What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-04 compared with 2021-05-05 · 381 added, 207 removed, 366 unchanged (62% of the section changed)

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We are a REIT that was organized under Maryland law and which owns medical office and life science properties, senior living communities and other healthcare related properties throughout the United States.

As of March 31, 2021, we owned 396 properties located in 36 states and Washington, D.C., including four properties classified as held for sale and one life science property owned in a joint venture arrangement in which we own a 55% equity interest.

At March 31, 2021, the gross book value of our real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, was $8.2 billion, including $66.1 million of gross book value classified as held for sale in our condensed consolidated balance sheet.

As of June 30, 2021, we owned 392 properties located in 36 states and Washington, D.C., including one life science property owned in a joint venture arrangement in which we own a 55% equity interest.

At June 30, 2021, the gross book value of our real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, was $8.2 billion.

Our business is focused on healthcare related properties, including medical office and life science properties, senior living communities, wellness centers and other medical and healthcare related properties.

We believe that the healthcare sector and many of our tenants and our manager provide essential services across the United States.

We believe that the healthcare sector and many of our tenants, managers and operators provide essential services across the United States.

Due to restrictions intended to prevent the spread of the virus that causes COVID-19, certain of our medical office and wellness center tenants, which include physician practices that had discontinued non-essential surgeries and procedures and fitness centers, that had been ordered closed by state executive orders experienced disruptions to their businesses.

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We are closely monitoring the impacts of the COVID-19 pandemic on all aspects of our business.

With respect to our SHOP segment, we expect that our senior living community operators will be operating our communities at lower average occupancy with higher operating expenses per resident, which will likely lead to decreased returns to us as a result of the COVID-19 pandemic.

Our operators continue to follow federal, state and local health department guidelines and their own infection prevention protocols but we expect to see additional cases of COVID-19 in our senior living communities.

Throughout the first quarter, Five Star coordinated multiple COVID-19 vaccination clinics at our SHOP communities for residents and staff.

At the conclusion of the vaccination clinics, over 96% of residents had received a vaccine.

All of our communities are now open to admissions.

We also believe that we, Five Star and our impacted tenants have and may continue to benefit from provisions of the CARES Act, signed into law in March 2020 and further supplemented by the Consolidated Appropriations Act, 2021, or other federal or state relief programs allowing them to continue or resume business activity.

During the three months ended March 31, 2021, we recognized $2.4 million in interest and other income in our condensed consolidated statement of comprehensive income (loss) related to funds received under the CARES Act.

With respect to our SHOP segment, we expect that our senior living community managers will be operating our communities at lower average occupancy with higher operating expenses per resident, which will likely lead to decreased returns to us as a result of the COVID-19 pandemic.

Our managers continue to follow federal, state and local health department guidelines and their own infection prevention protocols but we expect to see additional cases of COVID-19 in our senior living communities.

Throughout the first quarter of 2021, Five Star coordinated multiple COVID-19 vaccination clinics at senior living communities in our SHOP segment for residents and staff.

As previously disclosed, all of the communities in our SHOP segment have completed vaccination clinics and are accepting new residents.

On June 1, 2021, Five Star announced that all of its team members at our communities will be required to be fully vaccinated against COVID-19 by September 1, 2021 in order to protect Five Star's team members and residents at our communities from the ongoing threat posed by the COVID-19 virus.

Both Five Star's team members and residents at our communities continue to have access to vaccines.

We also believe that we and our managers, operators and impacted tenants have and may continue to benefit from provisions of the CARES Act, signed into law in March 2020 and further supplemented by the Consolidated Appropriations Act, 2021, or other federal or state relief programs allowing them to continue or resume business activity.

During the six months ended June 30, 2021, we recognized $18.2 million in interest and other income in our condensed consolidated statement of comprehensive income (loss) related to funds received under the CARES Act.

We believe that we are well positioned to weather the present disruptions facing the real estate industry and, in particular, the real estate healthcare industry, including senior living.

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In some cases, certain states and municipalities again required the closure of certain business activities and imposed certain other restrictions.

It is unclear whether the increases in the number of COVID-19 infections will continue or amplify in the United States or elsewhere and, if so, what the impact of that would be on human health and safety, the economy, or our manager's and other operators' and tenants' businesses.

As a result of these uncertainties, we are unable to determine what the ultimate impacts will be on our, our tenants', our operators' and other stakeholders' businesses, operations, financial results and financial position.

For further information and risks relating to the COVID-19 pandemic and its aftermath on us and our business, see Part I, Item 1, “Business—COVID-19 Pandemic” and Part I, Item 1A, “Risk Factors” in our Annual Report.

The conditions in the United States significantly improved since those periods during the pandemic;

however, certain areas of the United States have recently experienced increasing COVID-19 infections.

It is unclear whether the number of COVID-19 infections will further increase or amplify in the United States or elsewhere and, if so, what the impact of that would be on human health and safety, the economy, or our managers', operators' and tenants' businesses.

As a result of these uncertainties, we are unable to determine what the ultimate impacts will be on our, our tenants', our managers', our operators' and other stakeholders' businesses, operations, financial results and financial position.

For further information and risks relating

to the COVID-19 pandemic and its aftermath on us and our business, see Part I, Item 1, “Business—COVID-19 Pandemic” and Part I, Item 1A, “Risk Factors” in our Annual Report.

2021 Amendments to our Management Arrangements with Five Star

On April 9, 2021, we announced that we have agreed to amend our management arrangements with Five Star.

The principal changes to the management arrangements will include:

• that Five Star will cooperate with us in transitioning 108 of our senior living communities with approximately 7,500 living units to other third party operators without our payment of any termination fee to Five Star, and that we will no longer have the right to sell up to an additional $682 million of senior living communities currently managed by Five Star and terminate Five Star’s management of those communities without our payment of a fee to Five Star upon sale;

• that Five Star will continue to manage 120 of our senior living communities, with approximately 18,000 living units, for our account, and that the skilled nursing units in all of our continuing care retirement communities that Five Star will continue to manage for our account, which currently includes approximately 1,500 living units, will be closed and repositioned;

• that our performance termination rights pursuant to our existing management agreements with Five Star will be amended for the senior living communities that Five Star will continue to manage for our account, such that, commencing in 2025, we can terminate up to 10% of the senior living communities managed by Five Star for our account, based on total revenues, per year without our payment of any termination fee to Five Star for failure to meet 80% of a target EBITDA in prior years;

• that the incentive fee calculation included in our existing management agreements with Five Star will be amended for the senior living communities that Five Star will continue to manage for our account such that there will no longer be a cap placed on any incentive fee earned by Five Star in any calendar year and that any senior living communities that are undergoing a major renovation or repositioning will be excluded from the calculation;

• that RMR LLC will assume control of any major renovation or repositioning activities at the senior living communities that Five Star will continue to manage for our account;

• that the term of our existing management agreements with Five Star will be extended by two years to December 31, 2036.

We expect that the transition of the management of the 108 senior living communities to other third party operators will be completed before year end 2021.

We also expect to incur costs related to retention, temporary labor and other transition costs for these communities, which costs may be significant.

The following table presents a pro forma breakout of communities that Five Star will continue to manage and communities that will transition to other third party operators (dollars in thousands):

As of and For the Three Months Ended March 31, 2021

Five Star Retained Communities Operator Transition Communities Total

On June 9, 2021, we amended our management arrangements with Five Star.

The principal changes to the management arrangements include:

• that Five Star is cooperating with us in transitioning 108 of our senior living communities with approximately 7,500 living units to other third party managers without our payment of any termination fee to Five Star;

• that we no longer have the right to sell up to an additional $682 million of senior living communities currently managed by Five Star and terminate Five Star's management of those communities without our payment of a fee to Five Star upon sale;

• that Five Star is continuing to manage 120 of our senior living communities with approximately 18,000 living units, and that the skilled nursing units in all of our continuing care retirement communities that Five Star is continuing to manage, which then included approximately 1,500 living units, are being closed and repositioned;

• that beginning in 2025, we will have the right to terminate up to 10% of the senior living communities that Five Star is continuing to manage, based on total revenues per year for failure to meet 80% of a target EBITDA for the applicable period;

• that the incentive fee that Five Star may earn in any calendar year for the senior living communities that Five Star is continuing to manage is no longer subject to a cap and that any senior living communities that are undergoing a major renovation or repositioning are excluded from the calculation of the incentive fee;

• that RMR LLC will oversee any major renovation or repositioning activities at the senior living communities that Five Star is continuing to manage;

• that the term of our management agreements with Five Star for our senior living communities that Five Star is continuing to manage was extended by two years to December 31, 2036.

Pursuant to these changes, we and Five Star entered into the Master Management Agreement for the senior living communities that Five Star is continuing to manage and interim management agreements for the senior living communities that we and Five Star agreed to transition to new operators.

These agreements replaced our prior management and omnibus agreements with Five Star.

In addition, Five Star delivered to us a related amended and restated guaranty agreement pursuant to which Five Star is continuing to guarantee the payment and performance of each of its applicable subsidiary's obligations under the applicable management agreements.

We expect that the transition of the management of the 108 senior living communities from Five Star to other third party managers will be completed before year end 2021.

As of August 3, 2021, we had executed agreements with four new third party managers to transition 76 senior living communities.

Of these 76 senior living communities, 41 have been transitioned to new third party managers.

We also expect to incur costs related to retention and other transition costs for these communities, which costs may be significant.

For the three and six months ended June 30, 2021, we recorded $11.9 million of these costs to acquisition and certain other transaction related costs in our condensed consolidated statements of comprehensive income (loss).

The following table presents a pro forma breakout of communities that Five Star is continuing to manage and communities that we are in the process of transitioning from Five Star to other third party managers (dollars in thousands):

As of and For the Three Months Ended

June 30, 2021 As of and For the Six Months Ended

June 30, 2021

Five Star Retained Communities Operator Transition Communities Total Five Star Retained Communities Operator Transition Communities Total

Communities (1)

120 108 228 120 108 228

Number of units (2)

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(1) Excludes seven closed senior living communities.

(2) Excludes 1,532 skilled nursing facility units that are scheduled for closure and/or repositioning.

(2) Excludes skilled nursing units that have been closed or are being closed and repositioned.

(3) Our definition of NOI and our reconciliation of net income (loss) to NOI and a description of why we believe NOI is an appropriate supplemental measure are included below under the heading “Non-GAAP Financial Measures.”

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The following tables present an overview of our portfolio (dollars in thousands, except investment per square foot or unit data):

(As of March 31, 2021) Number

(As of June 30, 2021) Number

of Properties Square Feet or Number of Units Gross Book Value of Real Estate Assets (1)

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Total 392 $ 8,218,282 100.0 % $ 346,341 100.0 % $ 81,709 100.0 %

As of and For the Three Months Ended March 31,

As of and For the Three Months Ended June 30,

Office Portfolio (6)

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(1) Represents gross book value of real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, if any.

Amounts include $66,988 of gross book value of four properties classified as held for sale as of March 31, 2021, which amounts are included in assets of properties held for sale in our condensed consolidated balance sheet.

(2) Represents gross book value of real estate assets divided by number of rentable square feet or living units, as applicable, at March 31, 2021.

(3) Includes $370 of revenues and $374 of NOI from properties that we sold and $2,460 of revenues and $2,226 of NOI from properties classified as held for sale in our condensed consolidated balance sheet as of March 31, 2021.

(2) Represents gross book value of real estate assets divided by number of rentable square feet or living units, as applicable, at June 30, 2021.

(3) Includes $772 of revenues and $579 of NOI from properties that we sold.

(4) We calculate our NOI on a consolidated basis and by reportable segment.

Our definition of NOI and our reconciliation of net income (loss) to NOI are included below under the heading “Non-GAAP Financial Measures”.

(5) Our medical office and life science property leases include some triple net leases where, in addition to paying fixed rents, the tenants assume the obligation to operate and maintain the properties at their expense, and some net and modified gross leases where we are responsible for the operation and maintenance of the properties and we charge tenants for some or all of the property operating costs.

modified gross leases where we are responsible for the operation and maintenance of the properties and we charge tenants for some or all of the property operating costs.

A small percentage of our medical office and life science property leases are full-service leases where we receive fixed rent from our tenants and no reimbursement for our property operating costs.

(6) Medical office and life science property occupancy data is as of March 31, 2021 and 2020 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.

(7) Excludes data for periods prior to our ownership of certain properties, data for properties sold or classified as held for sale and data for which there was a transfer of operations during the periods presented.

(8) Operating data for other triple net leased senior living communities leased to third party operators and wellness centers are presented based upon the operating results provided by our tenants for the three months ended December 31, 2020 and 2019, or the most recent prior period for which tenant operating results are made available to us.

(6) Medical office and life science property occupancy data is as of June 30, 2021 and 2020 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.

(7) Excludes data for periods prior to our ownership of certain properties, data for properties sold or classified as held for sale, if any, and data for which there was a transfer of operations during the periods presented.

(8) Operating data for other triple net leased senior living communities leased to third party operators and wellness centers are presented based upon the operating results provided by our tenants for the three months ended March 31, 2021 and 2020, or the most recent prior period for which tenant operating results are made available to us.

We have not independently verified tenant operating data.

During the three months ended March 31, 2021, we entered into lease renewals for 60,420 square feet and new leases for 152,171 square feet at our medical office and life science properties.

The weighted average annual rental rate for leases entered

during the quarter was $57.89 per square foot, which was 18.68% higher than the previous weighted average annual rental rate for the same space.

Weighted (by annualized rental income) average lease term for leases entered during the first quarter of 2021 was 10.6 years.

Commitments for tenant improvements, leasing commission costs and concessions for leases entered during the first quarter of 2021 totaled $32.8 million, or $154.32 per square foot on average (approximately $14.57 per square foot per year of the lease term).

During the three and six months ended June 30, 2021, we entered into new and renewal leases at our medical office and life science properties in our Office Portfolio segment as summarized in the following tables (dollars and square feet in thousands, except per square foot amounts):

Three Months Ended June 30, 2021

New Leases Renewals Total

Square feet leased during the quarter 65 567 632

Weighted average rental rate change (by rentable square feet) 13.1 % 5.0 % 5.9 %

Weighted average lease term (years) (1)

Total leasing costs and concession commitments (2)

$ 5,191 $ 21,241 $ 26,432

Total leasing costs and concession commitments per square foot (2)

$ 80.38 $ 37.43 $ 41.82

Total leasing costs and concession commitments per square foot per year (2)

$ 8.60 $ 4.13 $ 4.60

Six Months Ended June 30, 2021

New Leases Renewals Total

Square feet leased during the quarter 217 627 844

Weighted average rental rate change (by rentable square feet) 20.1 % 4.9 % 9.9 %

Weighted average lease term (years) (1)

Total leasing costs and concession commitments (2)

$ 37,441 $ 21,799 $ 59,240

Total leasing costs and concession commitments per square foot (2)

$ 172.73 $ 34.72 $ 70.14

Total leasing costs and concession commitments per square foot per year (2)

$ 16.28 $ 3.85 $ 7.31

(1) Weighted based on annualized rental income pursuant to existing leases as of June 30, 2021, including straight line rent adjustments and estimated recurring expense reimbursements, and excluding lease value amortization.

(2) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.

Lease Expiration Schedules

As of March 31, 2021, lease expirations at our medical office and life science properties in our Office Portfolio segment are as follows (dollars in thousands):

As of June 30, 2021, lease expirations at our medical office and life science properties in our Office Portfolio segment are as follows (dollars in thousands):

Year Number of Tenants Square Feet Leased Percent of Total Cumulative Percent of Total Annualized Rental Income (1)

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Weighted average remaining lease term (in years) 5.0 6.0

(1) Annualized rental income is based on rents pursuant to existing leases as of March 31, 2021, including straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our medical office and life science properties.

(1) Annualized rental income is based on rents pursuant to existing leases as of June 30, 2021, including straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our medical office and life science properties.

Annualized rental income also includes 100% of rental income as reported under GAAP from the life science property owned in a joint venture arrangement in which we own a 55% equity interest.

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Our Office Portfolio segment consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties leased to biotech laboratories and other similar tenants.

Our SHOP segment consists of managed senior living communities that provide short term and long term residential living and in some instances care and other services for residents where we pay fees to the operator to manage the communities for our account.

We also report “non-segment” operations, which consists of triple net leased senior living communities that are leased to operators from which we receive rents, and wellness centers, which we do not consider to be sufficiently material to constitute a separate reporting segment, and any other income or expenses that are not attributable to a specific reporting segment.

The following table summarizes the results of operations of each of our segments for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

The following table summarizes the results of operations of each of our segments for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Office Portfolio $ 92,804 $ 95,510 $ 186,127 $ 194,280

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The following sections analyze and discuss the results of operations of each of our segments for the periods presented.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020 (dollars and square feet in thousands, except average monthly rate):

Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the three months ended March 31, 2021 to the three months ended March 31, 2020.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 (dollars and square feet in thousands, except average monthly rate):

Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the three months ended June 30, 2021 to the three months ended June 30, 2020.

Our definition of NOI and our reconciliation of net income (loss) to NOI and a description of why we believe NOI is an appropriate supplemental measure are included below under the heading “Non-GAAP Financial Measures.”

Three Months Ended March 31,

Three Months Ended June 30,

2021 2020 $ Change % Change

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General and administrative 9,126 7,312 1,814 24.8 %

Acquisition and certain other transaction related costs 12,071 87 11,984 nm

Impairment of assets — 31,175 (31,175) (100.0) %

Gain (loss) on sale of properties 30,760 (168) 30,928 nm

Gains and losses on equity securities, net (3,849) 11,974 (15,823) (132.1) %

Interest and other income 16,038 7,736 8,302 107.3 %

Interest expense

(67,657) (43,974) (23,683) 53.9 %

Loss on early extinguishment of debt (370) (181) (189) 104.4 %

Loss from continuing operations before income tax expense (32,454) (23,616) (8,838) 37.4 %

Income tax expense (191) (1,126) 935 (83.0) %

Net loss (32,645) (24,742) (7,903) 31.9 %

Net income attributable to noncontrolling interest (1,577) (1,330) (247) 18.6 %

Net loss attributable to common shareholders $ (34,222) $ (26,072) $ (8,150) 31.3 %

nm - not meaningful

Office Portfolio :

Comparable Properties (1)

All Properties

As of June 30, As of June 30,

2021 2020 2021 2020

Total buildings 113 113 118 129

Total square feet (2)

10,604 10,599 10,927 11,668

Occupancy (3)

92.3 % 93.4 % 91.0 % 92.0 %

(1) Consists of medical office and life science properties that we have owned and which have been in service continuously since April 1, 2020, including the life science property owned in a joint venture arrangement in which we own a 55% equity interest;

excludes properties classified as held for sale or out of service undergoing redevelopment, if any.

(2) Prior periods exclude space remeasurements made subsequent to those periods.

(3) Medical office and life science property occupancy includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants, and (iii) space being fitted out for occupancy.

Comparable property occupancy excludes out of service assets undergoing redevelopment.

Three Months Ended June 30,

Comparable (1)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2021 2020 Change Change 2021 2020 2021 2020 Change Change

Rental income $ 91,511 $ 90,337 $ 1,174 1.3 % $ 1,293 $ 5,173 $ 92,804 $ 95,510 $ (2,706) (2.8) %

Property operating expenses (30,725) (29,456) 1,269 4.3 % (596) (1,437) (31,321) (30,893) 428 1.4 %

NOI $ 60,786 $ 60,881 $ (95) (0.2) % $ 697 $ 3,736 $ 61,483 $ 64,617 $ (3,134) (4.9) %

excludes properties classified as held for sale or out of service undergoing redevelopment, if any.

Rental income.

Rental income decreased primarily due to our disposition of 12 properties since April 1, 2020 and assets being taken out of service and/or undergoing redevelopment, partially offset by an increase in rental income at our comparable properties.

Rental income increased at our comparable properties primarily due to increased parking revenue at certain of our comparable properties as states and municipalities have eased restrictions related to the COVID-19 pandemic and tenants' employees have increasingly returned to the office and commercial activity has increased and increases in tax escalation income and other property operating expense reimbursements at certain of our comparable properties, partially offset by a decrease in occupancy at certain of our comparable properties.

Property operating expenses.

Property operating expenses consist of real estate taxes, utility expenses, insurance, management fees, salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense and other direct costs of operating these properties.

The increase in property operating expenses is primarily due to an increase in property operating expenses at our comparable properties, partially offset by our disposition of 12 properties since April 1, 2020.

Property operating expenses at our comparable properties increased primarily due to increases in utility expenses, real estate taxes and other direct costs at certain of our comparable properties.

Net operating income.

The change in NOI reflects the net changes in rental income and property operating expenses described above.

Comparable Properties (1)

All Properties

As of and For the Three Months As of and For the Three Months

Ended June 30, Ended June 30,

2021 2020 2021 2020

Total properties 228 228 235 241

Number of units 25,423 25,423 25,423 28,348

Occupancy 71.0 % 80.7 % 70.9 % 78.7 %

Average monthly rate (2)

$ 4,279 $ 4,207 $ 4,307 $ 4,496

(1) Consists of senior living communities that we have owned and which have been operated by the same operator continuously since April 1, 2020;

excludes communities classified as held for sale or closed, if any.

(2) Average monthly rate is calculated by taking the average daily rate, which is defined as total residents fees and services divided by occupied units during the period, and multiplying it by 30 days.

Three Months Ended June 30,

Comparable (1)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2021 2020 Change Change 2021 2020 2021 2020 Change Change

Residents fees and services $ 243,921 $ 291,049 $ (47,128) (16.2) % $ 26 $ 13,055 $ 243,947 $ 304,104 $ (60,157) (19.8) %

Property operating expenses (232,669) (255,820) (23,151) (9.0) % (642) (15,202) (233,311) (271,022) (37,711) (13.9) %

NOI $ 11,252 $ 35,229 $ (23,977) (68.1) % $ (616) $ (2,147) $ 10,636 $ 33,082 $ (22,446) (67.8) %

(1) Consists of senior living communities that we have owned and which have been operated by the same operator continuously since April 1, 2020;

excludes communities classified as held for sale or closed, if any.

Residents fees and services.

Residents fees and services are the revenues earned at our managed senior living communities.

We recognize these revenues as services are provided and related fees are accrued.

Residents fees and services decreased primarily due to our disposition of nine properties since April 1, 2020 and decreases in occupancy primarily due to the impact of the COVID-19 pandemic at both comparable and non-comparable properties for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, partially offset by increases in average monthly rates at certain of our comparable properties.

Additionally, residents fees and services at our comparable properties decreased due to the closure of skilled nursing units during the three months ended June 30, 2021.

Property operating expenses.

Property operating expenses consist of real estate taxes, utility expenses, insurance, salaries and benefit costs of property level personnel, repairs and maintenance expense, management fees, cleaning expense and other direct

costs of operating these communities.

Property operating expenses decreased primarily due to our disposition of nine properties since April 1, 2020 and a decrease in property operating expenses at our comparable properties.

Property operating expenses at our comparable properties decreased primarily due to decreases in costs associated with staffing and dietary expenses primarily due to reduced occupancy at our comparable properties as a result of the impact of the COVID-19 pandemic and the closure of skilled nursing units during the three months ended June 30, 2021.

Net operating income.

The change in NOI reflects the net changes in residents fees and services and property operating expenses described above.

Non-Segment (1) :

Comparable Properties (2)

All Properties

As of and For the Three Months Ended June 30, As of and For the Three Months Ended June 30,

2021 2020 2021 2020

Total properties:

Other triple net leased senior living communities 29 29 29 32

Wellness centers 10 10 10 10

Rent coverage:

Other triple net leased senior living communities (3)

1.38 x 1.66 x 1.38 x 1.66 x

Wellness centers (3)

0.94 x 1.73 x 0.94 x 1.73 x

(1) Non-segment operations consists of all of our other operations, including certain senior living communities leased to third party operators and wellness centers, which segment we do not consider to be sufficiently material to constitute a separate reporting segment, and any other income or expenses that are not attributable to a specific reporting segment.

(2) Comparable properties consists of properties that we have owned and which have been leased to the same operator continuously since April 1, 2020;

excludes properties classified as held for sale, if any.

(3) All tenant operating data presented is based upon the operating results provided by our tenants for the 12 months ended March 31, 2021 and 2020 or the most recent prior period for which tenant operating results are available to us.

Rent coverage is calculated using the operating cash flows from our triple net lease tenants' operations of our properties, before subordinated charges, if any, divided by triple net lease minimum rents payable to us.

We have not independently verified tenant operating data.

Excludes data for historical periods prior to our ownership of certain properties, as well as data for properties sold or classified as held for sale, if any, during the periods presented.

Three Months Ended June 30,

Comparable (1)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2021 2020 Change Change 2021 2020 2021 2020 Change Change

Rental income $ 9,590 $ 9,737 $ (147) (1.5) % $ — $ 960 $ 9,590 $ 10,697 $ (1,107) (10.3) %

NOI $ 9,590 $ 9,737 $ (147) (1.5) % $ — $ 960 $ 9,590 $ 10,697 $ (1,107) (10.3) %

(1) Consists of properties that we have owned and which have been leased to the same operator continuously since April 1, 2020;

excludes properties classified as held for sale, if any.

Rental income.

Rental income decreased primarily due to the sale of three senior living communities leased to private operators since April 1, 2020 and a decrease in rental income at our comparable properties, partially offset by increased rents resulting from our purchase of improvements at our comparable properties since April 1, 2020.

Rental income decreased at our comparable properties primarily due to lease renewals with tenants of our wellness centers at lower average rental rates.

As a result of the COVID-19 pandemic, many of our wellness centers had been ordered closed by state or local executive orders.

In February 2021, we entered into lease renewals with the tenant of six of our wellness centers for a five year term at lower cash rental rates until deferred rents become due.

We have elected to recognize rental income from this tenant as rent payments are received.

In October 2020, the lease for our other four wellness centers was renewed for a 12 year term at a lower average rental rate.

Net operating income.

The change in NOI reflects the net changes in rental income described above.

Consolidated :

References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Depreciation and amortization expense.

Depreciation and amortization expense decreased primarily due to our disposition of 24 properties, certain depreciable leasing related assets becoming fully depreciated and certain of our acquired resident agreements becoming fully amortized since April 1, 2020, partially offset by the purchase of capital improvements at certain of our properties since April 1, 2020.

General and administrative expense .

General and administrative expense consists of fees paid to RMR LLC under our business management agreement, legal and accounting fees, fees and expenses of our Trustees, equity compensation expense and other costs relating to our status as a publicly traded company.

General and administrative expense increased primarily due to an increase in our base business management fees expense as a result of higher trading prices for our common shares during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Acquisition and certain other transaction related costs.

For the three months ended June 30, 2021, acquisition and certain other transaction related costs primarily represent costs incurred in connection with the Master Management Agreement.

For the three months ended June 30, 2020, acquisition and certain other transaction related costs primarily represent costs incurred in connection with the 2020 restructuring of our business arrangements with Five Star, or the Restructuring Transaction.

For information regarding the Master Management Agreement or the Restructuring Transaction, see Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Impairment of assets.

(Loss) gain on sale of properties (122) 2,782 (2,904) (104.4) %

Losses on equity securities, net (8,339) (9,943) 1,604 (16.1) %

Interest and other income 2,835 138 2,697 nm

For information about our asset impairment charges, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 3 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.

Gain (loss) on sale of properties.

Gain (loss) on sale of properties is the net result of our sale of certain of our properties during the three months ended June 30, 2021 and 2020.

For further information regarding gain (loss) on sale of properties, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 3 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.

Gains and losses on equity securities, net.

Gains and losses on equity securities, net, represent the net unrealized gains and losses to adjust our investment in Five Star to its fair value.

For further information regarding our investment in Five Star, see Note 5 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Interest and other income.

The increase in interest and other income is primarily due to $15,748 of funds we received from the U.S.

government pursuant to the CARES Act during the three months ended June 30, 2021 compared to $7,346 received during the three months ended June 30, 2020.

Interest expense.

Interest expense increased primarily due to our issuance in June 2020 of $1,000,000 aggregate principal amount of our 9.75% senior notes due 2025, our issuance in February 2021 of $500,000 aggregate principal amount of our 4.375% senior notes due 2031 and an increase in average borrowings under our revolving credit facility.

This increase was partially offset by our redemption in April 2020 of all $200,000 of our 6.75% senior notes due 2020, our prepayment in June 2020 of our $250,000 term loan, our prepayment in February 2021 of our $200,000 term loan and our redemption in June 2021 of all $300,000 of our 6.75% senior notes due 2021.

Loss on early extinguishment of debt.

We recorded a loss on early extinguishment of debt in connection with our redemption of all $300,000 of our 6.75% senior notes due 2021 during the three months ended June 30, 2021.

We recorded a loss on early extinguishment of debt in connection with our prepayment of our $250,000 term loan and of a mortgage note during the three months ended June 30, 2020.

Income tax expense .

Income tax expense is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 (dollars and square feet in thousands, except average monthly rate):

Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the six months ended June 30, 2021 to the six months ended June 30, 2020.

Six Months Ended June 30,

2021 2020 $ Change % Change

NOI by segment:

Office Portfolio $ 123,513 $ 130,681 $ (7,168) (5.5) %

SHOP 14,504 81,172 (66,668) (82.1) %

Non-Segment 19,025 22,425 (3,400) (15.2) %

Total NOI 157,042 234,278 (77,236) (33.0) %

Depreciation and amortization 134,041 137,255 (3,214) (2.3) %

General and administrative 16,668 16,144 524 3.2 %

Acquisition and certain other transaction related costs 12,071 750 11,321 nm

Impairment of assets (174) 42,409 (42,583) (100.4) %

Gain on sale of properties 30,638 2,614 28,024 nm

Gains and losses on equity securities, net (12,188) 2,031 (14,219) nm

Interest and other income 18,873 7,874 10,999 139.7 %

Interest expense

(127,748) (85,624) (42,124) 49.2 %

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Loss on early extinguishment of debt (2,410) (427) (1,983) nm

(Loss) income from continuing operations before income tax (expense) benefit (65,945) 10,700 (76,645) nm

Income tax (expense) benefit (238) 443 (681) (153.7) %

Net (loss) income (66,183) 11,143 (77,326) nm

Loss from continuing operations before income tax expense (98,399) (12,916) (85,483) nm

Income tax expense (429) (683) 254 (37.2) %

Net loss (98,828) (13,599) (85,229) nm

Net income attributable to noncontrolling interest (2,899) (2,738) (161) 5.9 %

Net (loss) income attributable to common shareholders $ (67,505) $ 9,735 $ (77,240) nm

Net loss attributable to common shareholders $ (101,727) $ (16,337) $ (85,390) nm

nm - not meaningful

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All Properties

As of March 31, As of March 31,

As of June 30, As of June 30,

2021 2020 2021 2020

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Comparable property occupancy excludes out of service assets undergoing redevelopment.

Three Months Ended March 31,

Six Months Ended June 30,

Comparable (1)

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Rental income decreased primarily due to our disposition of 20 properties since January 1, 2020, assets being taken out of service and/or undergoing redevelopment and a decrease in rental income at our comparable properties.

Rental income decreased at our comparable properties primarily due to reduced parking revenue at certain of our comparable properties related to the COVID-19 pandemic and decreases in tax escalation income and other property operating expense reimbursements at certain of our comparable properties.

Rental income decreased at our comparable properties primarily due to decreases in occupancy and tax escalation income, partially offset by increased parking revenue at certain of our comparable properties as states and municipalities have eased restrictions related to the COVID-19 pandemic and tenants' employees have increasingly returned to the office and commercial activity has increased.

Property operating expenses.

The decrease in property operating expenses is primarily due to our disposition of 16 properties since January 1, 2020 and a decrease in property operating expenses at our comparable properties.

Property operating expenses at our comparable properties decreased primarily due to decreases in real estate taxes and utility expenses, partially offset by increases in landscaping expenses and other direct costs at certain of our comparable properties.

The decrease in property operating expenses is primarily due to our disposition of 20 properties since January 1, 2020, partially offset by an increase in property operating expenses at our comparable properties.

Property operating expenses at our comparable properties increased primarily due to increases in landscaping expenses, utility expenses and other direct costs, partially offset by decreases in real estate taxes at certain of our comparable properties.

Net operating income.

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All Properties

As of and For the Three Months As of and For the Three Months

Ended March 31, Ended March 31,

As of and For the Six Months Ended June 30, As of and For the Six Months Ended June 30,

2021 2020 2021 2020

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Three Months Ended March 31,

Six Months Ended June 30,

Comparable (1)

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Residents fees and services.

Residents fees and services are the revenues earned at our managed senior living communities.

We recognize these revenues as services are provided and related fees are accrued.

Residents fees and services decreased primarily due to our disposition of nine properties since January 1, 2020 and decreases in occupancy primarily due to the impact of the COVID-19

pandemic at both comparable and non-comparable properties for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, partially offset by increases in average monthly rates at both comparable and non-comparable properties.

Residents fees and services decreased primarily due to our disposition of nine properties since January 1, 2020 and decreases in occupancy primarily due to the impact of the COVID-19 pandemic at both comparable and non-comparable properties for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, partially offset by

increases in average monthly rates at certain of our comparable properties.

Additionally, residents fees and services at our comparable properties decreased due to the closure of skilled nursing units during the six months ended June 30, 2021.

Property operating expenses.

Property operating expenses decreased primarily due to our disposition of nine properties since January 1, 2020 and a decrease in property operating expenses at our comparable properties.

Property operating expenses at our comparable properties decreased primarily due to decreases in costs associated with staffing and dietary expenses primarily due to the impact of the COVID-19 pandemic, partially offset by increased property operating expenses at certain of our comparable properties related to the February 2021 winter storms, which impacted Texas and certain other states.

Net operating income.

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All Properties

As of and For the Three Months Ended March 31, As of and For the Three Months Ended March 31,

As of and For the Six Months Ended June 30, As of and For the Six Months Ended June 30,

2021 2020 2021 2020

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excludes properties classified as held for sale, if any.

(3) All tenant operating data presented is based upon the operating results provided by our tenants for the 12 months ended December 31, 2020 and 2019 or the most recent prior period for which tenant operating results are available to us.

We have not independently verified tenant operating data.

Excludes data for historical periods prior to our ownership of certain properties, as well as data for properties sold or classified as held for sale during the periods presented.

(4) Wellness centers' rent coverage does not include the impacts of lease amendments that we entered into during the first quarter of 2021 with Starmark Holdings, LLC.

Three Months Ended March 31,

Excludes data for historical periods prior to our ownership of certain properties, as well as data for properties sold or classified as held for sale, if any, during the periods presented.

Six Months Ended June 30,

Comparable (1)

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Consolidated :

References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended March 31, 2021, compared to the three months ended March 31, 2020.

References to changes in the income and expense categories below relate to the comparison of consolidated results for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

Depreciation and amortization expense.

1 unchanged sentence

General and administrative expense .

General and administrative expense decreased primarily due to a decrease in our base business management fees expense as a result of lower trading prices for our common shares during the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

General and administrative expense increased primarily due to an increase in our base business management fees expense as a result of higher trading prices for our common shares during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Acquisition and certain other transaction related costs.

Acquisition and certain other transaction related costs primarily represent costs incurred in connection with the 2020 restructuring of our business arrangements with Five Star, or the Restructuring Transaction.

For information regarding the Restructuring Transaction, see Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For the six months ended June 30, 2021, acquisition and certain other transaction related costs primarily represent costs incurred in connection with the Master Management Agreement.

For the six months ended June 30, 2020, acquisition and certain other transaction related costs primarily represent costs incurred in connection with the Restructuring Transaction.

Impairment of assets.

For further information about our asset impairment charges, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 3 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.

(Loss) gain on sale of properties.

(Loss) gain on sale of properties is the net result of our sale of certain of our properties during the three months ended March 31, 2021 and 2020.

For further information regarding (loss) gain on sale of properties, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 3 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.

Losses on equity securities, net.

Losses on equity securities, net, represent the net unrealized losses to adjust our investment in Five Star to its fair value.

Gain on sale of properties.

Gain on sale of properties is the net result of our sale of certain of our properties during the six months ended June 30, 2021 and 2020.

For further information regarding gain on sale of properties, see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 3 to our consolidated financial statements included in Part IV, Item 15 of our Annual Report.

Gains and losses on equity securities, net.

Gains and losses on equity securities, net, represent the net unrealized gains and losses to adjust our investment in Five Star to its fair value.

For further information regarding our investment in Five Star, see Note 5 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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The increase in interest and other income is primarily due to $18,181 of funds we received from the U.S.

government pursuant to the CARES Act during the three months ended March 31, 2021.

government pursuant to the CARES Act during the six months ended June 30, 2021 compared to $7,346 received during the six months ended June 30, 2020.

Interest expense.

Interest expense increased primarily due to our issuance in June 2020 of $1,000,000 aggregate principal amount of our 9.75% senior notes due in 2025 and our issuance in February 2021 of $500,000 aggregate principal amount of our 4.375% senior notes due in 2031.

This increase was partially offset by a decrease in average borrowings under our revolving credit facility, our redemption in April 2020 of all $200,000 of our 6.75% senior notes due 2020, our prepayment in June 2020 of our $250,000 term loan and our prepayment in February 2021 of our $200,000 term loan.

Interest expense increased primarily due to our issuance in June 2020 of $1,000,000 aggregate principal amount of our 9.75% senior notes due 2025 and our issuance in February 2021 of $500,000 aggregate principal amount of our 4.375% senior notes due 2031.

This increase was partially offset by a decrease in average borrowings under our revolving credit facility, our redemption in April 2020 of all $200,000 of our 6.75% senior notes due 2020, our prepayment in June 2020 of our $250,000 term loan, our prepayment in February 2021 of our $200,000 term loan and our redemption in June 2021 of all $300,000 of our 6.75% senior notes due 2021.

Gain on lease termination.

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Loss on early extinguishment of debt.

We recorded a loss on early extinguishment of debt in connection with the amendments to our credit and term loan agreements and our prepayment of our $200,000 term loan during the three months ended March 31, 2021.

We recorded a loss on early extinguishment of debt in connection with our prepayment of a mortgage debt during the three months ended March 31, 2020.

Income tax (expense) benefit .

Income tax (expense) benefit is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.

We recorded a loss on early extinguishment of debt in connection with the amendments to our credit and term loan agreements, our prepayment of our $200,000 term loan and our redemption of all $300,000 of our 6.75% senior notes due 2021 during the six months ended June 30, 2021.

We recorded a loss on early extinguishment of debt in connection with our prepayment of our $250,000 term loan and mortgage notes during the six months ended June 30, 2020.

Income tax expense .

Income tax expense is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.

Non-GAAP Financial Measures (dollars in thousands, except per share amounts)

We present certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or SEC, including funds from operations attributable to common shareholders, or FFO attributable to common shareholders, normalized funds from operations attributable to common shareholders, or Normalized FFO attributable to common shareholders, and NOI for the three months ended March 31, 2021 and 2020.

These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) attributable to common shareholders as indicators of our operating performance or as measures of our liquidity.

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O ther real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do.

Our calculations of FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the three months ended March 31, 2021 and 2020 and reconciliations of net income (loss) attributable to common shareholders, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders appear in the following table.

Our calculations of FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the three and six months ended June 30, 2021 and 2020 and reconciliations of net income (loss) attributable to common shareholders, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders appear in the following table.

This table also provides a comparison of distributions to shareholders, FFO attributable to common shareholders and Normalized FFO attributable to common shareholders and net income (loss) attributable to common shareholders per share for these periods.

Three Months Ended March 31,

Net (loss) income attributable to common shareholders $ (67,505) $ 9,735

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net loss attributable to common shareholders $ (34,222) $ (26,072) $ (101,727) $ (16,337)

Depreciation and amortization 67,888 68,825 134,041 137,255

Loss (gain) on sale of properties 122 (2,782)

(Gain) loss on sale of properties (30,760) 168 (30,638) (2,614)

Impairment of assets — 31,175 (174) 42,409

Losses on equity securities, net 8,339 9,943

Losses (gains) on equity securities, net 3,849 (11,974) 12,188 (2,031)

FFO adjustments attributable to noncontrolling interest (5,275) (5,275) (10,548) (10,550)

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Per common share data (basic and diluted):

Net (loss) income attributable to common shareholders $ (0.28) $ 0.04

Net loss attributable to common shareholders $ (0.14) $ (0.11) $ (0.43) $ (0.07)

FFO attributable to common shareholders $ (0.01) $ 0.25 $ 0.01 $ 0.61

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The calculation of NOI by reportable segment is included above in this Item 2.

The following table includes the reconciliation of net income (loss) to NOI for the three months ended March 31, 2021 and 2020, respectively.

Three Months Ended March 31,

The following table includes the reconciliation of net income (loss) to NOI for the three and six months ended June 30, 2021 and 2020, respectively.

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Reconciliation of Net Income (Loss) to NOI:

Net (loss) income $ (66,183) $ 11,143

Income tax expense (benefit) 238 (443)

(Loss) income from continuing operations before income tax (expense) benefit (65,945) 10,700

Net loss $ (32,645) $ (24,742) $ (98,828) $ (13,599)

Income tax expense 191 1,126 429 683

Loss from continuing operations before income tax expense (32,454) (23,616) (98,399) (12,916)

Loss on early extinguishment of debt 370 181 2,410 427

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Interest and other income (16,038) (7,736) (18,873) (7,874)

Losses on equity securities, net 8,339 9,943

Loss (gain) on sale of properties 122 (2,782)

Losses (gains) on equity securities, net 3,849 (11,974) 12,188 (2,031)

(Gain) loss on sale of properties (30,760) 168 (30,638) (2,614)

Impairment of assets — 31,175 (174) 42,409

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Our future cash flows from operating activities will depend primarily upon:

• our ability to receive rents from our tenants in light of the COVID-19 pandemic and its resulting economic downturn and generally;

• our ability to maintain or increase the occupancy of, and the rental rates at, our properties or reduce the extent of the declines in occupancy and rental rates in response to the COVID-19 pandemic and its resulting economic downturn, particularly at our senior living communities;

• our ability to control operating expenses and capital expenses at our properties, including increased operating expenses in response to the COVID-19 pandemic;

• each manager's ability to operate our managed senior living communities during the COVID-19 pandemic and generally so as to maintain or increase our returns or, during the COVID-19 pandemic and its resulting economic downturn, to reduce the extent of the declines in our returns.

We continue to carefully monitor the developments of the COVID-19 pandemic and its resulting economic downturn and their impact on our tenants, operators and other stakeholders, including at our senior living communities.

In response to the operating challenges and uncertain economic challenges as a result of the COVID-19 pandemic, in February 2021, we issued $500.0 million aggregate principal amount of 4.375% senior notes due 2031.

We used net proceeds from this offering to prepay in full our $200.0 million term loan and will use the remaining net proceeds to redeem all of our outstanding 6.75% senior notes due 2021 in June 2021, when these notes become redeemable with no prepayment premium.

In April 2021, we delivered a notice of redemption to U.S.

Bank National Association, as trustee, with respect to these senior notes for a redemption price equal to the principal amount plus accrued and unpaid interest.

In addition, on March 31, 2021, we borrowed $800.0 million under our revolving credit facility as a precautionary measure to increase our cash position and preserve financial flexibility in light of continued uncertainty resulting from the COVID-19 pandemic.

Although we have taken steps to enhance our ability to maintain sufficient liquidity, as noted elsewhere in this Quarterly Report on Form 10-Q, a protracted negative economic impact resulting from the COVID-19 pandemic may cause increased pressure on our ability to satisfy financial and other covenants.

• our ability to receive rents from our tenants, including in light of the COVID-19 pandemic and its impact on our tenants' businesses;

• our ability to maintain or increase the occupancy of, and the rental rates at, our properties or reduce the extent of the declines in occupancy and rental rates in response to the COVID-19 pandemic and current economic conditions, particularly at our senior living communities;

• our ability to control operating expenses and capital expenses at our properties, including increased operating expenses that we may incur in response to the COVID-19 pandemic;

• each manager's ability to manage our managed senior living communities, including throughout the COVID-19 pandemic, to maintain or increase our returns and to reduce the extent of the declines in our returns.

We continue to carefully monitor the developments of the COVID-19 pandemic and the resulting economic conditions and their impact on our tenants, managers, operators and other stakeholders, including at our senior living communities.

In February 2021, we issued $500.0 million aggregate principal amount of 4.375% senior notes due 2031.

We used net proceeds from this offering to prepay in full our $200.0 million term loan and used the remaining net proceeds and cash on hand to redeem all of our outstanding 6.75% senior notes due 2021 for a redemption price equal to the principal amount of $300.0 million plus accrued and unpaid interest of $10.1 million in June 2021, when these notes became redeemable with no prepayment premium.

Although we have taken steps to enhance our ability to maintain sufficient liquidity, a protracted negative economic impact resulting from the COVID-19 pandemic may cause further increased pressure on our ability to satisfy financial and other covenants.

We may fail to satisfy covenants and conditions under our credit agreement or fail to satisfy our public debt covenants.

We expect the ratio of consolidated income available for debt service to debt service could fall below the 1.5x requirement under our revolving credit facility and our public debt covenants in 2021 as the continued effects of the COVID-19 pandemic adversely impact our operations.

We will not be allowed to incur additional debt while this ratio is below 1.5x.

As of June 30, 2021, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our revolving credit facility and our public debt covenants as the effects of the COVID-19 pandemic continued to adversely impact our operations.

We are not allowed to incur additional debt while this ratio is below 1.5x.

For additional responses and measures taken relating to the COVID-19 pandemic, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our Annual Report and Note 4 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2021, we sold one property for a sales price of $9.0 million, excluding closing costs.

In April 2021, we sold four properties for a sales price of $95.5 million, excluding closing costs.

The impacts of the COVID-19 pandemic and the resulting economic conditions are likely to cause any future property sales to be delayed or occur over a protracted period of time or not at all.

The measures noted above may not sufficiently offset the decrease in cash flows from operations and capital investments we make during the COVID-19 pandemic, which may negatively impact our liquidity.

During the six months ended June 30, 2021, we sold five properties for an aggregate sales price of $104.5 million, excluding closing costs.

The measures we have taken to enhance our ability to maintain sufficient liquidity may not sufficiently offset the decrease in cash flows from operations and capital investments we make, particularly during the COVID-19 pandemic, in which case our liquidity would be negatively impacted.

The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our condensed consolidated statements of cash flows (dollars in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents and restricted cash at beginning of period $ 90,849 $ 52,224

6 unchanged sentences

We generally receive minimum rents from our tenants monthly or quarterly, we receive residents fees and services revenues, net of expenses, from our managed senior living communities monthly and we receive percentage rents from certain of our senior living community tenants monthly, quarterly or annually.

The decrease in cash provided by operating activities for the three months ended March 31, 2021 compared to the prior period was primarily due to the impact of the COVID-19 pandemic on the senior living communities in our SHOP segment, along with reduced NOI as a result of dispositions of properties during 2020 and 2021.

As noted elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, the COVID-19 pandemic has had a substantial adverse impact on our industry.

Depending on the duration and severity of this pandemic and the resulting economic downturn, our tenants' and operators' businesses may become significantly adversely impacted, which may result in their failing to pay rent to us or to renew their leases upon expiration, which would result in our realizing decreased returns from our senior living communities.

As of May 3, 2021, we granted requests for certain of our tenants to defer rent payments totaling $1.9 million.

As of March 31, 2021, we recognized an increase in our accounts receivable balance related to these deferred rent payments of $0.9 million.

The decrease in cash provided by operating activities for the six months ended June 30, 2021 compared to the prior period was primarily due to the impact of the COVID-19 pandemic on the senior living communities in our SHOP segment, along with reduced NOI as a result of dispositions of properties during 2020 and 2021.

As previously disclosed, we expect that the transition of the management of the 108 senior living communities from Five Star to other third party managers will be completed before year end 2021.

We also expect to incur costs related to retention and other transition costs for these communities, which costs may be significant.

As noted elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, the COVID-19 pandemic has had a substantial adverse impact on our industries.

Depending on the duration and severity of this pandemic and the resulting economic conditions, our tenants', managers' and operators' businesses may become significantly adversely affected, which may result in our tenants failing to pay rent to us or not renewing their leases upon expiration and in our senior living community managers realizing decreased returns from our senior living communities.

As of August 2, 2021, we granted requests for certain of our tenants to defer rent payments totaling $1.8 million.

As of June 30, 2021, we recognized an increase in our accounts receivable balance related to these deferred rent payments of $0.4 million.

These tenants are obligated to pay, in most cases, the deferred rents in 12 equal monthly installments, which payments have commenced.

For the three months ended March 31, 2021, we collected approximately 99% of our contractual rents due from tenants in our Office Portfolio segment.

While these deferred amounts have not negatively impacted

our results of operations, the deferred rents have temporarily reduced our operating cash flows.

For the three months ended June 30, 2021, we collected approximately 99% of our contractual rents due from tenants in our Office Portfolio segment.

While these deferred amounts have not negatively impacted our results of operations, the deferred rents have temporarily reduced our operating cash

We are handling requests from our tenants for relief on an individual basis.

As it relates to our SHOP segment, we have also deferred approximately $22.2 million of payroll taxes as allowed under the CARES Act.

These deferred payroll taxes were included in other liabilities in our condensed consolidated balance sheet as of March 31, 2021 and we expect to pay these deferred taxes in the second half of 2021.

We also believe that, other than in our SHOP segment, overall tenant retention levels may increase as a result of the COVID-19 pandemic.

These deferred payroll taxes were included in other liabilities in our condensed consolidated balance sheet as of June 30, 2021 and we expect to pay these deferred taxes in the second half of 2021.

Our Investing Liquidity and Resources

The increase in cash used in investing activities for the three months ended March 31, 2021 compared to the prior year period was primarily due to less proceeds from the sale of real estate properties in the 2021 period compared to the 2020 period and an increase in real estate improvements in the 2021 period compared to the 2020 period.

The change in cash provided by (used in) investing activities for the six months ended June 30, 2021 compared to the prior period was primarily due to higher proceeds from the sale of real estate properties in the 2021 period compared to the 2020 period, partially offset by an increase in real estate improvements in the 2021 period compared to the 2020 period.

The following is a summary of capital expenditures, development, redevelopment and other activities for the periods presented (dollars in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Office Portfolio segment capital expenditures:

2 unchanged sentences

Building improvements (2)

4,437 3,708 6,613 6,373

SHOP segment fixed assets and capital improvements 19,283 8,505 41,813 21,423

3 unchanged sentences

Development, redevelopment and other activities - SHOP segment (3)

5,345 6,570 11,437 14,999

Total development, redevelopment and other activities $ 15,034 $ 21,511 $ 33,844 $ 38,154

2 unchanged sentences

(3) Development, redevelopment and other activities generally include capital expenditures that reposition a property or result in new sources of revenue.

During the three months ended March 31, 2021, we invested $0.2 million in revenue producing capital improvements at certain of our triple net leased senior living communities leased to private operators, and, as a result, annual rent payable to us increased by approximately $0.01 million pursuant to the terms of the applicable leases.

During the three and six months ended June 30, 2021, we invested $0.6 million and $0.8 million, respectively, in revenue producing capital improvements at certain of our triple net leased senior living communities leased to private operators, and, as a result, annual rent payable to us increased by approximately $0.04 million and $0.05 million, respectively, pursuant to the terms of the applicable leases.

We used cash on hand to fund these purchases.

These capital improvement amounts are not included in the table above.

During the three months ended March 31, 2021, commitments made for expenditures in connection with leasing space in our medical office and life science properties, such as tenant improvements and leasing costs, were as follows (dollars and square feet in thousands, except per square foot amounts):

New Leases Renewals Total

Square feet leased during the quarter 152 60 212

Total leasing costs and concession commitments (1)

$ 32,250 $ 558 $ 32,808

Total leasing costs and concession commitments per square foot (1)

$ 211.93 $ 9.24 $ 154.32

Weighted average lease term (years) (2)

11.0 8.7 10.6

Total leasing costs and concession commitments per square foot per year (1)

$ 19.31 $ 1.06 $ 14.57

(1) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.

(2) Weighted based on annualized rental income pursuant to existing leases as of March 31, 2021, including straight line rent adjustments and estimated recurring expense reimbursements, and excluding lease value amortization.

We plan to continue investing capital in our senior living communities to better position these communities in their respective markets in order to increase our returns in future years.

Our ability to make capital investments is currently limited pursuant to our credit agreement through the Amendment Period.

As of March 31, 2021, we have estimated unspent leasing related obligations at our triple net leased senior living communities and our medical office and life science properties of approximately $38.6 million, of which we expect to spend approximately $36.4 million during the next 12 months.

Our ability to make capital investments is currently limited to $350.0 million per year pursuant to our credit agreement through the Amendment Period.

As of June 30, 2021, we have estimated unspent leasing related obligations at our triple net leased senior living communities and our medical office and life science properties of approximately $49.6 million, of which we expect to spend approximately $43.4 million during the next 12 months.

We expect to fund these obligations using operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities, cash on hand and proceeds from the disposition of certain properties.

Our redevelopment in San Diego, CA has been substantially completed and we expect to incur additional leasing costs in 2021 to lease the remaining available space.

During the six months ended June 30, 2021, we entered into five leases with a weighted (by annualized rental income) average lease term of approximately 11 years at a weighted average rental rate that is approximately 22% higher than the prior rental rate for the same space at this San Diego, CA property.

As of August 2, 2021,

we have executed new leases for an aggregate 85% of the leasable square footage at this property.

We are currently in the process of redeveloping two properties in our Office Portfolio located in Tempe, AZ and Lexington, MA.

These redevelopment projects may require significant capital expenditures and time to complete.

Physical improvements at our redevelopment in San Diego, CA have been substantially completed and we expect to incur additional leasing costs in 2021 to lease the available space.

During the three months ended March 31, 2021, we entered into two leases with a weighted (by annualized rental income) average lease term of approximately 12 years at a weighted average rental rate that is approximately 20% higher than the prior rental rate for the same space at this San Diego, CA property.

As of May 3, 2021, we have executed new leases and received a letter of intent for an aggregate 83% of the square footage at this property.

We have continued to progress on our redevelopments during 2021 and continue to assess opportunities to redevelop other properties in our portfolio.

In April 2021, we entered into an agreement to acquire a property which is adjacent to one of our existing properties located in Silver Springs, Maryland for a purchase price of $19.6 million, excluding acquisition related costs.

This acquisition is expected to close during the third quarter of 2021.

However, this acquisition is subject to conditions;

accordingly, we cannot be sure that we will complete this acquisition, that this acquisition will not be delayed or that the terms will not change.

In June 2021, we terminated a previously announced agreement to acquire a property which is adjacent to one of our existing properties located in Silver Springs, Maryland.

As noted above, our ability to make capital investments is currently limited pursuant to our credit agreement through the Amendment Period.

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Our Financing Liquidity and Resources

The increase in cash provided by financing activities for the three months ended March 31, 2021 compared to the prior period was primarily due to increased net borrowings under our revolving credit facility, net proceeds from our issuance in February 2021 of $500.0 million aggregate principal amount of our 4.75% senior notes, and a reduction in distributions paid to our shareholders in the 2021 period, partially offset by our prepayment in February 2021 of our $200.0 million term loan.

As of March 31, 2021, we had $843.2 million of cash and cash equivalents and were fully drawn under our revolving credit facility.

We typically use cash balances, borrowings under our revolving credit facility, net proceeds from offerings of debt or equity securities, net proceeds from the disposition of assets and the cash flows from our operations to fund our operations, debt repayments, distributions, property acquisitions, capital expenditures and other general business purposes.

In order to fund acquisitions and to meet cash needs that may result from timing differences between our receipt of rents and our desire or need to make distributions or pay operating or capital expenses, we maintain a revolving credit facility.

The change in cash provided by (used in) financing activities for the six months ended June 30, 2021 compared to the prior period was primarily due to increased net borrowings under our revolving credit facility, net proceeds from our issuance in February 2021 of $500.0 million aggregate principal amount of our 4.75% senior notes, decreased term loan repayment amounts in the 2021 period compared to the 2020 period, and a reduction in distributions paid to our shareholders in the 2021 period, partially offset by increased senior unsecured notes repayment amounts in the 2021 period compared to the 2020 period and net proceeds from our issuance in June 2020 of $1.0 billion aggregate principal amount of our 9.75% senior notes.

As of June 30, 2021, we had $849.1 million of cash and cash equivalents and were fully drawn under our revolving credit facility.

We typically use cash balances, borrowings under our revolving credit facility, net proceeds from offerings of debt or equity securities, net proceeds from the disposition of assets and the cash flows from our operations to fund our operations, debt repayments, distributions, property acquisitions, investments, capital expenditures and other general business purposes.

In order to fund investments and to meet cash needs that may result from timing differences between our receipt of rents and our desire or need to make distributions or pay operating or capital expenses, we maintain a revolving credit facility.

The maturity date of our revolving credit facility is January 15, 2022, and, subject to the payment of an extension fee and meeting other conditions, we have two, one year options to extend the maturity date of the facility to January 2024.

Our revolving credit facility generally provides that we can borrow, repay and re-borrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.

At March 31, 2021, our revolving credit facility required interest to be paid on borrowings at the annual rate of 2.9%, plus a facility fee of 30 basis points per annum on the total amount of lending commitments under the facility.

At June 30, 2021, our revolving credit facility required interest to be paid on borrowings at the annual rate of 2.9%, plus a facility fee of 30 basis points per annum on the total amount of lending commitments under the facility.

The interest rate premium and facility fee are each subject to adjustment based upon changes to our credit ratings.

On March 31, 2021, we borrowed $800.0 million under our revolving credit facility as a precautionary measure to increase our cash position and preserve financial flexibility in light of continued uncertainty resulting from the COVID-19 pandemic.

As of March 31, 2021 and May 3, 2021, we were fully drawn under our revolving credit facility.

In January 2021, we amended our credit and term loan agreements in order to provide us with certain flexibility in light of the uncertainties related to the COVID-19 pandemic.

As of June 30, 2021 and August 2, 2021, we were fully drawn under our revolving credit facility.

In January 2021, we amended our credit and term loan agreements in order to provide us with certain flexibility in light of continued uncertainties related to the COVID-19 pandemic.

Pursuant to the amendments:

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• the revolving credit facility commitments have been reduced from $1.0 billion to $800.0 million;

• we pledged certain equity interests of subsidiaries owning properties to secure our obligations under our credit and term loan agreements and agreed to provide first mortgage liens on 62 medical office and life science properties with an aggregate gross book value of real estate assets of $1.0 billion as of March 31, 2021 to secure our obligations, which pledges and/or mortgage liens may be removed or new ones may be added during the Amendment Period based on outstanding debt amounts, among other things;

• we pledged certain equity interests of subsidiaries owning properties to secure our obligations under our credit and term loan agreements and agreed to provide first mortgage liens on 62 medical office and life science properties with an aggregate gross book value of real estate assets of $1.0 billion as of June 30, 2021 to secure our obligations, which pledges and/or mortgage liens may be removed or new ones may be added during the Amendment Period based on outstanding debt amounts, among other things;

• we have the ability to fund $350.0 million of capital expenditures per year and we are restricted in our ability to acquire real property as defined in our credit agreement;

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• certain covenants and restrictions on distributions to common shareholders, share repurchases, capital expenditures, acquiring additional properties and incurring additional indebtedness (in each case subject to various exceptions), and the minimum liquidity requirement of $200.0 million will remain in place during the Amendment Period;

• we are generally required to apply the net cash proceeds from the disposition of assets, capital markets transactions, and debt financings to the repayment of our $300.0 million senior notes due in 2021, or maintain sufficient cash for such payment of these senior notes until they can be paid at par, our $200.0 million term loan and any amounts outstanding under our revolving credit facility.

In February 2021, we prepaid in full our $200.0 million term loan using proceeds from our February 2021 issuance of $500.0 million aggregate principal amount of 4.375% senior notes due 2031.

We will use the remaining net proceeds from this offering and cash on hand to redeem all of our outstanding 6.75% senior notes due 2021 in June 2021, when these notes become redeemable with no prepayment premium.

In April 2021, we delivered a notice of redemption to U.S.

Bank National Association, as trustee, with respect to these senior notes for a redemption price equal to the principal amount plus accrued and unpaid interest.

• we are generally required to apply the net cash proceeds from the disposition of assets, capital markets transactions, and debt financings to the repayment of any amounts outstanding under our revolving credit facility.

Generally, when significant amounts are outstanding under our revolving credit facility, or as the maturities of our indebtedness approach, we intend to explore refinancing alternatives.

Such alternatives may include incurring additional debt, selling certain properties and issuing new equity securities.

In addition, we may also seek to participate in joint ventures or other arrangements that may provide us additional sources of financing.

In addition, we may also seek to expand our existing joint venture arrangements or to participate in additional joint ventures or other arrangements that may provide us additional sources of financing.

We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.

We may also assume debt in connection with our acquisitions of properties or place new debt on properties we own.

During the three months ended March 31, 2021, we paid a quarterly cash distribution to our shareholders totaling approximately $2.4 million using existing cash balances.

On April 15, 2021, we declared a quarterly distribution payable to common shareholders of record on April 26, 2021 in the amount of $0.01 per share, or approximately $2.4 million.

We expect to pay this distribution on or about May 20, 2021 using cash on hand.

During the six months ended June 30, 2021, we paid quarterly cash distributions to our shareholders totaling approximately $4.8 million using existing cash balances.

On July 15, 2021, we declared a quarterly distribution payable to common shareholders of record on July 26, 2021 in the amount of $0.01 per share, or approximately $2.4 million.

We expect to pay this distribution on or about August 19, 2021 using cash on hand.

For further information regarding the distribution we paid during 2021, see Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We believe we will have access to various types of financings, including debt or equity offerings, to fund our future acquisitions and to pay our debts and other obligations as they become due.

We believe we will have access to various types of financings, including debt or equity offerings, to fund our future acquisitions and to pay our debts and other obligations as they become due, subject to limitations on debt offerings in agreements governing our debt.

Our ability to complete, and the costs associated with, future debt transactions depends primarily upon credit market conditions and our then creditworthiness.

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We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out that intention.

As noted elsewhere in this Quarterly Report on Form 10-Q, it is uncertain what the duration and severity of the current economic downturn resulting from the COVID-19 pandemic will be.

A protracted economic downturn may have various negative

consequences including a decline in financing availability and increased costs for financing.

Further, such conditions could also disrupt capital markets and limit our access to financing from public sources, particularly if the global financial markets experience significant disruptions.

It is uncertain what the duration and severity of the COVID-19 pandemic and its economic impact will be.

A protracted economic downturn may have various negative consequences including a decline in financing availability and increased costs for financing.

Further, those conditions could also disrupt capital markets and limit our access to financing from public sources, particularly if the global financial markets experience significant disruptions.

In February 2021, we issued $500.0 million aggregate principal amount of our 4.375% senior notes due 2031 in an underwritten public offering.

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We used the net proceeds from this offering to prepay in full our $200.0 million term loan which was scheduled to mature in September 2022.

We will use the remaining net proceeds and cash on hand to redeem all $300.0 million of our outstanding 6.75% senior notes due 2021 in June 2021, when these notes become redeemable with no prepayment premium.

In April 2021, we delivered a notice of redemption to U.S.

Bank National Association, as trustee, with respect to these senior notes for a redemption price equal to the principal amount plus accrued and unpaid interest.

In June 2021, we used the remaining net proceeds from this offering and cash on hand to redeem all of our outstanding 6.75% senior notes due 2021 for a redemption price equal to the principal amount of $300.0 million plus accrued and unpaid interest of $10.1 million, when these notes became redeemable with no prepayment premium.

Our next significant debt maturity does not occur until $250.0 million of our senior notes mature in May 2024.

In February 2021, Moody's Investors Service downgraded our senior unsecured debt rating from Ba2 to B1 and our 9.75% senior notes due 2025 rating from Ba1 to Ba3 and assigned a Ba3 rating to our 4.375% senior notes due 2031, and Standard & Poor's Ratings Services downgraded our senior unsecured debt rating from BB to BB- and our 9.75% senior notes due 2025 rating from BB+ to BB and assigned a BB rating to our 4.375% senior notes due 2031.

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Our plans for particular properties and other strategic considerations may cause us to change our acquisition and disposition strategies, and we may do so at any time and without shareholder approval.

Further, such plans may continue to be impacted by the scope and duration of the COVID-19 pandemic.

Further, those plans may be further impacted by the COVID-19 pandemic.

Debt Covenants

Our principal debt obligations at March 31, 2021 were:

Our principal debt obligations at June 30, 2021 were:

(1) outstanding borrowings under our $800.0 million revolving credit facility;

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Our senior unsecured notes indentures and their supplements and our credit agreement also contain covenants that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts and require us to maintain various financial ratios, and our credit agreement contains covenants that restrict our ability to make distributions to our shareholders in certain circumstances.

As of March 31, 2021, we believe we were in compliance with all of the covenants under our senior unsecured notes indentures and their supplements, our credit agreement and our other debt obligations.

We are not allowed to incur additional debt while this ratio is below 1.5x, and as such, prior to falling below the 1.5x incurrence requirement, we borrowed $800.0 million under our revolving credit facility as a precautionary measure to increase our cash position and preserve financial flexibility in light of continued uncertainties related to the COVID-19 pandemic.

The proceeds from this borrowing may be used for general business purposes.

As of June 30, 2021, we believe we were in compliance with all of the other covenants under our senior unsecured notes indentures and their supplements, our credit agreement and our other debt obligations.

Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions.

If our operating results and financial condition are significantly negatively impacted by the current economic conditions or otherwise, we may fail to satisfy covenants and conditions under our credit agreement or fail to satisfy our public debt covenants.

We expect our ratio of consolidated income available for debt service to debt service could fall below the 1.5x requirement under our revolving credit facility and our public debt covenants in 2021 as the continued effects of the COVID-19 pandemic adversely impact our operations.

We will not be allowed to incur additional debt while this ratio is below 1.5x, and as a result, we borrowed $800.0 million under our revolving credit facility as a precautionary measure to increase our cash position and preserve financial flexibility in light of continued uncertainty resulting from the COVID-19 pandemic.

The proceeds from this borrowing may be used for general business purposes.

If our operating results and financial condition are significantly negatively impacted by the economic conditions or otherwise, we may fail to satisfy covenants and conditions under our credit agreement or fail to satisfy our public debt covenants.

Further, if we believe we would not be able to satisfy our financial or other covenants, we would seek waivers, amendments, or in the case of our public debt covenants, draw upon any undrawn amounts if again available from our revolving credit facility prior to any covenant violation, consistent with our previous approach in March 2021, which may lead to increased costs and interest rates, additional restrictive covenants or other lender protections.

We can provide no assurance that

we would be able to obtain these waivers or amendments or repay the related debt facilities when due, which would lead to an event of default or potential acceleration of amounts due on our outstanding debt.

We can provide no assurance that we would be able to obtain these waivers or amendments or repay the related debt facilities when due, which would lead to an event of default or potential acceleration of amounts due on our outstanding debt.

Neither our senior unsecured notes indentures and their supplements, nor our credit agreement, contain provisions for acceleration which could be triggered by our debt ratings.

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33-10762, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities, or Release 33-10762.

Release 33-10762 amended the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rules 3-10 and 3-16, permitting registrants to provide certain alternative financial disclosures and non-financial disclosures in lieu of separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities if certain conditions are met.

separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities if certain conditions are met.

On May 28, 2020, we issued $1.0 billion of our 9.75% senior notes due 2025.

On February 3, 2021, we issued $500.0 million of our 4.375% senior notes due 2031.

As of March 31, 2021, all $1.0 billion of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including pledged subsidiaries under our credit agreement.

As of June 30, 2021, all $1.0 billion of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint and several basis and on a senior unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries, including pledged subsidiaries under our credit agreement.

The notes and the guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes.

Our remaining $1.65 billion of senior unsecured notes do not have the benefit of any guarantees as of March 31, 2021.

Our remaining $1.35 billion of senior unsecured notes do not have the benefit of any guarantees as of June 30, 2021.

A subsidiary guarantor's guarantee of our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, as applicable, and all other obligations of such subsidiary guarantor under the indenture governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and the indenture under certain circumstances, including on or after the date (a) the notes have an investment grade rating from two rating agencies and one of such investment grade ratings is a mid-BBB investment grade rating and (b) no default or event of default has occurred and is continuing under the indenture.

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The following tables present summarized financial information for guarantor entities and issuer, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor (dollars in thousands):

March 31, 2021 December 31, 2020

As of June 30, 2021 As of December 31, 2020

Real estate properties, net $ 4,092,063 $ 4,097,573

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Total liabilities $ 3,896,698 $ 3,068,005

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

Six Months Ended June 30, 2021

Revenues $ 575,540

Expenses 625,053

(Loss) income from continuing operations (80,085) 5,318

Net (loss) income (80,324) 5,761

Net (loss) income attributable to DHC (80,324) 5,761

Loss from continuing operations (160,716)

Net loss (161,145)

Net loss attributable to DHC (161,145)

Related Person Transactions

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Impact of Government Reimbursement

For the three months ended March 31, 2021, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments.

Nonetheless, we own, and our tenants and manager operate, facilities in many states that participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid programs and other federal and state healthcare payment programs.

For the six months ended June 30, 2021, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments.

Nonetheless, we own, and our tenants, managers and operators operate, facilities in many states that participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid programs and other federal and state healthcare payment programs.

Also, some of our medical office and life science property tenants participate in federal Medicare and state Medicaid programs and other government healthcare payment programs.

Under the CARES Act, HHS established a Provider Relief Fund as noted elsewhere in this Quarterly Report on Form 10-Q.

We have recognized $2,433 as other income with respect to our SHOP segment for the three months ended March 31, 2021.

We have recognized $18,181 as other income with respect to our SHOP segment for the six months ended June 30, 2021.

For more information regarding the government healthcare funding and regulation of our business, please see the section captioned “Business—Government Regulation and Reimbursement” in our Annual Report and the section captioned “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Government Reimbursement” in our Annual Report.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis