if applicable, on the accelerated method) over the requisite service period. For performance conditioned awards, total compensation expense is recognized over the requisite service period for each separately vesting tranche of the award as if the award is, in substance, multiple awards once the performance condition is deemed probable of achievement. Performance conditions are evaluated quarterly. If such conditions are not ultimately met or it is not probable the conditions will be achieved, no compensation expense for performance conditioned awards is recognized and any previously recognized compensation expense is reversed. Income Taxes The Company accounts for income taxes under the asset and liability approach which requires recognition of deferred tax assets and liabilities for the differences between the financial reporting and tax basis of assets and liabilities using the tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance reduces deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. When it is determined that it is more likely than not that the Company will be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset is made and reflected in income. This determination is made by 72 considering various factors, including the reversal and timing of existing temporary differences, tax planning strategies, and estimates of future taxable income exclusive of the reversal of temporary differences. Fair Value of Financial Instruments Fair value measurements are based on a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows. • Level 1 – quoted prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 – quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and • Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Marketable Securities Marketable securities are investments in commercial paper and short-term corporate bond instruments with maturities of greater than 90 days as of their acquisition date by the Company. Accounts Receivable, Net Accounts receivable are reported net of an allowance for credit losses to represent the Company's estimate of expected losses at the balance sheet date. The adequacy of the Company's allowance for credit losses is reviewed on an ongoing basis, using historical payment trends, write-off experience, analyses of receivable portfolios by payor source and aging of receivables, a review of specific accounts, as well as expected future economic conditions and market trends, and adjustments are made to the allowance as necessary. Property, Plant and Equipment and Leasehold Intangibles, Net Property, plant and equipment and leasehold intangibles, net are recorded at cost. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, which are as follows. Asset Category Estimated Useful Life (in years) Buildings and improvements 40 Furniture and equipment 3 – 15 Resident in-place lease intangibles 1 – 3 Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Renovations and improvements, which improve and/or extend the useful life of the asset, are capitalized and depreciated over the estimated useful life of the renovations or improvements. For communities subject to operating or financing leases, leasehold improvements are depreciated over the shorter of the estimated useful life of the assets or the term of the lease. For financing leases that have a purchase option the Company is reasonably certain to exercise, the leasehold improvements are depreciated over their estimated useful life. Facility operating expense excludes facility depreciation and amortization. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. Recoverability of an asset group is assessed by comparing its carrying amount to the estimated future undiscounted net cash flows expected to be generated by the asset group through operation or disposition, calculated utilizing the lowest level of identifiable cash flows. If this comparison indicates that the carrying amount of an asset group is not recoverable, the Company is required to recognize an impairment loss. The impairment loss is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value, with any amount in excess of fair value recognized as an expense in the current period. Undiscounted cash flow projections and estimates of fair value amounts are 73 based on a number of assumptions such as revenue and expense growth rates, estimated holding periods, and estimated selling prices (Level 3). Investment in Unconsolidated Ventures The Company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting. The initial carrying amount of investment in unconsolidated ventures is based on the amount paid to purchase the investment or its fair value in the case of a retained noncontrolling interest upon deconsolidation of a former subsidiary. The Company's reported share of earnings of an unconsolidated venture is adjusted for the impact, if any, of basis differences between its carrying amount of the equity investment and its share of the venture's underlying assets. Distributions received from an investee are recognized as a reduction in the carrying amount of the investment. The Company evaluates realization of its investment in ventures accounted for using the equity method if circumstances indicate that the Company's investment is other than temporarily impaired. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. If the Company determines that an equity method investment is other than temporarily impaired, it is recorded at its fair value with an impairment charge recognized in asset impairment expense for the difference between its carrying amount and fair value. Goodwill The Company tests goodwill for impairment annually during the fourth quarter or more frequently if indicators of impairment arise. Factors the Company considers important in its analysis of whether an indicator of impairment exists include a significant decline in the Company's stock price or market capitalization for a sustained period since the last testing date, significant underperformance relative to historical or projected future operating results, and significant negative industry or economic trends. The Company first assesses qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If so, the Company performs a quantitative goodwill impairment test based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned with the reporting unit's carrying amount. The fair values used in the quantitative goodwill impairment test are estimated using Level 3 inputs based upon discounted future cash flow projections for the reporting unit. These cash flow projections are based upon a number of estimates and assumptions such as revenue and expense growth rates, capitalization rates, and discount rates. The Company also considers market-based measures such as earnings multiples in its analysis of estimated fair values of its reporting units. If the quantitative goodwill impairment test results in a reporting unit's carrying amount exceeding its estimated fair value, an impairment charge will be recorded based on the difference, with the impairment charge limited to the amount of goodwill allocated to the reporting unit. Self-Insurance Liability Accruals The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Although the Company maintains general liability and professional liability insurance policies for its owned, leased, and managed communities under a master insurance program, the Company's current policies provide for deductibles for each claim and contain various exclusions from coverage. The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company’s wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits. In addition, the Company maintains a high deductible workers' compensation program and a self-insured employee medical program. The Company reviews the adequacy of its accruals related to these liabilities on an ongoing basis using historical claims, actuarial valuations, third-party administrator estimates, consultants, advice from legal counsel, and industry data, and adjusts accruals periodically. Estimated costs related to these self-insurance programs are accrued based on known claims and projected claims incurred but not yet reported. Subsequent changes in actual experience are monitored, and estimates are updated as information becomes available. Treasury Stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders' equity. 74 Recently Adopted Accounting Pronouncements In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which standardizes categories for the effective tax rate reconciliation, requires disaggregation of income taxes and additional income tax-related disclosures. The Company adopted ASU 2023-09 for the year ended December 31, 2025 and applied the new disclosure requirements prospectively to the current year. Refer to Note 17 for disclosures of income tax information. Recently Issued Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregated disclosure of income statement expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the effect this pronouncement will have on its disclosures of income statement expenses. Reclassifications Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's consolidated financial position or results of operations. 3. Acquisitions, Dispositions, and Other Significant Leasing Transactions Ventas Lease Amendments In December 2024, the Company and certain of its subsidiaries, and Ventas, Inc. (“Ventas”) and certain of its subsidiaries, amended the existing master lease arrangement pursuant to which the Company, at the time of the amendment, leased 120 communities previously subject to a maturity of December 31, 2025. As of January 1, 2026, the Company continues to lease 65 communities (“Renewal Communities”) under the master lease arrangement, which was extended through December 31, 2035 with one 10-year extension option remaining. The leases for the remaining 55 communities (“Non-renewal Communities”) were terminated during 2025, with such terminations commencing on September 1, 2025. As of January 1, 2026, the Company continued to manage eight of the Non-renewal Communities, which were not transitioned to other operators by December 31, 2025, at a management fee of 5 % of managed revenue. The amended master lease arrangement provides for an aggregate annual minimum rent for the Renewal Communities of $ 64.0 million beginning on January 1, 2026. Effective on January 1, 2027, and on January 1 of each lease year thereafter, the annual minimum rent will continue to be subject to an escalator equal to 3 %. In addition, Ventas agreed to fund costs associated with capital expenditures at the communities subject to the master lease arrangement in the aggregate amount of up to $ 35.0 million during the calendar years 2025 to 2027, provided that, with respect to any such amounts funded by Ventas, the annual rent under the master lease arrangement will prospectively increase by the amount of each reimbursement multiplied by the greater of (i) 8 % and (ii) the United States 10-Year Treasury Rate plus 3.5 %. No more than $ 15.0 million may be funded in each calendar year. In October 2025, the Company and Ventas amended the existing master lease arrangement. Pursuant to the amendment, the Company paid $ 5.0 million to Ventas in 2025 in conjunction with the termination of the leases for the Non-renewal Communities. The Company recognized $ 3.6 million within loss on facility operating lease termination, net in 2025 for the $ 5.0 million paid to Ventas, partially offset by the derecognition of the remaining operating lease obligations and right-of-use assets upon the termination of the leases for the Non-renewal Communities. In addition, Ventas agreed to fund up to an additional $ 2.5 million of costs associated with capital expenditures at the Renewal Communities during the calendar years 2026 to 2027 under the same terms as the funding in the December 2024 amendment described above. International JV / Welltower Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire 11 senior living communities that were leased by the Company from a joint venture between Welltower Inc. (“Welltower”) and its joint venture partners for a purchase price of $ 300.0 million. Effective December 17, 2024, the Company successfully closed on the acquisition. As part of this transaction, the Company assumed $ 194.5 million of existing 4.92 % fixed-rate agency debt which is scheduled to mature in March 2027 and the remainder of the purchase price was paid with cash on hand. Previously, these communities were held in a 75 triple-net lease with annualized cash rent payments of $ 22.3 million and an initial maturity of August 31, 2028. The leases for the 11 communities were previously classified as operating leases and were prospectively classified as financing leases from the purchase agreement date through the date of the acquisition. Diversified Healthcare Trust Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire 25 senior living communities that were leased by the Company from Diversified Healthcare Trust for a purchase price of $ 135.0 million. Effective February 27, 2025, the Company successfully closed the acquisition. The Company funded the acquisition of the 25 communities through proceeds from mortgage financings and cash on hand. Refer to Note 7 for information on the mortgage financing. As of December 31, 2024, these communities were held in a triple-net lease with annualized cash rent payments of $ 10.2 million and an initial maturity of December 31, 2032. The leases for the 25 communities were previously classified as operating leases and were prospectively classified as financing leases subsequent to the amendment of the leasing arrangement through the date of acquisition. Welltower Portfolio Acquisition In September 2024, the Company entered into a definitive agreement to acquire five senior living communities that were leased by the Company from Welltower for a purchase price of $ 175.0 million. Effective February 27, 2025, the Company successfully closed the acquisition. The Company funded the acquisition of the five communities through proceeds from mortgage financings and cash on hand. Refer to Note 7 for information on the mortgage financing. Previously, these communities were held in a triple-net lease with annualized cash rent payments of $ 13.7 million and an initial maturity of December 2024, which had been extended through the acquisition date. The definitive agreement included the finalization of the purchase price under the provisions of a purchase option arrangement with a variable price component based upon the fair value of the assets. The leasing arrangements for three of these communities were accounted for as failed sale-leaseback transactions as the Company did not transfer control of the underlying assets under a sale and leaseback arrangement with a purchase option. For the year ended December 31, 2025, the Company recognized a $ 32.8 million loss on extinguishment of the financing obligation for the amount by which the repurchase price exceeded the previously recognized financing obligation for such three communities. Omega Lease Amendment In August 2024, the Company and Omega Healthcare Investors, Inc. ("Omega") amended the existing master lease pursuant to which the Company continues to lease 24 communities from Omega. The Company's amended master lease has an initial term to expire on December 31, 2037. As part of the amendment, Omega agreed to make available up to $ 80.0 million to fund costs associated with capital expenditures for the communities through December 31, 2037. The annual rent under the lease will not be adjusted upon reimbursements for capital expenditures in the aggregate amount of up to $ 30.0 million of the $ 80.0 million pool, which is available in certain tranches through June 30, 2028. With respect to the remaining $ 50.0 million of the $ 80.0 million pool, the annual rent under the lease will prospectively increase by the amount of each reimbursement multiplied by 9.5 %. The $ 50.0 million is available in certain tranches, which began January 1, 2025, subject to certain annual reimbursement caps specified in the lease. Under the terms of the amendment, rent will escalate annually per the terms of the existing lease escalator, with a potential minor contingent rent adjustment beginning in 2028 depending on lease performance. The amendment to the lease arrangements increased the operating lease right-of-use assets and lease obligations recognized on the Company's consolidated balance sheet each by $ 253.4 million. Sale of Investment in Health Care Services Venture Prior to December 2023, the Company held a 20 % equity interest in its former Health Care Services segment with the remaining 80 % equity interest held by affiliates of HCA Healthcare, Inc. ("HCA Healthcare"). During 2023, the Company contributed $ 7.5 million to the Health Care Services Venture (the "HCS Venture"). During the three months ended December 31, 2023, the Company recognized a non-cash impairment charge of $ 26.0 million on its investment in the HCS Venture as a result of the Company's decision to sell its equity interest prior to the recovery of its market value. In December 2023, the Company completed the sale of its 20 % equity interest in the HCS Venture to HCA Healthcare for cash proceeds of $ 27.4 million. Welltower Lease Amendments During the three months ended June 30, 2023, the Company entered into amendments to its existing lease arrangements with 76 Welltower pursuant to which the Company continued to lease 74 communities. In connection with the amendments, the Company extended the maturity of one lease involving 39 communities from December 31, 2026 until June 30, 2032. As a result, the Company's amended lease arrangements provide that the current term for 69 of the communities will expire on June 30, 2032. In 2025, the remaining five communities were purchased by the Company as described above. The amendments did not change the amount of required lease payments over the previous term of the leases or the annual lease escalators. In addition, Welltower agreed to make available a pool in the aggregate amount of up to $ 17.0 million to fund costs associated with certain capital expenditure projects for 69 of the communities. Upon reimbursement of such expenditures, the annual minimum rent under the lease will prospectively increase by the amount of the reimbursement multiplied by the sum of the then current Secured Overnight Financing Rate ("SOFR") (subject to a floor of 3.0 %) and a margin of 4.0 %, and such amount will escalate annually consistent with the minimum rent escalation provisions of the 39 community lease. The amended leases for 35 of such communities were prospectively classified as operating leases subsequent to the amendment. The amendment to the lease arrangements increased the right-of-use assets and lease obligations recognized on the Company's consolidated balance sheet each by $ 122.3 million. The amendments replaced the net worth covenant provisions requiring the Company to maintain at least $ 400.0 million of stockholders' equity with a consolidated tangible net worth covenant requiring the Company to maintain at least $ 2.0 billion of tangible net worth, generally calculated as stockholders' equity plus accumulated depreciation and amortization less intangible assets and further adjusted for certain other items. So long as it maintains tangible net worth as defined in the leases of at least $ 1.5 billion, the Company will also be able to cure any breach by posting collateral with Welltower. Completed Dispositions of Owned Communities During the year ended December 31, 2025, the Company completed the sale of 12 owned communities for cash proceeds of $ 26.1 million, net of transaction costs, and recognized a net gain on sale of communities of $ 2.4 million for the Company's Assisted Living and Memory Care segment. During the year ended December 31, 2023, the Company completed the sale of two owned CCRCs for cash proceeds of $ 25.6 million, net of $ 29.6 million in mortgage debt repaid and transaction costs, and recognized a net gain on sale of communities of $ 36.3 million for the Company’s CCRCs segment. 4. Fair Value Measurements Cash, Cash Equivalents, and Restricted Cash Cash, cash equivalents, and restricted cash are reflected in the accompanying consolidated balance sheets at amounts considered by management to reasonably approximate fair value due to their short maturity of 90 days or less. Marketable Securities As of December 31, 2025, the Company did not hold any marketable securities. As of December 31, 2024, marketable securities of $ 19.9 million are stated at fair value based on valuations provided by third-party pricing services and are classified within Level 2 of the valuation hierarchy. Interest Rate Derivatives The Company's derivative assets include interest rate cap and swap instruments that effectively manage the risk above certain interest rates for a portion of the Company's long-term variable-rate debt. The Company has not designated the interest rate cap and swap instruments as hedging instruments and as such, changes in the fair value of the instruments are recognized in earnings in the period of the change. The interest rate derivative positions are valued using models developed by the respective counterparty that use as their basis readily available observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation hierarchy. The Company considers the credit risk of its counterparties when evaluating the fair value of its derivatives. 77 The following table summarizes the Company's SOFR interest rate cap instruments as of December 31, 2025. ($ in millions) Notional balance $ 916.3 Weighted average fixed cap rate 4.30 % Weighted average remaining term 0.9 years Estimated fair value (included in other assets, net) $ 1.7 As of December 31, 2024, the estimated fair value of the SOFR interest rate cap instruments was $ 4.1 million included in other assets, net. The following table summarizes the Company's SOFR interest rate swap instrument as of December 31, 2025. ($ in millions) Notional balance $ 230.0 Fixed interest rate 4.06 % Remaining term 0.8 years Estimated fair value (included in other liabilities) $ ( 1.1 ) As of December 31, 2024, the estimated fair value of the SOFR interest rate swap instrument was $ 0.1 million included in other liabilities, net. Long-Term Debt The Company estimates the fair value of its debt primarily using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company estimates the fair value of its convertible senior notes based on valuations provided by third-party pricing services. The Company had outstanding long-term debt with a carrying amount of approximately $ 4.3 billion and $ 4.1 billion as of December 31, 2025 and 2024, respectively. The estimated fair value of the long-term debt was approximately $ 4.4 billion and $ 3.8 billion as of December 31, 2025 and 2024, respectively. The Company's fair value of long-term debt disclosure is classified within Level 2 of the valuation hierarchy. On October 1, 2021, the Company issued $ 230.0 million principal amount of 2.00 % convertible senior notes due 2026 (the "2026 Notes"). The carrying amount for the $ 23.3 million principal amount outstanding 2026 Notes was $ 23.2 million and $ 23.1 million, net of deferred financing costs, as of December 31, 2025 and 2024, respectively. The estimated fair value of the 2026 Notes was approximately $ 32.0 million and $ 22.0 million as of December 31, 2025 and 2024, respectively (Level 2). Refer to Note 7 for additional information on the 2026 Notes. On October 3, 2024, the Company issued $ 369.4 million aggregate principal amount of its 3.50 % convertible senior notes due 2029 (the “2029 Notes”) pursuant to convertible notes issuance and exchange transactions. The Company estimated the fair value of the issued debt based upon the cash proceeds obtained for the new subscriptions in the issuance transactions (Level 2). The Company recognized $ 362.2 million of long-term debt as of the date of the exchange and subscription transactions based upon the estimated fair value of the 2029 Notes. Refer to Note 7 for additional information on the convertible notes issuance and exchange transactions. The carrying amount for the $ 369.4 million principal amount outstanding 2029 Notes was $ 358.3 million and $ 355.3 million, net of deferred financing costs, as of December 31, 2025 and 2024, respectively. The estimated fair value of the 2029 Notes was approximately $ 516.0 million and $ 331.0 million as of December 31, 2025 and 2024, respectively (Level 2). As part of the acquisition of 11 senior living communities on December 17, 2024, the Company assumed $ 194.5 million of existing 4.92 % fixed-rate agency debt which is scheduled to mature in March 2027. The Company estimated the fair value of the assumed debt using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness (Level 2). The Company recognized $ 188.6 million of long-term debt as of the acquisition date based upon on its estimated fair value. 78 Asset Impairment Expense The following is a summary of asset impairment expense. For the Years Ended December 31, (in millions) 2025 2024 2023 Property, plant and equipment and leasehold intangibles, net $ 69.4 $ 4.0 $ 6.3 Operating lease right-of-use assets 1.9 4.6 8.3 Investment in unconsolidated ventures — — 26.0 Asset impairment $ 71.3 $ 8.6 $ 40.6 Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset group may not be recoverable. In estimating the recoverability of asset groups for purposes of the Company’s long-lived asset impairment testing, the Company utilizes future cash flow projections that are 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 the cash flow projections, the Company considers its historic operating results, approved budgets and business plans, future demographic factors, expected revenue and expense growth rates, estimated asset holding periods, estimated capitalization rates, and other factors. Future events may indicate differences from management's current judgments and estimates which could, in turn, result in future impairments. Property, Plant and Equipment and Leasehold Intangibles, Net During the years ended December 31, 2025, 2024, and 2023, the Company evaluated property, plant and equipment and leasehold intangibles for impairment and identified properties with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets. The Company compared the estimated fair value of the assets to their carrying amount for these identified properties and recorded an impairment charge for the excess of carrying amount over fair value. The Company recorded property, plant and equipment and leasehold intangibles non-cash impairment charges in its operating results of $ 69.4 million, $ 4.0 million, and $ 6.3 million for the years ended December 31, 2025, 2024, and 2023, respectively. These impairment charges are primarily due to identified properties with a carrying value of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets primarily due to an expectation that certain underperforming communities will be or have been disposed of, resulting in a change in their intended holding periods. As a result of this change in intent, the Company compared the estimated fair value of the assets to their carrying value for these identified properties and recorded an impairment charge for the excess of carrying value over estimated fair value. The estimates of fair values of the property, plant and equipment of the communities with impairments recognized in 2025 were determined based on valuations provided by third-party pricing services and/or sale agreements with purchasers. Operating Lease Right-of-Use Assets During the years ended December 31, 2025, 2024, and 2023, the Company evaluated operating lease right-of-use assets for impairment and identified communities with a carrying amount of the assets in excess of the estimated future undiscounted net cash flows expected to be generated by the assets. The Company compared the estimated fair value of the assets to their carrying amount for these identified communities and recorded an impairment charge for the excess of carrying amount over fair value. In the aggregate, the Company recorded a non-cash impairment charge of $ 1.9 million, $ 4.6 million, and $ 8.3 million for the years ended December 31, 2025, 2024, and 2023, respectively, to operating lease right-of-use assets. These impairment charges are primarily due to lower than expected occupancy and decreased future cash flow estimates at certain leased communities over the remaining lease term, and reflect the amount by which the carrying amounts of the assets exceeded their estimated fair value. The fair values of the operating lease right-of-use assets were estimated utilizing a discounted cash flow approach based upon projected community cash flows and market data, including management fees and a market supported lease coverage ratio, all of which are considered Level 3 inputs within the valuation hierarchy. The estimated future cash flows were discounted at a rate that is consistent with a weighted average cost of capital from a market participant perspective. 79 Investment in Unconsolidated Ventures The Company evaluates realization of its investment in unconsolidated ventures accounted for using the equity method if circumstances indicate the Company's investment is other than temporarily impaired. During the year ended December 31, 2023, the Company recognized a non-cash impairment charge of $ 26.0 million on its investment in the HCS Venture as a result of the Company's decision to sell its equity interest prior to the recovery of its market value. The Company determined the $ 27.4 million fair value of its investment based primarily on the sale agreements with the purchasers. The fair value measurement is classified within Level 2 of the valuation hierarchy. 5. Revenue Resident fee revenue by payor source is as follows. For the Years Ended December 31, 2025 2024 2023 Private pay 93.9 % 93.8 % 93.7 % Government reimbursement 4.8 % 4.8 % 4.8 % Other third-party payor programs 1.3 % 1.4 % 1.5 % Government reimbursements represented 15.3 %, 15.5 %, and 16.9 % of resident fee revenue for the CCRCs segment for the years ended December 31, 2025, 2024, and 2023, respectively. Refer to Note 19 for disaggregation of revenue by reportable segment. The payment terms and conditions within the Company's revenue-generating contracts vary by contract type and payor source, although terms generally include payment to be made within 30 days. Resident fee revenue for recurring and routine monthly services is generally billed monthly in advance under the Company's independent living, assisted living, and memory care residency agreements. Resident fee revenue for standalone or certain healthcare services is generally billed monthly in arrears. Additionally, certain of the Company's revenue-generating contracts include non-refundable fees that are generally billed and collected in advance or upon move-in of a resident under the Company's independent living, assisted living, and memory care residency agreements. Amounts of revenue that are collected from residents in advance are recognized as deferred revenue until the performance obligations are satisfied. The Company had total deferred revenue (included within refundable fees and deferred revenue, and other liabilities within the consolidated balance sheets) of $ 51.3 million and $ 53.8 million, including $ 29.1 million and $ 29.4 million of monthly resident fees billed and received in advance, as of December 31, 2025 and 2024, respectively. For the years ended December 31, 2025, 2024, and 2023 the Company recognized $ 53.8 million, $ 48.3 million, and $ 50.2 million respectively, of revenue that was included in the deferred revenue balance as of January 1, 2025, 2024, and 2023, respectively. The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose amounts for remaining performance obligations that have original expected durations of one year or less. The following table presents the changes in allowance for credit losses on accounts receivable for the periods indicated. For the Years Ended December 31, (in millions) 2025 2024 2023 Balance at beginning of period $ 13.7 $ 14.1 $ 12.8 Provision within facility operating expense 21.2 19.4 22.6 Write-offs ( 21.7 ) ( 21.3 ) ( 22.5 ) Recoveries and other 4.3 1.5 1.2 Balance at end of period $ 17.5 $ 13.7 $ 14.1 80 6. Property, Plant and Equipment and Leasehold Intangibles, Net As of December 31, 2025 and 2024, net property, plant and equipment and leasehold intangibles, which include assets under financing leases, consisted of the following. As of December 31, (in thousands) 2025 2024 Land $ 544,824 $ 532,719 Buildings and improvements 5,799,937 5,667,855 Furniture and equipment 1,259,410 1,182,026 Resident in-place lease intangibles 260,389 281,041 Construction in progress 35,788 32,965 Assets under financing leases and leasehold improvements 586,496 1,245,791 Property, plant and equipment and leasehold intangibles 8,486,844 8,942,397 Accumulated depreciation and amortization ( 4,214,147 ) ( 4,347,996 ) Property, plant and equipment and leasehold intangibles, net $ 4,272,697 $ 4,594,401 Long-lived assets with definite useful lives are depreciated or amortized on a straight-line basis over their estimated useful lives (or, in certain cases, the shorter of their estimated useful lives or the lease term) and are tested for impairment whenever indicators of impairment arise. Refer to Note 4 for information on impairment expense for property, plant and equipment and leasehold intangibles. For the years ended December 31, 2025, 2024, and 2023, the Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $ 355.5 million, $ 357.8 million, and $ 342.7 million, respectively. As of December 31, 2025, eight communities in the Assisted Living and Memory Care segment and one community in the CCRCs segment were classified as held for sale, resulting in $ 77.2 million of net property, plant and equipment and leasehold intangibles assets being recognized as assets held for sale within the consolidated balance sheet. 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. 7. Debt Long-term debt consists of the following. December 31, (in thousands) 2025 2024 Fixed mortgage notes payable due 2027 through 2047; weighted average interest rate of 4.88 % and 4.65 %, as of December 31, 2025 and 2024, respectively $ 2,897,275 $ 2,599,028 Variable mortgage notes payable due 2027 through 2031; weighted average interest rate of 6.18 % and 6.89 % as of December 31, 2025 and 2024, respectively 1,048,308 1,110,642 Convertible notes payable due October 2026; interest rate of 2.00 % as of both December 31, 2025 and 2024 23,297 23,297 Convertible notes payable due October 2029; interest rate of 3.50 % as of both December 31, 2025 and 2024 369,445 369,445 Tangible equity units senior amortizing notes due November 2025; interest rate of 10.25 % as of December 31, 2024 — 9,449 Deferred financing costs, net ( 45,828 ) ( 49,074 ) Total long-term debt 4,292,497 4,062,787 Current portion 77,492 40,779 Total long-term debt, less current portion $ 4,215,005 $ 4,022,008 As of December 31, 2025, the current portion of long-term debt within the Company's consolidated financial statements includes $ 19.6 million of mortgage notes payable secured by assets held for sale. 81 As of December 31, 2025, 89.7 %, or $ 3.9 billion of the Company's total debt obligations represented non-recourse property-level mortgage financings. The annual aggregate scheduled maturities (including recurring principal payments) of long-term debt outstanding as of December 31, 2025 are as follows (in millions). Year Ending December 31, Long-term Debt Weighted Rate 2026 $ 71.1 3.79 % 2027 668.4 4.85 % 2028 (1) 929.2 5.66 % 2029 824.3 4.31 % 2030 829.2 4.33 % Thereafter 1,016.1 5.95 % Total obligations 4,338.3 5.06 % Less amount representing deferred financing costs, net ( 45.8 ) Total $ 4,292.5 (1) Includes the maturities of $ 357.8 million of mortgage debt for which the Company has the option to extend the maturity for two additional terms of one year each subject to the satisfaction of certain conditions. In 2023, the Company's remaining variable rate mortgage notes payable arrangements indexed to London Interbank Offered Rate ("LIBOR") were modified to reference SOFR rather than LIBOR prospectively after the discontinuance of LIBOR in July 2023. The Company applied the optional expedient provided by ASC 848, Reference Rate Reform , for debt contract modifications related to the discontinuation of reference rates to ease the potential burden in accounting for reference rate reform. 2026 Convertible Senior Notes On October 1, 2021, the Company issued $ 230.0 million principal amount of 2.00 % convertible senior notes due 2026. The 2026 Notes were issued pursuant to, and are governed by, the Indenture dated as of October 1, 2021 by and between the Company and Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC) ("EQ") as trustee. The 2026 Notes are the Company’s senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2026 Notes, and equal in right of payment to any of the Company’s indebtedness that is not so subordinated. The 2026 Notes are effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) and any preferred equity of current or future subsidiaries of the Company. The 2026 Notes bear interest at 2.00 % per year, payable semi-annually in arrears in cash on April 15 and October 15 of each year. The 2026 Notes will mature on October 15, 2026, unless earlier converted, redeemed, or repurchased in accordance with their terms. Holders of the 2026 Notes may convert all or any portion of their 2026 Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2026, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2021 (and only during such calendar quarter), if the last reported sale price of the common stock of the Company for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the "measurement period") in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the common stock of the Company and the conversion rate for the 2026 Notes on each such trading day; (3) if the Company calls any or all of the 2026 Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the 2026 Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events. On or after July 15, 2026, holders may convert all or any portion of their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Upon conversion, the Company will satisfy its 82 conversion obligation by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock at the Company’s election. The conversion rate for the 2026 Notes is initially 123.4568 shares of the Company’s common stock per $1,000 principal amount of the 2026 Notes (equivalent to an initial conversion price of approximately $ 8.10 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or following the issuance of a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2026 Notes in connection with such a corporate event or who elects to convert any 2026 Notes called (or deemed called) for redemption during the related redemption period in certain circumstances. The Company may redeem for cash all or (subject to certain limitations) any portion of the 2026 Notes, at the Company's option, on or after October 21, 2024 and prior to the 51 st scheduled trading day immediately preceding the maturity date if the last reported sale price of the Company's common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2026 Notes. The Company has recognized the 2026 Notes in their entirety as a liability on the consolidated balance sheet and no portion of the proceeds from the issuance of the convertible debt instrument was accounted for separately as an embedded conversion feature within stockholders’ equity. The 2026 Notes were initially recognized at $ 223.3 million, which reflects $ 230.0 million principal amount less the $ 5.7 million initial purchasers' discount and $ 1.0 million of debt issuance costs. Subsequent to the Company’s convertible notes exchange transactions on October 3, 2024, $ 23.3 million in aggregate principal amount of the 2026 Notes remain outstanding with the terms unchanged. Capped Call Transactions In connection with the offering of the 2026 Notes, the Company entered into privately negotiated capped call transactions ("Capped Call Transactions") with each of Bank of America, N.A., Royal Bank of Canada, Wells Fargo Bank, National Association or their respective affiliates (the "Capped Call Counterparties"). The Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlie the 2026 Notes and initially have an exercise price of $ 8.10 per share of common stock. The cap price of the Capped Call Transactions is initially approximately $ 9.90 per share of the Company’s common stock, representing a premium of 65 % above the last reported sale price of $ 6.00 per share of the Company’s common stock on September 28, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions are expected generally to reduce or offset potential dilution to holders of the Company’s common stock upon conversion of the 2026 Notes and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount of any converted 2026 Notes upon conversion thereof, with such reduction and/or offset subject to a cap based on the cap price. The Capped Call Transactions are separate transactions entered into by the Company with the Capped Call Counterparties and are not part of the terms of the 2026 Notes. The Capped Call Transactions had a cost of $ 15.9 million, which was paid on October 1, 2021 from the proceeds of the 2026 Notes. The Company accounted for the Capped Call Transactions separately from the 2026 Notes and recognized the $ 15.9 million cost as a reduction of additional paid-in capital in the year ended December 31, 2021 as the Capped Call Transactions are indexed to the Company’s common stock. Subsequent to the Company’s convertible notes exchange transactions on October 3, 2024, the Capped Call Transactions remain outstanding with the terms unchanged and continue to cover the number of shares of the Company’s common stock that initially underlie the $ 230.0 million initial principal amount of 2026 Notes. 2029 Convertible Senior Notes On September 30, 2024, the Company entered into privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with certain holders of the 2026 Notes. On October 3, 2024, pursuant to the Exchange and Subscription Agreements, the Company issued $ 369.4 million aggregate principal amount of its 2029 Notes. At closing, $ 219.4 million principal amount of the 2029 Notes were issued in exchange for $ 206.7 million principal amount of the 2026 Notes and $ 150.0 million principal amount of the 2029 Notes were issued for cash. As part of such transactions, $ 29.7 million principal amount of the 2029 Notes were issued in exchange for $ 28.0 million principal amount of the 2026 Notes in transactions with one holder and its affiliates whom beneficially owned more than 10 % of the shares of the Company's common 83 stock as of such date and at closing. The 2029 Notes were issued pursuant to, and are governed by, an Indenture (the “2029 Notes Indenture”), dated as of October 3, 2024 between the Company and EQ as trustee. Following the closing, $ 23.3 million in aggregate principal amount of the 2026 Notes remain outstanding with the terms unchanged. The 2029 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of its indebtedness that is expressly subordinated in right of payment to the 2029 Notes, and equal in right of payment to any indebtedness that is not so subordinated. The 2029 Notes are effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally junior to all indebtedness and other liabilities (including trade payables) and any preferred equity of current or future subsidiaries of the Company. Under the terms of the 2029 Notes Indenture, subject to certain exceptions, the Company may not incur pari passu indebtedness in an aggregate principal amount exceeding $ 500.0 million. The 2029 Notes bear interest at a rate of 3.50 % per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2025. The 2029 Notes will mature on October 15, 2029, unless earlier converted or repurchased in accordance with their terms. Holders of the 2029 Notes may convert all or any portion of their 2029 Notes at their option at any time prior to the close of business on the business day immediately preceding July 15, 2029, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2024 (and only during such calendar quarter), if the last reported sale price of the common stock of the Company for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2029 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the common stock of the Company and the conversion rate for the 2029 Notes on each such trading day; or (3) upon the occurrence of specified corporate events. On or after July 15, 2029, holders may convert all or any portion of their 2029 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. Under the 2029 Notes Indenture, the Company will not be obligated to deliver any shares of common stock to any holder upon any conversion of the 2029 Notes whereby such holder would beneficially own a number of shares of Company common stock in excess of 19.9 % of the total number of shares of Company common stock issued and outstanding immediately following such conversion. The conversion rate for the 2029 Notes will initially be 111.1111 shares of common stock per $1,000 principal amount of the 2029 Notes (equivalent to an initial conversion price of approximately $ 9.00 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its 2029 Notes in connection with such a corporate event. The Company does not have the right to redeem the 2029 Notes at its election before the maturity date. No sinking fund is provided for the 2029 Notes. The Company’s net cash proceeds from the exchange and issuance transactions, after subtracting fees, discounts, and expenses, were $ 135.0 million. The 2029 Notes were initially recognized at the $ 362.2 million estimated fair value, which reflects $ 369.4 million principal amount less the $ 7.2 million discount in the exchange and subscription transactions. The Company recognized a $ 15.5 million loss on debt extinguishment in the year ended December 31, 2024 for the completed exchange and issuance transactions. 84 Credit Facilities In December 2023, the Company amended its revolving credit agreement with Capital One, National Association, as administrative agent and lender and the other lenders from time to time parties thereto. The amended agreement provides an expanded commitment amount of up to $ 100.0 million which can be drawn in cash or as letters of credit. The credit facility matures in January 2027, and the Company has the option to extend the facility for two additional terms of approximately one year each subject to the satisfaction of certain conditions. Amounts drawn under the facility will bear interest at 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 0.35 % per annum was applicable on the unused portion of the facility as of December 31, 2025. The revolving credit facility is currently secured by first priority mortgages and negative pledges on certain of the Company’s 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 December 31, 2025, $ 1.4 million of letters of credit and no cash borrowings were outstanding under the Company's $ 100.0 million secured credit facility. The Company also had separate letter of credit facilities providing up to $ 68.0 million of letters of credit as of December 31, 2025 under which $ 59.2 million had been issued as of that date. 2025 Mortgage Financing In February 2025, the Company obtained an aggregate of $ 130.1 million of debt secured by non-recourse first priority mortgages on five communities. The debt bears interest at a fixed rate of 6.47 %, is interest only for the first five years , and matures in March 2035. In February 2025, the Company obtained $ 161.0 million of debt secured by first priority mortgages on 36 communities. The loan bears interest at a variable rate based on SOFR plus a margin of 300 basis points, and is interest only for the first year. The debt has an initial three-year term and two one-year extension options, exercisable subject to certain performance criteria, with a final maturity date, including extension options, of February 2030. At the time of closing, the Company repaid $ 50.0 million of outstanding mortgage debt on 11 communities, which was obtained in February 2024 and held a final maturity date of February 2029. In December 2025, the Company obtained $ 245.8 million of debt secured by first mortgages on 17 communities. Approximately 90 % of the principal, or $ 221.2 million, of the loan bears interest at a fixed rate of 5.69 %, is interest-only for the first five years , and matures in January 2036. The remaining $ 24.6 million of the loan bears interest at a variable rate equal to one-month SOFR plus 2.11 %, is interest-only for the first three years , and matures in January 2031. In addition to provisions allowing the Company to convert all or a portion of the variable-rate note to a fixed-rate note and subsequently extend the maturity date, the credit facility structure provides future optionality for asset substitutions, borrow-ups, and partial releases. In December 2025, the Company obtained an aggregate of $ 146.1 million of debt secured by first mortgages on nine communities. The non-recourse loans bear interest at a fixed rate of 5.48 %, are interest-only for the first two years , and mature in January 2033. At the time of closing of the aforementioned two December 2025 financings, the Company used the loan proceeds and cash on hand to repay $ 398.9 million of existing mortgage debt which was scheduled to mature in 2026 and 2027. In December 2025, the Company also completed a non-recourse financing for $ 205.0 million secured by first mortgages on 16 communities. The loan bears interest at a variable rate equal to the one-month SOFR plus 2.30 % and is interest-only for the first three years . The loan is scheduled to mature in December 2028 and has two one-year extension options available to the Company subject to the satisfaction of certain conditions. The financing also contains an option for the Company to obtain up to $ 20.0 million of additional loan proceeds in the future upon meeting certain requirements in the loan agreement. In connection with this transaction, the Company refinanced $ 146.8 million of mortgage debt scheduled to mature in 2026. 2024 Mortgage Financing In September 2024, the Company obtained $ 182.5 million of debt secured by first priority mortgages on 16 communities. The loan bears interest at a fixed rate of 5.67 % and is interest only for the first two years . The debt matures in October 2029. At the closing, the Company repaid $ 197.1 million of outstanding mortgage debt, which was scheduled to mature in September 2025, using proceeds from the $ 182.5 million debt and cash on hand. 85 In December 2024, as part of the acquisition of 11 senior living communities the Company assumed $ 194.5 million of existing 4.92 % fixed-rate agency debt which is scheduled to mature in March 2027. In December 2024, the Company obtained $ 344.2 million of debt secured by non-recourse first mortgages on 47 communities, which also continue to secure $ 433.9 million of additional outstanding mortgages with maturities in 2027 and 2031. The $ 344.2 million loan bears interest at a fixed rate of 6.14 %, is interest only for the first two years , and matures in January 2032. At the closing, the Company repaid $ 312.5 million of debt under the mortgage facility, which was scheduled to mature in 2027, using proceeds from the $ 344.2 million loan. Financial Covenants Certain of the Company's debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity and net worth levels and debt service ratios, and requiring the Company not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. In addition, the Company's debt documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. The Company's failure to comply with applicable covenants, subject to cure provisions in certain instances, could constitute an event of default under the applicable debt documents. Many of the Company's debt documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Furthermore, the Company's mortgage debt is secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of December 31, 2025, the Company is in compliance with the financial covenants of its debt agreements. 8. Leases As of December 31, 2025, the Company operated 178 communities under long-term leases ( 169 operating leases and 9 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. In certain cases, the Company guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. An event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio. The leases relating to substantially all of the Company's leased communities are fixed-rate leases with annual escalators that are fixed. The Company is responsible for all operating costs, including repairs and maintenance, property taxes, and insurance. As of December 31, 2025, the weighted average remaining lease term of the Company's operating and financing leases was 9.9 and 6.3 years, respectively. The leases generally provide for renewal or extension options, or in certain cases, purchase options. As of December 31, 2025, none of the Company's renewal or extension option periods for community leases are included in the lease term for accounting purposes. 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 the Company to maintain prescribed minimum liquidity and net worth levels and lease coverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company's lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. The Company's failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company's lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other lease and debt documents (including documents with other lessors and lenders). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company's leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of December 31, 2025, the Company is in compliance with the financial covenants of its long-term lease agreements. 86 A summary of operating and financing lease expense (including the respective presentation on the consolidated statements of operations) and net cash outflows from leases is as follows. Years Ended December 31, Operating Leases (in thousands) 2025 2024 2023 Facility operating expense $ 7,968 $ 8,122 $ 7,105 Facility lease expense 200,263 200,587 202,410 Operating lease expense 208,231 208,709 209,515 Operating lease expense adjustment (1) 14,349 48,793 45,739 Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements ( 32,187 ) ( 16,362 ) ( 9,844 ) Operating net cash outflows from operating leases $ 190,393 $ 241,140 $ 245,410 (1) Represents the difference between the amount of cash operating lease payments and the amount of operating lease expense. Years Ended December 31, Financing Leases (in thousands) 2025 2024 2023 Depreciation and amortization $ 4,652 $ 15,275 $ 16,444 Interest expense: financing lease obligations 10,797 27,761 21,950 Financing lease expense $ 15,449 $ 43,036 $ 38,394 Operating cash outflows from financing leases $ 10,797 $ 27,761 $ 21,950 Financing cash outflows from financing leases 1,195 1,084 8,473 Changes in financing lease assets and liabilities for lessor capital expenditure reimbursement ( 388 ) ( 598 ) ( 475 ) Total net cash outflows from financing leases $ 11,604 $ 28,247 $ 29,948 As of December 31, 2025, the weighted average discount rate of the Company's operating leases was 8.7 %. The aggregate amounts of future minimum lease payments, including community, office, and equipment leases, recognized on the consolidated balance sheet as of December 31, 2025 are as follows (in millions). Year Ending December 31, Operating Leases Financing Leases 2026 $ 184.5 $ 7.1 2027 187.3 6.5 2028 184.5 6.3 2029 187.0 6.3 2030 179.6 6.3 Thereafter 919.9 9.3 Total lease payments 1,842.8 41.8 Imputed interest and variable lease payments ( 644.7 ) ( 36.9 ) Non-cash gain on future sale of property — 20.7 Total lease obligations $ 1,198.1 $ 25.6 87 9. Tangible Equity Units During 2022, the Company issued 2,875,000 of its 7.00 % tangible equity units (the “Units”) at a public offering price of $ 50.00 per Unit for an aggregate offering of $ 143.8 million. Each Unit was comprised of a prepaid stock purchase contract and a senior amortizing note with an initial principal amount of $ 8.8996 . During the year ended December 31, 2024, 583,662 of the Units were separated at the election of the holders into the two components, prepaid stock purchase contracts and senior amortizing notes, and the Company delivered 7,549,141 shares of the Company’s common stock upon settlement of such prepaid stock purchase contracts. In March 2025, the Company elected to exercise its right to settle the remaining outstanding 2,291,338 prepaid stock purchase contracts, pursuant to the early settlement right in the purchase contract agreement, and the Company delivered 29,636,386 shares of the Company's common stock upon settlement. In November 2025, the Company repaid the remaining outstanding balance of the senior amortizing notes component of the Units. As of December 31, 2025, the Company had no outstanding prepaid stock purchase contracts. 10. Accrued Expenses Accrued expenses reflected within current liabilities on the Company’s consolidated balance sheets consist of the following. As of December 31, (in thousands) 2025 2024 Employee compensation $ 121,080 $ 107,710 Insurance liabilities 72,848 72,501 Real estate taxes 25,005 27,300 Interest 18,158 18,175 Utilities 7,716 8,709 Income taxes payable 1,917 2,385 Other 26,670 27,604 Total $ 273,394 $ 264,384 11. Commitments and Contingencies Litigation The Company has been and is currently involved in litigation and claims incidental to the conduct of its business, which it believes are generally comparable to other companies in the senior living and healthcare industries. In addition, the Company has been and currently is involved in putative class action litigation regarding staffing at the Company's communities and compliance with consumer protection laws and the Americans with Disabilities Act (and similar state laws). Certain claims and lawsuits allege large damage amounts, seek injunctive relief, and may require (and have required) significant costs to defend and resolve. The Company took a charge for this litigation of $ 7.0 million for the year ended December 31, 2024, representing its estimate of the Company’s ultimate cost to resolve such litigation, net of estimated probable insurance recoveries. The final outcome of the pending class action litigation is dependent on many factors that are difficult to predict. Accordingly the Company’s ultimate cost related to these matters may be materially different than the amount of the Company’s current estimate and accruals. The Company continues to vigorously defend against the pending putative class action cases. The Company maintains general liability, professional liability, excess liability, and other insurance policies in amounts and with coverage and deductibles the Company believes are appropriate, based on the nature and risks of its business, historical experience, availability, and industry standards. The Company's current policies provide for deductibles for each claim and contain various exclusions from coverage. The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company's wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits. The senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement actions, or litigation related to regulatory compliance matters. In addition, the Company is subject to various government reviews, audits, and investigations to verify compliance with Medicare and Medicaid programs and other applicable laws and regulations. The Centers for Medicare & Medicaid Services has engaged 88 third-party firms to review claims data to evaluate appropriateness of billings. In addition to identifying overpayments, audit contractors can refer suspected violations to government authorities. In addition, states' Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry. An adverse outcome of government scrutiny may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, and damage to the Company's business reputation. The Company's costs to respond to and defend any such audits, reviews, and investigations may be significant. Other The Company has employment or letter agreements with certain officers of the Company and has adopted policies to which certain officers of the Company are eligible to participate, which grant these employees the right to receive a portion or multiple of their base salary, pro-rata bonus, bonus, and/or continuation of certain benefits, for a defined period of time, in the event of certain terminations of the officers' employment, as described in those agreements and policies. 12. Self-Insurance The Company obtains various insurance coverages, including general and professional liability and workers' compensation programs, from commercial carriers at stated amounts as defined in the applicable policy. The Company's current general and professional liability policies provide for deductibles for each claim and contain various exclusions from coverage. The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company’s wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits. Losses related to self-insured amounts are accrued based on the Company's estimate of expected losses for known claims and projected claims incurred but not yet reported. As of December 31, 2025 and 2024, the Company accrued liabilities of $ 129.2 million and $ 140.0 million, respectively, under the Company's insurance programs, of which $ 56.3 million and $ 67.5 million is classified as other liabilities as of December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, the Company accrued $ 13.5 million and $ 13.8 million, respectively, of estimated amounts receivable from the insurance companies under these insurance programs. The Company has secured self-insured retention risk under its primary workers' compensation programs with restricted cash deposits and other deposits of $ 3.5 million and $ 5.7 million and letters of credit of $ 50.2 million and $ 57.1 million as of December 31, 2025 and 2024, respectively. Additionally, the Company’s wholly-owned captive insurance company had restricted cash and other deposits of $ 8.2 million and $ 13.4 million as of December 31, 2025 and 2024, respectively. 89 13. Stock-Based Compensation The following table sets forth information about the Company's restricted stock units and stock awards. (in thousands, except for weighted average amounts) Number of Restricted Stock Units and Stock Awards Weighted Average Grant Date Fair Value Outstanding on January 1, 2023 5,373 $ 6.00 Granted 3,992 2.98 Vested ( 2,001 ) 5.87 Cancelled/forfeited ( 961 ) 5.90 Outstanding on December 31, 2023 6,403 4.17 Granted 2,290 6.36 Vested ( 1,892 ) 4.88 Cancelled/forfeited ( 443 ) 3.93 Outstanding on December 31, 2024 6,358 4.76 Granted 3,390 5.86 Vested ( 3,478 ) 4.96 Cancelled/forfeited ( 2,045 ) 4.91 Outstanding on December 31, 2025 4,225 5.41 As of December 31, 2025, there was $ 11.9 million of total unrecognized compensation cost related to outstanding, unvested share-based compensation. That cost is expected to be recognized over a weighted average period of 2.1 years and is based on grant date fair value. As of December 31, 2025 and 2024, the Company's outstanding shares included 28,929 and 27,972 unvested restricted shares, respectively. During 2025, grants of restricted stock units and stock awards under the Company's 2024 Omnibus Incentive Plan were as follows. (in thousands, except for weighted average amounts) Restricted Stock Unit and Stock Award Grants Weighted Average Grant Date Fair Value Total Grant Date Fair Value Three months ended March 31, 2025 2,806 $ 5.12 $ 14,366 Three months ended June 30, 2025 175 $ 6.29 $ 1,100 Three months ended September 30, 2025 13 $ 7.75 $ 100 Three months ended December 31, 2025 396 $ 10.86 $ 4,304 14. Earnings Per Share Potentially dilutive common stock equivalents for the Company include convertible senior notes, unvested restricted stock, and restricted stock units. Prior to December 31, 2025, the potentially dilutive common stock equivalents for the Company also included warrants and prepaid stock purchase contracts. As of December 31, 2025, the maximum number of shares issuable upon settlement of the 2026 Notes is 3.9 million (after giving effect to 1.0 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events). As of December 31, 2025, the maximum number of shares issuable upon settlement of the 2029 Notes is 55.0 million (after giving effect to 13.9 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events). Refer to Note 7 for more information on the 2026 Notes and the 2029 Notes. 90 On July 26, 2020, the Company issued to Ventas a warrant (the "Warrant") to purchase 16.3 million shares of the Company’s common stock, $ 0.01 par value per share, at a price per share of $ 3.00 . During the year ended December 31, 2024, the Company issued 2.9 million shares of common stock upon the partial exercise of the Warrant by Ventas for 5.2 million shares, net of shares withheld to satisfy the aggregate exercise price. During the year ended December 31, 2025, the Company issued 5.7 million shares of common stock upon the partial exercise of the Warrant by Ventas for the remaining 11.1 million shares, net of shares withheld to satisfy the aggregate exercise price. As of December 31, 2025, the Company had no outstanding warrants. As of December 31, 2025, the Company had no outstanding prepaid stock purchase contracts. Refer to Note 9 for more information on the prepaid stock purchase contract component of the Units. Basic earnings per share ("EPS") is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, after giving effect to the weighted average minimum number of shares during the period issuable upon settlement of the prepaid stock purchase contract component of the Units. Years Ended December 31, (in thousands) 2025 2024 2023 Weighted average common shares outstanding 227,869 195,612 188,023 Weighted average minimum shares issuable under purchase contracts 7,308 31,913 37,186 Weighted average shares outstanding - basic 235,177 227,525 225,209 Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. Diluted EPS reflects the potential dilution that could occur if securities or other instruments that are convertible into common stock were exercised or could result in the issuance of common stock. For the purposes of computing diluted EPS, weighted average shares outstanding do not include potentially dilutive securities that are anti-dilutive under the treasury stock method or if-converted method, and performance-based equity awards are included based on the attainment of the applicable performance metrics as of the end of the reporting period. The Company has the following potentially outstanding shares of common stock, which were excluded from the computation of diluted net income (loss) per share attributable to common stockholders in all periods as a result of the net loss. As of December 31, (in millions) 2025 2024 2023 2026 Notes at initial conversion rate 2.9 2.9 28.4 Incremental shares issuable upon certain events for 2026 Notes 1.0 1.0 9.9 2029 Notes at initial conversion rate 41.1 41.1 — Incremental shares issuable upon certain events for 2029 Notes 13.9 13.9 — Warrants — 11.1 16.3 Restricted stock and restricted stock units 4.2 6.4 6.4 Incremental shares issuable under purchase contracts — 5.2 6.5 Total 63.1 81.6 67.5 15. Share Repurchase Program In 2016, the Company's Board of Directors approved a share repurchase program that authorizes the Company to purchase up to $ 100.0 million in the aggregate of the Company's common stock. The share repurchase program is intended to be implemented through purchases made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, or block trades, or by any combination of these methods, in accordance with applicable insider trading and other securities laws and regulations. The size, scope, and timing of any purchases will be based on business, market, and other conditions and factors, including price, regulatory, and contractual requirements or consents, and capital availability. The repurchase program does not obligate the Company to acquire any particular amount of common stock and the program may be suspended, modified, or discontinued at any time at the Company's discretion without prior notice. Shares of stock repurchased under the program will be held as treasury shares. The Company temporarily suspended purchases under the share repurchase plan in March 2020. 91 For the years ended December 31, 2025, 2024, and 2023, there were no repurchases under the share repurchase program. As of December 31, 2025, approximately $ 44.0 million remains available under the share repurchase program. 16. Retirement Plans The Company maintains a 401(k) retirement savings plan for all employees that meet minimum employment criteria. Such plan provides that the participants may defer eligible compensation subject to certain Internal Revenue Code maximum amounts. The Company makes matching contributions in amounts equal to 25.0 % of the employee's contribution to such plan, for contributions up to a maximum of 4.0 % of eligible compensation. An additional matching contribution of 12.5 %, subject to the same limit on eligible compensation, may be made at the discretion of the Company based upon the Company's performance. For the years ended December 31, 2025, 2024, and 2023, the Company's expense for such plan was $ 5.2 million, $ 4.4 million, and $ 4.8 million, respectively. 17. Income Taxes The benefit (provision) for income taxes is comprised of the following: Years Ended December 31, (in thousands) 2025 2024 2023 Current tax benefit (provision): U.S. federal $ 80 $ 122 $ ( 183 ) U.S. state and local ( 1,417 ) ( 1,151 ) ( 1,011 ) Total current tax benefit (provision) ( 1,337 ) ( 1,029 ) ( 1,194 ) Deferred tax benefit (provision): U.S. federal 2,511 ( 3,617 ) ( 7,590 ) U.S. state and local (1) 777 — — Total deferred tax benefit (provision) 3,288 ( 3,617 ) ( 7,590 ) Total income tax benefit (provision) $ 1,951 $ ( 4,646 ) $ ( 8,784 ) (1) Prior to the adoption of ASU 2023-09 prospectively for the year ended December 31, 2025, U.S. state and local deferred tax benefit (provision) was presented within the U.S. federal amount. Reconciliations of the benefit (provision) for income taxes to the amount computed at the U.S. federal statutory tax rate of 21% are as follows. For the Year Ended December 31, 2025 (in thousands) Amount Percent of pre-tax loss U.S. federal statutory tax rate $ 55,575 21.0 % U.S. state and local taxes, net of U.S. federal income tax (1) ( 640 ) ( 0.2 ) % Tax credits ( 485 ) ( 0.2 ) % Changes in U.S. federal income tax valuation allowance ( 48,690 ) ( 18.4 ) % Nontaxable or nondeductible items: Officers' compensation ( 3,342 ) ( 1.3 ) % Other 171 0.1 % Changes in unrecognized tax benefits 67 — % Other adjustments ( 705 ) ( 0.3 ) % Effective income tax rate $ 1,951 0.7 % (1) State taxes in Texas comprised the majority of this category. 92 For the Years Ended December 31, (in thousands) 2024 2023 Tax benefit (provision) at U.S. statutory rate $ 41,431 $ 37,848 U.S. state and local taxes, net of U.S. federal income tax 5,125 5,766 Valuation allowance ( 47,345 ) ( 49,109 ) Convertible debt repurchase premium ( 2,745 ) — Stock compensation ( 83 ) ( 1,312 ) Other ( 1,029 ) ( 1,977 ) Total $ ( 4,646 ) $ ( 8,784 ) Income taxes paid (net of refunds received) consisted of the following: (in thousands) For the Year Ended December 31, 2025 Texas $ 997 Oregon 395 All other states 45 Total income taxes paid (net of refunds) $ 1,437 Significant components of the Company's deferred tax assets and liabilities are as follows. As of December 31, (in thousands) 2025 2024 Deferred income tax assets: Operating loss carryforwards $ 489,929 $ 426,454 Operating lease obligations 300,713 322,612 Tax credits 49,883 50,367 Accrued expenses 44,337 47,467 Financing lease obligations — 29,524 Intangible assets 5,537 17,103 Investment in unconsolidated ventures 2,943 3,322 Capital loss carryforward 167 — Other — 97 Total gross deferred income tax asset 893,509 896,946 Valuation allowance ( 578,225 ) ( 521,497 ) Net deferred income tax assets 315,284 375,449 Deferred income tax liabilities: Operating lease right-of-use assets ( 259,117 ) ( 284,594 ) Property, plant and equipment ( 48,955 ) ( 100,459 ) Financing lease obligations ( 9,401 ) — Other ( 4,127 ) — Total gross deferred income tax liability ( 321,600 ) ( 385,053 ) Net deferred tax asset (liability) $ ( 6,316 ) $ ( 9,604 ) 93 A reconciliation of the beginning and ending amounts of the deferred tax valuation allowance is as follows: Year Ended Balance at beginning of period Charged to deferred income tax (benefit) provision Balance at end of period December 31, 2023 $ 425,043 $ 49,109 (1) $ 474,152 December 31, 2024 $ 474,152 $ 47,345 (1) $ 521,497 December 31, 2025 $ 521,497 $ 56,728 (1) $ 578,225 (1) Increase to valuation allowance for U.S. federal and state net operating losses and credits. As of both December 31, 2025 and 2024, the Company had federal net operating loss carryforwards generated in 2017 and prior of approximately $ 790.8 million, which are available to offset future taxable income from 2026 through 2037. Additionally, as of December 31, 2025 and 2024, the Company had federal net operating loss carryforwards generated after 2017 of $ 1.2 billion and $ 0.9 billion, respectively, which have an indefinite life, but with usage limited to 80% of taxable income in any given year. The Company had federal and state capital loss carryforwards of $ 0.7 million as of December 31, 2025. The Company determined that a valuation allowance was required after consideration of the Company's estimated future reversal of existing timing differences as of December 31, 2025 and 2024. The Company does not consider estimates of future taxable income in its determination due to the existence of cumulative historical operating losses. The Company's valuation allowance as of December 31, 2025 and 2024 was $ 578.2 million and $ 521.5 million, respectively. The Company has recorded valuation allowances of $ 528.2 million and $ 471.1 million against its federal and state net operating losses as of December 31, 2025 and 2024, respectively. The Company has recorded a valuation allowance against its federal and state capital loss carryforward of $ 0.1 million as of December 31, 2025. The Company also recorded a valuation allowance against federal and state credits of $ 49.9 million and $ 50.4 million as of December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, the Company had gross tax affected unrecognized tax benefits of $ 18.0 million and $ 18.1 million, respectively, which, if recognized, would result in an income tax benefit recorded in the consolidated statement of operations and would affect the annual effective tax rate. Interest and penalties related to these tax positions are classified as tax expense in the Company's consolidated financial statements. Total interest and penalties reserved is $ 0.2 million as of both December 31, 2025 and 2024. As of December 31, 2025, the Company's tax returns for years 2021 through 2024 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination. A reconciliation of the unrecognized tax benefits is as follows. For the Years Ended December 31, (in thousands) 2025 2024 Balance at beginning of period $ 18,101 $ 18,205 Reductions for tax positions related to prior years ( 69 ) ( 104 ) Balance at end of period $ 18,032 $ 18,101 94 18. Supplemental Disclosure of Cash Flow Information (in thousands) For the Years Ended December 31, Supplemental Disclosure of Cash Flow Information: 2025 2024 2023 Interest paid $ 238,371 $ 243,071 $ 231,786 Income taxes paid, net of (refunds) $ 1,437 $ 1,051 $ ( 1,429 ) Capital expenditures, net of related payables: Capital expenditures - non-development, net $ 170,700 $ 186,755 $ 216,511 Capital expenditures - development, net 13 637 1,762 Capital expenditures - non-development - reimbursable from lessor 32,575 16,958 10,319 Trade accounts payable ( 1,763 ) ( 3,100 ) 4,613 Net cash paid $ 201,525 $ 201,250 $ 233,205 Acquisition of assets, net of cash acquired: Prepaid expenses and other assets, net $ — $ — $ 23 Property, plant and equipment and leasehold intangibles, net $ 1,028 $ 277,997 $ 6,872 Investment in unconsolidated ventures — — ( 3,395 ) Operating lease right-of-use assets — ( 51,968 ) — Long-term debt — ( 188,634 ) — Operating lease obligations — 71,016 — Financing lease obligations 277,208 — — Loss on debt modification and extinguishment, net 32,792 — — Other liabilities — — ( 384 ) Other non-operating loss (income) — — ( 2,542 ) Net cash paid $ 311,028 $ 108,411 $ 574 Proceeds from sale of assets, net: Prepaid expenses and other assets, net $ ( 195 ) $ ( 362 ) $ ( 1,889 ) Property, plant and equipment and leasehold intangibles, net ( 23,584 ) ( 6,291 ) ( 36,545 ) Investment in unconsolidated ventures — — ( 27,392 ) Refundable fees and deferred revenue — — 9,347 Other liabilities — 559 10,690 Non-operating loss (gain) on sale of assets, net — ( 923 ) ( 1,441 ) Loss (gain) on sale of communities, net ( 2,368 ) — ( 36,296 ) Net cash received $ ( 26,147 ) $ ( 7,017 ) $ ( 83,526 ) Supplemental Schedule of Non-cash Operating, Investing and Financing Activities: Non-cash lease transactions, net: Property, plant and equipment and leasehold intangibles, net $ — $ 146,571 $ ( 51,518 ) Operating lease right-of-use assets 13,241 660,756 223,309 Other assets, net ( 481 ) — — Operating lease obligations ( 13,252 ) ( 654,352 ) ( 260,611 ) Financing lease obligations — ( 152,975 ) 88,820 Loss (gain) on facility operating lease termination, net 492 — — Net $ — $ — $ — 95 Restricted cash consists principally of escrow deposits for real estate taxes, property insurance, interest rate caps, capital expenditures, and debt service reserves required by certain lenders under mortgage debt agreements, deposits as security for self-insured retention risk under general and professional liability programs, property insurance programs and workers' compensation programs, and regulatory reserves for certain CCRCs. The components of restricted cash are as follows. December 31, (in thousands) 2025 2024 Current: Real estate tax and property insurance escrows $ 20,156 $ 16,307 Interest rate cap escrows 7,901 16,861 Replacement reserve escrows 4,920 6,452 Other 250 251 Subtotal 33,227 39,871 Non-current: Insurance deposits 12,714 17,508 CCRCs escrows 11,710 11,277 Debt service reserve 6,222 2,147 Other 13 112 Subtotal 30,659 31,044 Total $ 63,886 $ 70,915 The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sums to the total of the same such amounts shown in the consolidated statements of cash flows. December 31, (in thousands) 2025 2024 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 279,122 $ 308,925 Restricted cash - current 33,227 39,871 Restricted cash - non-current 30,659 31,044 Total cash, cash equivalents, and restricted cash $ 343,008 $ 379,840 19. Segment Information The Company has three reportable segments: Independent Living; Assisted Living and Memory Care; and CCRCs. Operating segments are defined as components of an enterprise that engage in business activities from which it may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the Chief Operating Decision Maker ("CODM") to assess the performance of the individual segment and make decisions about resources to be allocated to the segment. The Company's CODM is its Chief Executive Officer. Independent Living . The Company's Independent Living segment includes owned or leased communities that are primarily designed for middle to upper income seniors who desire to live in a residential setting that feels like home, without the efforts of ownership. The majority of the Company's independent living communities consist of both independent and assisted living units in a single community, which allows residents to age-in-place by providing them with a broad continuum of senior independent and assisted living services to accommodate their changing needs. Assisted Living and Memory Care. The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily living for the Company's residents. The Company's assisted living and memory care communities include both freestanding, multi-story communities, as well as smaller, freestanding, single story communities. The Company also provides memory care services at freestanding memory care communities that are specially designed for residents with Alzheimer's disease and other dementias. 96 CCRCs. The Company's CCRCs segment includes large owned or leased communities that offer a variety of living arrangements and services to accommodate a broad spectrum of physical ability and healthcare needs. Most of the Company's CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus. All Other. All Other includes communities operated by the Company pursuant to management agreements. Under the management agreements for these communities, the Company receives management fees as well as reimbursement of expenses it incurs on behalf of the owners. The accounting policies of the Company's reportable segments are the same as those described in the summary of significant accounting policies in Note 2. 97 The following tables set forth selected segment financial data. For the Years Ended December 31, (in thousands) 2025 2024 2023 Revenue and other operating income: Independent Living (1)(2) $ 593,813 $ 598,922 $ 564,499 Assisted Living and Memory Care (1)(2) 2,103,303 2,038,660 1,968,440 CCRCs (1)(2) 345,596 334,468 333,404 All Other (3) 151,354 153,437 149,486 Total revenue and other operating income 3,194,066 3,125,487 3,015,829 Community labor expenses: Independent Living 226,323 230,037 221,112 Assisted Living and Memory Care 1,024,260 994,687 979,926 CCRCs 185,795 183,322 192,860 Other facility operating expenses: (4) Independent Living 169,944 173,803 158,742 Assisted Living and Memory Care 515,633 510,670 486,197 CCRCs 94,061 90,742 90,963 Total facility operating expenses 2,216,016 2,183,261 2,129,800 Segment operating income: (5) Independent Living 197,546 195,082 184,645 Assisted Living and Memory Care 563,410 533,303 502,317 CCRCs 65,740 60,404 49,581 All Other 10,853 10,521 10,161 Total segment operating income 837,549 799,310 746,704 General and administrative expense (including non-cash stock-based compensation expense) 195,141 185,850 178,894 Facility operating lease expense 200,263 200,587 202,410 Depreciation and amortization 355,527 357,788 342,712 Asset impairment 71,349 8,557 40,572 Loss (gain) on sale of communities, net ( 2,368 ) — ( 36,296 ) Loss (gain) on facility operating lease termination, net 4,139 — — Income (loss) from operations $ 13,498 $ 46,528 $ 18,412 Total capital expenditures for property, plant and equipment, and leasehold intangibles: Independent Living $ 44,357 $ 48,658 $ 51,188 Assisted Living and Memory Care 121,325 122,384 121,240 CCRCs 18,188 18,214 37,414 Corporate and All Other 19,418 15,094 18,750 $ 203,288 $ 204,350 $ 228,592 (1) All revenue and other operating income is earned from external third parties in the United States. (2) During the year ended December 31, 2023, the Company recognized $ 9.1 million of other operating income from grants from states and other local government sources. The Independent Living, Assisted Living and Memory Care, and CCRCs segments recognized $ 0.5 million, $ 8.0 million, and $ 0.6 million, respectively, in other operating income for the year ended December 31, 2023. 98 (3) All Other revenue and other operating income includes management fees and reimbursements of costs incurred on behalf of managed communities. For the year ended December 31, 2023, revenue and other operating income includes $ 0.9 million of revenue earned from unconsolidated ventures in which the Company had an ownership interest. (4) Other facility operating expenses is primarily comprised of costs for food, utilities, maintenance, real estate taxes, insurance, marketing, paid referral fees, and other costs of operating the Company's communities. (5) Segment operating income is defined as segment revenues and other operating income less segment facility operating expenses (excluding facility depreciation and amortization) and costs incurred on behalf of managed communities. The Company does not report total assets by segment because this is not a metric used by the CODM to allocate resources or evaluate segment performance. The Company's total carrying amount of goodwill is included on the Independent Living segment and was $ 27.3 million as of December 31, 2025, 2024, and 2023. 99 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.