What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-01 compared with 2022-02-24 · 171 added, 219 removed, 835 unchanged (32% of the section changed)

1 unchanged sentence

We own medical office and life science properties, senior living communities and other healthcare related properties throughout the United States.

As of December 31, 2021, we wholly owned 390 properties located in 36 states and Washington, D.C.

As of December 31, 2022, we wholly owned 379 properties, including eight closed senior living communities, located in 36 states and Washington, D.C.

On that date, 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 $7.1 billion.

As of December 31, 2021, we owned a 20% equity interest in an unconsolidated joint venture that owns a life science property located in Boston, Massachusetts with approximately 1.1 million rentable square feet that was 100% leased with an average (by annualized rental revenues) remaining lease term of 7.0 years.

Additionally, in January 2022, we entered into a joint venture for 10 medical office and life science properties we owned with two unrelated third party global institutional investors, and we retained a 20% equity interest in the joint venture.

As of December 31, 2022, we owned an equity interest in each of two unconsolidated joint ventures that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet that were 99% leased with an average (by annualized rental income) remaining lease term of 6.0 years.

Our principal executive offices are located at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634, and our telephone number is (617) 796-8350.

12 unchanged sentences

population will increase demand for existing medical office and life science properties, senior living communities (including active adult rental properties) and other medical and healthcare related properties.

Although we are currently limited in making acquisitions or other capital investments pursuant to the terms of the agreement governing our revolving credit facility, or our credit agreement, described below, we plan to seek to profit from this demand in the future by, over time, acquiring additional properties and entering into leases and management arrangements with qualified tenants and managers which generate returns to us that exceed our operating and capital costs, including structuring leases that provide for or permit periodic rent increases.

Despite this trend, future economic downturns, softness in the U.S.

Although we are currently limited in making acquisitions or other capital investments pursuant to the terms of the agreement governing our credit facility, or our credit agreement, described below, we plan to seek to profit from this demand in the future by, over time, acquiring additional properties and entering into leases and management arrangements with qualified tenants and managers which generate returns to us that exceed our operating and capital costs, including structuring leases that provide for or permit periodic rent increases.

Despite this trend, future economic downturns or recessions, high inflation, rising or sustained high interest rates, softness in the U.S.

housing market, higher levels of unemployment among our potential residents' family members, lower levels of consumer confidence, stock market volatility and/or changes in demographics could adversely affect the ability of seniors to afford the resident fees at our senior living communities.

Further, as discussed elsewhere in this Annual Report on Form 10-K, the COVID-19 pandemic and its resulting economic impact have materially adversely affected the senior living industry, including us and our senior living community managers.

Further, as discussed elsewhere in this Annual Report on Form 10-K, the senior living industry experienced significant disruptions during the COVID-19 pandemic.

Although our and certain of our managers' and other operators' and tenants' businesses have improved from low points experienced during the COVID-19 pandemic, they have not returned to pre-pandemic levels and there is a risk that they may not return to pre-pandemic levels due to changed market practices, delayed returns to prior market practices, current market and economic conditions, such as rising or sustained high interest rates and high inflation, labor market challenges, supply chain challenges, geopolitical instability (such as the war in Ukraine) and economic downturns or recessions, or otherwise.

For example, occupancy in our senior housing operating portfolio, or SHOP, segment has generally increased, but not to pre-pandemic levels, and we may continue to face challenges in our SHOP segment with labor availability and wage inflation, along with cost pressures from supply chain disruptions and commodity price inflation.

We seek to selectively sell properties from time to time when we determine our continued ownership or ongoing required capital expenditures will not achieve desired returns or when we believe we can successfully pursue more desirable opportunities than retaining these properties.

We also expect to use future sales proceeds, at such time as we are able to do so under our credit agreement or otherwise, to acquire new properties that we believe will help us reduce the average age of our properties, increase our weighted average lease term, reduce our ongoing capital requirements and/or increase our distributions to shareholders.

We also may use future sales proceeds, at such time as we are able to do so under our credit agreement or otherwise, to acquire new properties that we believe will help us reduce the average age of our properties, increase our weighted average lease term, reduce our ongoing capital requirements and/or increase our distributions to shareholders.

We refer to this as our capital recycling program.

Additionally, we seek to selectively develop our properties when we believe the returns will be satisfactory.

Office Portfolio

1 unchanged sentence

Some of our medical office properties are occupied as administrative facilities for healthcare companies, such as hospitals and healthcare insurance companies.

As our lease expirations approach, we will seek to renew our leases with existing tenants or to enter into new leases with new tenants, in both circumstances at rental rates equal to or higher than current rental rates for the same space.

Our ability to renew leases with our existing tenants or to enter into new leases with new tenants and the rents we are able to charge will depend in large part upon market conditions, which are beyond our control.

Senior Living Communities

10 unchanged sentences

Professional nursing and healthcare services are usually available at the property on call or at regularly scheduled times.

These communities may also include Alzheimer's or memory care services.

In some of our assisted living communities, separate parts of the property are dedicated to independent living and/or nursing services.

3 unchanged sentences

Licensed nursing professionals staff SNFs 24 hours per day.

During 2021, we closed approximately 1,500 skilled nursing units, and we have approximately 1,900 skilled nursing units remaining in our portfolio.

Wellness Centers

6 unchanged sentences

We may explore these or other alternative investments in the future.

Our medical office and life science property leases include both “triple net” leases, as described below, and “net” and “modified gross” leases, where we are responsible for operating and maintaining the properties and we charge the tenants for some or all of the property operating expenses.

Our medical office and life science property leases include both “triple net” leases, where the tenant is generally responsible for the payment of property operating expenses and capital expenditures during the lease term, and “net” and “modified gross” leases, where we are responsible for operating and maintaining the properties and we charge the tenants for some or all of the property operating expenses.

A small percentage of our medical office and life science property leases are “full service” leases where we receive fixed rent from the tenants and do not charge the tenants for any property operating expenses.

The leases for some of our senior living communities and all of our wellness centers are “triple net” leases.

Triple net leases generally require the tenants to pay rent and all property operating expenses, to indemnify us from liability which may arise by reason of our ownership of the properties, to maintain the properties at their expense, to remove and dispose of hazardous substances on the properties in compliance with applicable law and to maintain insurance on the properties for their and our benefit.

In the event of any damage, or immaterial condemnation, of a leased property, the tenants are generally required to rebuild with insurance or condemnation proceeds or, if such proceeds are insufficient, other amounts made available by us, if any, but if other amounts are made available by us, the rent will be increased accordingly.

In the event of any material or total condemnation of a leased property, generally the lease will terminate with respect to that leased property, in which event we will be entitled to the condemnation proceeds and the rent will be reduced accordingly.

In the event of any material or total destruction of a leased property, in certain cases the applicable tenant may terminate the lease with respect to that leased property, in which event the tenant will be required to pay us any shortfall in the amount of proceeds we receive from insurance compared to the replacement cost of that leased property.

Senior Housing Operating Portfolio Management Agreements

5 unchanged sentences

The managers may also receive an annual incentive fee equal to a percentage of the amount by which the annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of the applicable communities exceeds the target EBITDA for the applicable communities.

Effective January 1, 2020, we completed a restructuring of our business arrangements, or the 2020 Restructuring Transaction, with Five Star Senior Living, or Five Star, which is an operating division of AlerisLife Inc.

(f/k/a Five Star Senior Living Inc.), or AlerisLife, pursuant to which, among other things, our previously existing master leases with Five Star for 166 of our senior living communities and our previously existing management and pooling agreements for 78 of our senior living communities were terminated and replaced with new management agreements and a related omnibus agreement, which agreements were subsequently replaced in June 2021, as described below.

2021 Amendments to our Management Arrangements with Five Star .

In June 2021, we amended our then existing management arrangements with Five Star.

The principal changes to the management arrangements included:

• that Five Star agreed to cooperate 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 had the right to sell up to an additional $682.0 million of senior living communities then managed by Five Star and terminate Five Star's management of those communities without our payment of a fee to Five Star;

• that Five Star is continuing to manage 120 of our senior living communities, 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, were closed and are being evaluated 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 The RMR Group LLC, or 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 an amended and restated master management agreement, or the Master Management Agreement, for the senior living communities that Five Star is continuing to manage.

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.

As of December 31, 2021, we had transitioned 107 of the 108 senior living communities from Five Star to new third party managers.

The remaining senior living community was closed and we are assessing opportunities to redevelop that community.

We lease nearly all of our senior living communities, including those managed by Five Star and by the new third party managers, to our TRSs.

Our managed senior living communities are operated by third parties pursuant to management agreements.

As of December 31, 2022, Five Star Senior Living, or Five Star, which is an operating division of AlerisLife Inc., or AlerisLife, managed 119 of our senior living communities.

Also as of December 31, 2022, 118 of our senior living communities were managed by other third party managers, 107 of which were transitioned from Five Star in 2021.

We lease nearly all of our senior living communities, including those managed by Five Star and by the other third party managers, to our TRSs.

Although we have various rights as owner under our senior living management agreements, we rely on the managers' personnel, good faith, expertise, performance, technical resources, operating efficiencies, information systems, proprietary information and judgment to manage our managed senior living communities efficiently and effectively.

3 unchanged sentences

Further, any funding we maintain for these purposes will not be available for other business purposes, which may limit our ability to pursue other business opportunities and could limit the amount of distributions we can pay to our shareholders.

As a result of the 2020 Restructuring Transaction, effective January 1, 2020, the operating results of our senior living communities that were previously leased from us and operated by Five Star and are now managed by new third party managers for our account are included in our operating results.

The operating results of our other pre-existing and subsequently acquired or transitioned senior living communities managed by Five Star for our account are similarly included in our operating results.

The change in our historical arrangements with Five Star from mostly leased to now managed has resulted, and likely will continue to result in future periods, in our realizing significantly increased variability in our operating results from our senior living communities from what we experienced in the past.

For more information about the 2020 Restructuring Transaction and the terms of the Master Management Agreement and of the management agreements with the new third party managers, see Note 6 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

COVID-19 Pandemic

The COVID-19 pandemic and the various governmental and market responses intended to contain and mitigate the spread of the virus and its detrimental public health impact have had a significant impact on the global economy, including the U.S.

Many of the restrictions that had been imposed in the United States during the pandemic have since been lifted and commercial activity in the United States generally has increasingly returned to pre-pandemic practices and operations, although recent variants of the virus have caused increased infections and resulted in governments and businesses implementing or adopting certain requirements, including proof of vaccinations and mask wearing.

We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business.

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.

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, 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.

Our senior living community operators also experienced disruptions, including limitations on in-person tours and new admissions, and experienced challenges in attracting new residents to their communities in addition to experiencing increased expenses due to increased labor costs, including higher health benefits costs, and increased costs and consumption of supplies, including personal protective equipment.

There will be lasting impacts of the COVID-19 pandemic, even as states and municipalities have eased and may further ease restrictions.

Our tenants and their businesses may become increasingly negatively impacted, which may result in our tenants seeking assistance from us regarding their rent obligations owed to us, their being unable or unwilling to pay us rent, their ceasing to pay us rent and their ceasing to continue as going concerns.

We are closely monitoring the impacts of the COVID-19 pandemic on all aspects of our business, including, but not limited to, labor availability and costs and other cost pressures from supply chain disruptions and commodity price inflation in our senior housing operating portfolio, or SHOP segment.

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 as a result of the COVID-19 pandemic, which will likely lead to decreased returns to us.

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.

In December 2020, the United States Food and Drug Administration, or FDA, issued emergency use authorizations, or EUAs, for vaccines for the prevention of COVID-19, to Pfizer Inc.

/ BioNTech SE and Moderna, Inc.

This was followed by the FDA issuing an EUA for the Johnson & Johnson vaccine in February 2021.

Throughout 2021, COVID-19 variants became of increasing concern.

The variants have caused COVID-19 surges in different parts of the country at different times, which has caused the Federal and state governments to re-impose certain restrictions in certain geographies at different times.

In response to the variants, and scientific findings that the protection from COVID-19 vaccines waned over time, the Federal government began emphasizing the importance of COVID-19 vaccine booster shots.

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

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

On September 13, 2021, Five Star reported full compliance with its previously announced requirement that all of its team members at our communities managed by Five Star be fully vaccinated.

We may be subject to claims by residents and staff related to vaccines our managers administer or the care our managers provide following administration of the vaccine.

However, any such potential liability will be limited by the Public Readiness and Emergency Preparedness Act, or PREP Act, which provides immunity protections under federal and state law for individuals and entities, or Covered Persons, against claims of loss relating to certain COVID-19 countermeasures, or Covered Countermeasures.

We and our managers' personnel that administer Covered Countermeasures such as the COVID-19 vaccine are classified as Covered Persons immune to claims arising from COVID-19 vaccine administration with the exception of death or serious physical injury caused by willful misconduct.

We also believe that we and our managers, operators and impacted tenants have and may continue to benefit from provisions of the Coronavirus Aid, Relief, and Economic Security Act, or 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 year ended December 31, 2021, we recognized $19.6 million in interest and other income in our consolidated statement of comprehensive income (loss) related to funds received under the CARES Act.

We believe that our current financial position and recent financing activities will enable us to withstand the COVID-19 pandemic and its aftermath due in part to the following:

• In June 2020, we issued $1.0 billion aggregate principal amount of 9.75% senior notes due 2025.

We used the net proceeds from this offering to prepay in full our $250.0 million term loan that was scheduled to mature on June 12, 2020 and to reduce amounts outstanding under our revolving credit facility;

• Beginning in the second quarter of 2020, we reduced our quarterly cash distribution rate on our common shares to $0.01 per share, conserving approximately $33.3 million of cash per calendar quarter compared to our prior quarterly distribution rate;

• In January 2021, we and our lenders amended our credit agreement and the agreement governing our previously existing $200.0 million term loan to, among other things, obtain waivers from compliance with certain financial covenants through June 2022, or the Amendment Period;

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

We used the net proceeds from this offering to prepay our $200.0 million term loan.

In June 2021, we used the remaining net proceeds to redeem all of our outstanding 6.75% senior notes due 2021, when those notes were redeemable with no prepayment premium;

• In March 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 February 2022, we repaid $100.0 million of this borrowing to reduce the borrowing capacity under our revolving credit facility to $700.0 million pursuant to the February 2022 amendment to our credit agreement;

• In December 2021 and January 2022, we raised aggregate net proceeds of approximately $1.0 billion from the sale of equity interests in an existing joint venture that owns a life science property located in Boston, Massachusetts and in a new joint venture for 10 medical office and life science properties we owned.

We retained a 20% equity interest in each of these joint ventures.

We expect to use these proceeds to fund capital expenditures and to reduce leverage;

• In February 2022, we amended our credit agreement to, among other things, extend the waiver of the fixed charge coverage ratio covenant through December 31, 2022, and we also exercised our option to extend the maturity date of our revolving credit facility to January 2024.

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 elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements”, Part I, Item 1A, “Risk Factors” and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".

For more information about the terms of the management agreements with Five Star and the other third party managers, see Note 6 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Economic and Market Conditions

We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, labor availability, high inflation, rising or sustained high interest rates, supply chain disruptions, geopolitical risks and economic downturns or recessions.

We expect labor, utility and food costs to continue to increase on a per resident basis in our SHOP segment.

In response to inflationary pressures, the U.S.

Federal Reserve has significantly increased the federal funds rate since the beginning of 2022 and has signaled that further significant increases are likely to occur.

These inflationary pressures and rising and sustained high interest rates in the United States and globally have given rise to increasing concerns that the U.S.

economy may soon enter, an economic recession and they have caused disruptions in the financial markets.

Economic downturns or recessions, or continued or intensified disruptions in the financial markets could adversely affect our financial condition and that of our managers, operators and tenants, could adversely impact the ability of our managers, operators, tenants or residents to pay the contractual amounts of returns, rents or other obligations due to us, could impair our ability to effectively deploy our capital or realize upon investments on favorable terms, may restrict our access to, and would likely increase our cost of capital, and may cause the values of our properties and of our securities to decline.

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

However, it is unclear what the long term impacts of changing market and economic conditions, including the impact of the changed market practices that arose or increased in response to the COVID-19 pandemic, will be on our and 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 managers', operators', tenants' and other stakeholders' businesses, operations, financial results and financial position.

For further information and risks relating to these economic uncertainties, including as related to the COVID-19 pandemic, and their impact on our business and financial condition, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements”, Part I, Item

1A, “Risk Factors” and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".

Our Investment and Operating Policies

3 unchanged sentences

invest in strong credit quality properties with strong credit quality tenants and managers;

use debt leverage to fund additional investments which increase cash flow from operations because of positive spreads between our cost of investment capital and investment yields;

use leverage to fund additional investments which increase cash flow from operations because of positive spreads between our cost of investment capital and investment yields;

structured investments, including joint venture arrangements, which generate a minimum return and provide an opportunity to participate in operating growth at our properties;

20 unchanged sentences

• the level of permitted services and regulatory history of the property and its historical tenants and managers;

• the existence of alternative sources, uses or needs for capital.

• the existence of alternative sources, uses or needs for our capital and our leverage.

An important part of our acquisition strategy is to identify and select qualified, experienced and financially stable tenants and managers.

Disposition Policies

We plan to selectively sell certain properties from time to time to fund future acquisitions and to strategically update, rebalance and reposition our investment portfolio, and to achieve and maintain leverage at levels we believe are appropriate with a goal of (1) improving the asset quality of our portfolio by reducing the average age, lengthening the weighted average term of our leases and increasing the likelihood of retaining our tenants, (2) reducing our leverage and (3) increasing our distributions to shareholders.

We expect further disruptions to future disposition activity due to uncertain market conditions as a result of the COVID-19 pandemic and its resulting economic conditions.

We plan to selectively sell certain properties from time to time to manage our leverage, to fund future acquisitions and to strategically update, rebalance and reposition our investment portfolio with a goal of (1) reducing our leverage, (2) improving the asset quality of our portfolio by reducing the average age of our properties, lengthening the weighted average term of our leases and increasing the likelihood of retaining our tenants and (3) increasing our distributions to shareholders.

Other than as described, we generally consider ourselves to be a long term owner of properties and are more interested in the long term earnings potential of our properties and stability of our portfolio than selling properties for short term gains.

8 unchanged sentences

• the strategic fit of the property or investment with the rest of our portfolio;

• the capital required to maintain the property;

• the age and capital required to maintain the property;

• the estimated value we may receive by selling the property;

1 unchanged sentence

• the expected benefits that can be achieved from contributing additional properties to our existing or any new joint ventures;

• the existence of alternative sources, uses or needs for capital;

• the existence of alternative sources, uses or needs for our capital and our leverage;

• the tax implications to us and our shareholders for any proposed disposition.

1 unchanged sentence

We have no policies which specifically limit the percentage of our assets that may be invested in any individual property, in any one type of property, in properties leased to any one tenant or to an affiliated group of tenants or in properties operated by any one tenant or manager or by an affiliated group of tenants or managers or in securities of one or more persons.

We own a significant number of common shares of AlerisLife, and we expect to own these shares for the foreseeable future.

However, we may sell some or all of our AlerisLife common shares, or our ownership interest in AlerisLife may otherwise be diluted in the future.

We own 10,691,658 common shares of AlerisLife, or approximately 31.9% of AlerisLife's outstanding common shares.

In February 2023, in connection with the proposed acquisition of AlerisLife by a subsidiary of ABP Trust, which is the controlling shareholder of The RMR Group Inc., or RMR Inc., pursuant to a tender offer for all of the outstanding common shares of AlerisLife (other than the AlerisLife common shares owned by ABP Trust or its applicable subsidiaries), at a price of $1.31 per share, we agreed to tender all of our AlerisLife common shares into the tender offer at the tender offer price, subject to the right, but not the obligation, to purchase, in a single private transaction, on or before December 31, 2023, a number of shares of common stock of the surviving entity in the proposed acquisition constituting a percentage up to 31.9% of the then issued and outstanding shares of the common stock of the surviving entity based on the tender offer price and otherwise pursuant to a stockholders agreement to be entered into at the time of any such purchase on such terms as are negotiated and mutually agreed by the parties.

We may also in the future acquire additional common shares or securities of other entities, including entities engaged in real estate activities.

We may invest in the securities of other entities for the purpose of exercising

control, or otherwise, make loans to other persons or entities, engage in the sale of investments, offer securities in exchange for property or repurchase or reacquire our securities.

As of December 31, 2021, Five Star, an operating division of AlerisLife, managed 120 senior living communities for our account.

We may invest in the securities of other entities for the purpose of exercising control, or otherwise,

make loans to other persons or entities, engage in the sale of investments, offer securities in exchange for property or repurchase or reacquire our securities.

Historically, we have primarily owned wholly owned investments in fee interests.

1 unchanged sentence

We may invest or enter into additional real estate joint ventures if we conclude that by doing so we may benefit from the participation of joint venture partners or that our opportunity to participate in the investment is contingent on the use of a joint venture structure.

As of December 31, 2021, we owned a 20% equity interest in an unconsolidated joint venture for a life science property located in Boston, Massachusetts.

Additionally, in January 2022, we entered into a joint venture for 10 medical office and life science properties we owned with two unrelated third party global institutional investors.

We retained a 20% equity interest in this joint venture.

As of December 31, 2022, we owned a 10% equity interest in an unconsolidated joint venture that owns a life science property located in Boston, Massachusetts, or the Seaport JV, and a 20% equity interest in an unconsolidated joint venture for 10 medical office and life science properties, or the LSMD JV.

Further, we may acquire interests in joint ventures as part of an acquisition of properties or entities or we may contribute wholly owned properties into our existing or new joint ventures.

3 unchanged sentences

Our Financing Policies

Although there are no limitations in our organizational documents on the amount of indebtedness we may incur, our credit agreement and our senior unsecured notes indentures and their supplements contain financial covenants which, among other things, restrict our ability to incur indebtedness and require us to maintain certain financial ratios.

As of December 31, 2021, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants, as the effects of the COVID-19 pandemic continued to adversely impact our operations.

We are currently unable to incur additional debt because this ratio is below 1.5x on a pro forma basis, 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.

Although there are no limitations in our organizational documents on the amount of indebtedness we may incur, our credit agreement and our senior unsecured notes indentures and their supplements contain covenants which, among other things, restrict our ability to incur debts and generally require us to maintain certain financial ratios.

In February 2023, we and our lenders amended our credit agreement to, among other things, extend the waiver of the fixed charge coverage ratio covenant through January 15, 2024, the current maturity date of our credit facility.

Additionally, our facility commitments have been reduced to $450.0 million.

In the future, we may decide to seek an extension of our credit facility.

There is no assurance our lenders will grant an extension, or that the terms of such extension would be satisfactory.

As of December 31, 2022, our ratio of consolidated income available for debt service to debt service was below the 1.5x incurrence requirement under our credit agreement and our public debt covenants as the effects of the slow recovery of our SHOP business from the COVID-19 pandemic, high inflation, rising or sustained high interest rates, geopolitical risks and other economic, market or industry conditions, continued to adversely impact our operations.

We are unable to incur additional debt until this ratio is at or above 1.5x on a pro forma basis.

As of February 24, 2023, we were fully drawn under our credit facility.

For further information relating to our indebtedness, see elsewhere in this Annual Report on Form 10-K, including Note 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

4 unchanged sentences

The proceeds from any of our financings may be used to pay distributions, to provide working capital, to refinance existing indebtedness or to finance acquisitions and improvements of existing or new properties, subject to limitations in agreements governing our debt.

As of December 31, 2021, we had a $800.0 million revolving credit facility.

As a result of the February 2022 amendment to our credit agreement, our revolving credit facility was reduced to $700.0 million.

We use our revolving credit facility for working capital and general business purposes and for funding investments on an interim basis until we are able to refinance them with equity or long term debt.

In some instances, we may assume debt in connection with our acquisition of properties or place new mortgages on properties we own.

As of December 31, 2022, we had a $700.0 million credit facility.

In February 2022, we and our lenders amended our credit agreement to, among other things, reduce the facility commitments to $700.0 million.

In January 2023 and February 2023, the facility commitments were further reduced to $586.4 million and $450.0 million, respectively.

For more information regarding our financing sources and activities, see “Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investment and Financing Liquidity and Resources” in Part II, Item 7 of this Annual Report on Form 10-K.

Our Board of Trustees may change our financing policies at any time without a vote of, or notice to, our shareholders.

The RMR Group Inc., or RMR Inc., is a holding company and substantially all of its business is conducted by its majority owned subsidiary, RMR LLC.

is a holding company and substantially all of its business is conducted by its majority owned subsidiary, The RMR Group LLC, or RMR.

The Chair of our Board of Trustees and one of our Managing Trustees, Adam D.

Portnoy, as the sole trustee of ABP Trust, is the controlling shareholder of RMR Inc., is a managing director and the president and chief executive officer of RMR Inc.

and an officer and employee of RMR LLC.

Francis, our other Managing Trustee and our President and Chief Executive Officer, also serves as an officer and employee of RMR LLC.

Clark, our Secretary and former Managing Trustee, also serves as a managing director and as executive vice president, general counsel and secretary of RMR Inc., an officer of ABP Trust and an officer and employee of RMR LLC.

Our day to day operations are conducted by RMR LLC.

RMR LLC originates and presents investment and divestment opportunities to our Board of Trustees and provides management and administrative services to us.

RMR LLC has a principal place of business at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts, 02458-1634, and its telephone number is (617) 796-8390.

RMR LLC is an alternative asset management company that is focused on commercial real estate and related businesses.

RMR LLC or its subsidiaries also act as a manager to other publicly traded real estate companies, privately held real estate funds and real estate related operating businesses.

In addition, RMR LLC provides management services to our existing joint ventures.

As of the date of this Annual Report on Form 10-K, the executive officers of RMR LLC are:

Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., is chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc.

and an officer and employee of RMR.

Francis, our other Managing Trustee and our President and Chief Executive Officer, also serves as an officer and employee of RMR.

Clark, our Secretary and former Managing Trustee, also serves as a managing director and the executive vice president, general counsel and secretary of RMR Inc., an officer and employee of RMR and an officer of ABP Trust.

Our day to day operations are conducted by RMR.

RMR originates and presents investment and divestment opportunities to our Board of Trustees and provides management and administrative services to us.

RMR has a principal place of business at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts, 02458-1634, and its telephone number is (617) 796-8390.

RMR is an alternative asset management company that is focused on commercial real estate and related businesses.

RMR or its subsidiaries also act as a manager to other publicly traded real estate companies, privately held real estate funds and real estate related operating businesses.

In addition, RMR provides management services to joint ventures, including our existing joint ventures.

As of the date of this Annual Report on Form 10-K, the executive officers of RMR are:

Portnoy, President and Chief Executive Officer;

6 unchanged sentences

In addition, our Chief Financial Officer and Treasurer, Richard W.

Siedel, Jr., is a Senior Vice President of RMR LLC.

Siedel and other officers of RMR LLC also serve as officers of other companies to which RMR LLC or its subsidiaries provide management services.

Siedel, Jr., is a Senior Vice President of RMR.

Certain other officers of RMR also serve as officers of other companies to which RMR or its subsidiaries provide management services.

We have no employees.

Services which would otherwise be provided to us by employees are provided by RMR LLC and by our Managing Trustees and officers.

As of December 31, 2021, RMR LLC had approximately 600 full time employees in its headquarters and regional offices located throughout the United States.

Services which would otherwise be provided to us by employees are provided by RMR and by our Managing Trustees and officers.

As of December 31, 2022, RMR had approximately 600 full time employees in its headquarters and regional offices located throughout the United States.

Government Regulation and Reimbursement

12 unchanged sentences

State licensure standards for assisted living communities, SNFs, clinics and other healthcare facilities typically address facility policies, staffing, quality of services and care, resident rights, fire safety and physical plant matters, and related matters.

In addition, the spread of COVID-19 has brought increased government regulation, including additional compliance obligations.

In addition, government regulation increased and additional compliance obligations were imposed in response to the COVID-19 pandemic, some of which have since been, or are expected in the near future to be, reduced or removed as a result of the abating of the COVID-19 pandemic.

We are unable to predict the future course of federal, state and local legislation or regulation.

5 unchanged sentences

In addition, some states (such as California and Texas) that have eliminated CON laws have retained other means of limiting development of facilities, including moratoria, licensing laws and limitations upon participation in the state Medicaid program.

Senior living communities and certain other healthcare facilities must also comply with applicable state and local building, zoning, fire and food service codes before licensing or Medicare and Medicaid certification are granted.

Senior living communities and certain other healthcare facilities must also comply with applicable state and local building, zoning, fire and food service codes before licensing or Medicare and

Medicaid certification are granted.

These laws and regulatory requirements could affect our ability and that of our tenants and managers to expand into new markets or to expand communities in existing markets.

23 unchanged sentences

Our tenants and managers operate facilities in many states and they and we participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid benefit programs for services in SNFs and other similar facilities and state Medicaid programs for services in assisted living communities.

In 2021, we closed approximately 1,500 skilled nursing units, reducing the overall impact of government regulation in this sector on our operations, and we have approximately 1,900 skilled nursing units remaining in our portfolio.

In addition, the Federal government took several measures to address the financial impact of the pandemic.

The CARES Act was signed into law on March 27, 2020.

The CARES Act, among other things, provides billions of dollars of relief to certain individuals and businesses suffering from the COVID-19 pandemic, including as follows:

• It temporarily suspended the 2% Medicare sequestration payment reductions from May 1, 2020 through December 31, 2020.

This suspension was extended to March 31, 2021 as part of the Consolidated Appropriations Act, 2021, and in April 2021, was further extended until December 31, 2021.

• It established a Provider Relief Fund for allocation by HHS.

On April 10, 2020, HHS began to distribute these funds, or the General Distribution, to healthcare providers who received Medicare fee-for-service reimbursement

in 2018 and 2019.

On May 22, 2020, HHS announced that Provider Relief Funds would be available to SNFs with six or more certified beds that have been impacted by the COVID-19 pandemic.

On June 9, 2020, HHS announced Phase 2 General Distributions, including the Medicaid and Children's Health Insurance Program programs.

On September 3, 2020, HHS announced details of a $2 billion incentive-payment distribution to nursing homes, of which approximately $333 million was distributed in the first round and $523 million in the second round.

On October 1, 2020, HHS announced Phase 3 General Distributions, intended to balance payments of 2% of annual revenue from patient care for all applicants plus a possible add-on payment to account for revenue losses and expenses attributable to COVID-19.

On December 16, 2020, HHS announced that Phase 3 funds would be distributed in amounts up to 88% of reported losses.

• On September 1, 2020, HHS announced that assisted living providers could apply for COVID-19 relief funding as provided by the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act.

On October 28, 2020, CMS published an interim final rule that, among other items, clarified its interpretation that the CARES Act provided Medicare Part B coverage and the payment for COVID-19 vaccine and administration.

• It created the employee retention credit calculated at 50% of qualifying wages up to $10,000 in total per employee, resulting in a maximum credit of $5,000 per employee for employers with 100 or fewer employees.

Further, the Consolidated Appropriations Act, 2021 was signed into law on December 27, 2020.

Among other things, this Act further supplemented the Provider Relief Fund with an additional $3 billion.

The statute required that no less than 85% of unobligated balances of the fund and funds recovered from providers after the enactment date be allocated based on financial losses and changes in operating expenses occurring in the third or fourth quarter of calendar year 2020.

The Consolidated Appropriations Act, 2021 also extended the credits and modified the calculation to 70% of qualifying wages up to $10,000 per quarter per employee for employers with up to 500 employees.

On March 11, 2021, the American Rescue Plan Act of 2021, or ARPA, was signed into law.

In addition to broad-based public and private financial relief, ARPA included a number of measures intended to assist the health care industry, including funding to support COVID-19 research, testing, and vaccination efforts.

The ARPA temporarily increased the Federal Medical Assistance Percentage specifically for the provision of home- and community- based services, or HCBS, which include home health care services and rehabilitative services, by ten points from April 1, 2021 through March 31, 2022, provided states maintain state spending levels as of April 1, 2021.

ARPA further specified that states must use the enhanced funds to “implement, or supplement the implementation of, one or more activities to enhance, expand, or strengthen” Medicaid HCBS.

Further, on September 10, 2021, HHS, through the Health Resources and Services Administration, made $25.5 billion in new funding in COVID-19 relief available to healthcare providers.

Under this plan, Provider Relief Fund Phase 4 payments were based on lost revenues and expenditures between July 1, 2020, and March 31, 2021.

We have received funds as part of certain relief programs provided under the CARES Act.

The terms and conditions of the Provider Relief Fund require that the funds are utilized to compensate for lost revenues that are attributable to the COVID-19 pandemic and for eligible costs to prevent, prepare for and respond to the COVID-19 pandemic that are not covered by other sources.

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was signed into law on March 27, 2020.

The CARES Act, among other things, provided $2.0 trillion in aid to certain individuals, businesses and state and local governments suffering from the COVID-19 pandemic.

Additionally, the American Rescue Plan Act, or ARPA, was signed into law on March 11, 2021 to provide additional economic stimulus.

For a description of the governmental funding and subsequent legislation, see our Annual Report on Form 10-K for the year ended December 31, 2021.

The CARES Act created a Provider Relief Fund, which allocated financial support to providers who experienced lost revenues and increased expenses as a result of the COVID-19 pandemic.

The terms and conditions of the Provider Relief Fund

require that the funds are utilized to compensate for lost revenues that are attributable to the COVID-19 pandemic and for eligible costs to prevent, prepare for and respond to the COVID-19 pandemic that are not covered by other sources.

In addition, Provider Relief Fund recipients are subject to other terms and conditions, including certain reporting requirements.

Any funds not used in accordance with the terms and conditions, must be returned to HHS.

Receipt of additional government funds and other benefits from the CARES Act is subject to, in certain circumstances, a detailed application and approval process and it is too soon to accurately predict whether we will meet any eligibility requirements.

We have received funds related to certain programs under the CARES Act and various state programs in which certain of our communities in our SHOP segment are located.

We recognized $19.6 million of these funds in interest and other income in our consolidated statement of comprehensive income (loss) for which we have met the required terms and conditions for the year ended December 31, 2021.

We have received funds related to certain programs under the CARES Act, ARPA and various state programs in which certain of our communities in our SHOP segment are located.

We recognized $4.3 million of these funds in interest and other income in our consolidated statement of comprehensive income (loss) for which we believe we have met the required terms and conditions for the year ended December 31, 2022.

In addition to federal measures, many states have taken actions to waive or modify healthcare laws or regulations and Medicaid reimbursement rules.

Both state and federal waivers and other temporary actions in response to the COVID-19 pandemic are expected to last throughout the national emergency, the duration of which is currently unknown.

Both state and federal waivers and other temporary actions in response to the COVID-19 pandemic are expected to last throughout the national emergency, which will expire on May 11, 2023.

Additional measures may be taken prior to and after the conclusion of the national emergency to alleviate the economic impact of the COVID-19 pandemic.

Governmental responses to COVID-19 are rapidly evolving, and it is not yet known what the duration or impact of such responses will be.

Governmental responses to COVID-19 rapidly evolved since the beginning of the national emergency;

however, many of these responses have been, and will continue to be phased out after the national emergency, and it is not yet known what the duration or impact of such responses will be.

Government Payers.

have a material adverse effect on the ability of our tenants to pay us rent, the profitability of our managed senior living communities and the values of our properties.

Our tenants' and managers' Medicare Part B outpatient therapy revenue rates are tied to the Medicare Physician Fee Schedule, or MPFS, which has been subject to separate limitations on rate growth.

In light of the current and projected federal budget deficit and challenging state fiscal conditions, there have been numerous recent legislative and regulatory actions or proposed actions with respect to federal Medicare rates and state Medicaid rates and federal payments to states for Medicaid programs, each of which, or in any combination, could have a material adverse effect on the ability of our tenants to pay us rent, the profitability of our managed senior living communities and the values of our properties.

It is unclear whether any adjustments in Medicare rates will compensate for the increased costs our tenants and managers may incur for services to residents whose services are paid for by Medicare.

1 unchanged sentence

Current and future programmatic changes to Medicaid eligibility and rates may also impact us.

Federal and state efforts to target false claims, fraud and abuse and violations of anti-kickback, physician referral and privacy laws by providers under Medicare, Medicaid and other public and private programs have increased in recent years, as have civil monetary penalties, treble damages, repayment requirements and criminal sanctions for noncompliance.

The federal False Claims Act, as amended and expanded by the Fraud Enforcement and Recovery Act of 2009 and the Patient Protection and Affordable Care Act of 2010, or the ACA, provides significant civil monetary penalties and treble damages for false claims and authorizes individuals to bring claims on behalf of the federal government for false claims and earn a percentage of the government's recovery should the government intervene.

3 unchanged sentences

Government authorities are devoting increasing attention and resources to the prevention, detection and prosecution of healthcare fraud and abuse.

CMS contractors are also expanding the retroactive audits of Medicare claims submitted by SNFs and other providers, and recouping alleged overpayments for services determined by auditors not to have been medically necessary or not to meet Medicare coverage criteria as billed.

CMS contractors are also expanding the retroactive audits of Medicare claims submitted by SNFs and other providers, and recouping alleged overpayments for services determined by auditors not to have been appropriately billed (e.g., not medically necessary or not meeting Medicare coverage criteria).

State Medicaid programs and other third party payers are conducting similar medical necessity and compliance audits.

2 unchanged sentences

We and our tenants and managers expend significant resources to comply with these laws and regulations.

Other Matters.

Data Privacy and Security.

Federal and state laws designed to protect the confidentiality and security of individually identifiable information apply to us, our tenants and our managers.

Under the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, we, our managers and our tenants that are covered entities or business associates within the meaning of HIPAA must comply with rules adopted by HHS governing the privacy, security, use and disclosure of individually identifiable information, including financial information and protected health information, or PHI, and also with security rules for electronic PHI.

must comply with rules adopted by HHS governing the privacy, security, use and disclosure of individually identifiable information, including financial information and protected health information, or PHI, and also with security rules for electronic PHI.

There may be both civil monetary penalties and criminal sanctions for noncompliance with such federal laws.

In January 2013, HHS released the HIPAA Omnibus Rule, or the Omnibus Rule, which modified various requirements, including the standard for providing breach notices, which previously required an analysis of the harm of any disclosure, to a more objective analysis relating to whether any PHI was actually acquired or viewed as a result of the breach.

On December 10, 2020, HHS issued a proposed rule that would modify certain standards, definitions and patient rights under the previously-promulgated Standards for Privacy of Individually Identifiable Health Information, or the HIPAA Privacy Rule, to address barriers to coordinated care and case management.

On December 10, 2020, HHS issued a proposed rule that would modify certain standards, definitions and patient rights under the previously-promulgated Standards for Privacy of Individually Identifiable Health Information to address barriers to coordinated care and case management.

The effect of this proposed rule, if finalized, upon our operations is unknown at this time.

In addition to HIPAA, many states have enacted their own security and privacy laws relating to individually identifiable information.

For example, the California Consumer Privacy Act became effective in 2020, and was further modified by the California Privacy Rights Act.

We expect additional federal and state legislative and regulatory efforts to regulate consumer privacy in the future.

In some states, these laws are more stringent than HIPAA, and we, our tenants and our managers must comply with both the applicable federal and state standards.

HIPAA enforcement efforts have increased considerably over the past few years, with HHS, through its Office for Civil Rights, or OCR, entering into several multi-million dollar HIPAA settlements in 2021 alone.

OCR has also demonstrated a continuing commitment to enforce the obligation to provide individuals with timely access to their health information upon request.

Finally, OCR and other regulatory bodies have become increasingly focused on cybersecurity risks,

including the emerging threat of ransomware and similar cyberattacks.

Finally, OCR and other regulatory bodies have become increasingly focused on cybersecurity risks, including the emerging threat of ransomware and similar cyberattacks.

The increasing sophistication of cybersecurity threats presents challenges to the entire healthcare industry.

In addition, many states have enacted their own security and privacy laws relating to individually identifiable information.

For example, the California Consumer Privacy Act, or the CCPA, became effective in 2020, and was further modified by the California Privacy Rights Act, or the CPRA.

The majority of CPRA provisions went into effect on January 1, 2023, with some requirements applying to data collected beginning on January 1, 2022.

The CPRA significantly expanded the CCPA's data protection obligations.

Failure to comply with the CCPA or CPRA could result in penalties for noncompliance of up to $7,500 per violation.

We expect additional federal and state legislative and regulatory efforts to regulate consumer privacy in the future.

In some states, these laws are more stringent than HIPAA, and we, our tenants and our managers must comply with both the applicable federal and state standards.

Other Matters.

We require our tenants and managers to comply with all laws that regulate the operation of our senior living communities.

8 unchanged sentences

Our tenants that are healthcare providers or suppliers are subject to reimbursement rates that are increasingly subject to cost control pressures and may be reduced or may not be increased sufficiently to cover their increasing costs, including our rents.

The FDA and other federal, state and local authorities extensively regulate our biotechnology laboratory tenants that develop, manufacture, market or distribute new drugs, biologicals or medical devices for human use.

Further, healthcare providers are experiencing heightened scrutiny under antitrust laws in the United States as integration and consolidation of health care delivery increase and affect competition.

The United States Food and Drug Administration, or FDA, and other federal, state and local authorities extensively regulate our biotechnology laboratory tenants that develop, manufacture, market or distribute new drugs, biologicals or medical devices for human use.

The FDA and such other authorities regulate the clinical development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising and promotion of those products.

1 unchanged sentence

Preclinical and clinical studies and documentation in connection with FDA approval of new pharmaceuticals or medical devices involve significant time, expense and risks of failure.

Once a product is approved, the FDA maintains oversight of the product and its developer and can withdraw its approval, recall products or suspend their production, impose or seek to impose civil or criminal penalties on the developer or take other actions for the developer's failure to comply with regulatory requirements, including anti-fraud, false claims, anti-kickback or physician referral laws.

Once a product is approved, the FDA maintains oversight of the product and its developer and can withdraw its approval, recall products or suspend their production,

impose or seek to impose civil or criminal penalties on the developer or take other actions for the developer's failure to comply with regulatory requirements, including anti-fraud, false claims, anti-kickback or physician referral laws.

Other concerns affecting our biotechnology laboratory tenants include the potential for subsequent discovery of safety concerns and related litigation, ensuring that the product qualifies for reimbursement under Medicare, Medicaid or other federal or state programs, cost control initiatives of payment programs, the potential for litigation over the validity or infringement of intellectual property rights related to the product, the eventual expiration of relevant patents and the need to raise additional capital.

3 unchanged sentences

Investing in medical office and life science properties, senior living communities and other healthcare related properties, and their operations, are highly competitive businesses.

We compete against other REITs, numerous financial institutions, individuals and other public and private companies who are actively engaged in this business.

We compete against other REITs, numerous financial institutions, individuals and other public and private companies that are actively engaged in this business.

Also, we compete for tenants and residents and for investments based on a number of factors including location, rents, rates, financings offered, underwriting criteria and reputation.

2 unchanged sentences

Some of our competitors may have greater financial and other resources than we have.

We believe the quality and diversity of our investments, the financial

strength of many of our tenants and the experience and capabilities of our managers may afford us some competitive advantages and allow us to operate our business successfully despite the competitive nature of our business.

We believe the quality and diversity of our investments, the financial strength of many of our tenants and the experience and capabilities of our managers may afford us some competitive advantages and allow us to operate our business successfully despite the competitive nature of our business.

Our tenants and managers compete on a local and regional basis with operators of facilities that provide comparable services.

4 unchanged sentences

We are guided by Environmental, Social and Governance, or ESG, principles, and believe corporate sustainability must be a strategic focus alongside our focus on economic performance.

Our sustainability practices which align with those of our manager, RMR LLC — minimizing our impact on the environment, embracing the communities where we operate and attracting top professionals — are critical elements supporting our long-term success.

Our sustainability practices which align with those of our manager, RMR — minimizing our impact on the environment, embracing the communities where we operate and attracting top professionals — are critical elements supporting our long-term success.

We recognize our responsibility to minimize the impact of our business on the environment and seek to preserve natural resources and maximize efficiencies in order to reduce the impact the properties we own have on the planet.

1 unchanged sentence

We seek to obtain certifications that measure progress in environmental sustainability, which helps to benchmark performance and mitigate risk.

We and our manager, RMR LLC, drive value, manage risk and benchmark the performance of our properties by effectively capturing and managing data through real-time energy monitoring, or RTM.

We and our manager, RMR, drive value, manage risk and benchmark the performance of our properties by effectively capturing and managing data through real-time energy monitoring, or RTM.

RTM facilitates advanced data analytics and access to detect faults and inefficiencies in equipment operations faster meanwhile enhancing building system control in a cost-effective and scalable way.

3 unchanged sentences

In an effort to reduce the effects of any increased energy costs in the future, we continuously study ways to improve the energy efficiency at all of our properties.

Our property manager, RMR LLC, is a member of the ENERGY STAR program, a joint program of the U.S.

Our property manager, RMR, is a member of the ENERGY STAR program, a

joint program of the U.S.

Environmental Protection Agency and the U.S.

28 unchanged sentences

Board Diversity

As of December 31, 2021, our Board of Trustees was comprised of six Trustees, of which four were independent trustees.

As of December 31, 2022, our Board of Trustees was comprised of seven Trustees, of which five were independent trustees.

Our Board of Trustees is comprised of approximately 29% women and approximately 14% members of underrepresented minorities.

4 unchanged sentences

Copies of our governance guidelines, our code of business conduct and ethics, or our Code of Conduct, and the charters of our audit, compensation and nominating and governance committees are posted on our website and also may be obtained free of charge by writing to our Secretary, Diversified Healthcare Trust, Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634.

We also have a policy outlining procedures for handling concerns or complaints about accounting, internal accounting controls or auditing matters and a

governance hotline accessible on our website that shareholders can use to report concerns or complaints about accounting, internal accounting controls or auditing matters or violations or possible violations of our Code of Conduct.

We also have a policy outlining procedures for handling concerns or complaints about accounting, internal accounting controls or auditing matters and a governance hotline accessible on our website that shareholders can use to report concerns or complaints about accounting, internal accounting controls or auditing matters or violations or possible violations of our Code of Conduct.

We make available, free of charge, through the "Investors" section of our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after these forms are filed with, or furnished to, the Securities and Exchange Commission, or SEC.

29 unchanged sentences

• a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds;

shareholder that is a passive foreign investment company or controlled foreign corporation;

• a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC);

27 unchanged sentences

Our REIT election, assuming continuing compliance with the then applicable qualification tests, has continued and will continue in effect for subsequent taxable years.

Although we cannot be sure, we believe that from and after our 1999 taxable

year we have been organized and have operated, and will continue to be organized and to operate, in a manner that qualified us and will continue to qualify us to be taxed as a REIT under the IRC.

Although we cannot be sure, we believe that from and after our 1999 taxable year we have been organized and have operated, and will continue to be organized and to operate, in a manner that qualified us and will continue to qualify us to be taxed as a REIT under the IRC.

As a REIT, we generally are not subject to federal income tax on our net income distributed as dividends to our shareholders.

17 unchanged sentences

While we believe that we have satisfied and will satisfy these tests, our counsel does not review compliance with these tests on a continuing basis.

If we fail to qualify for taxation as a REIT in any year, then we will be subject to federal income taxation as if we were a corporation taxed under subchapter C of the IRC, or a C corporation, and our shareholders will be taxed like shareholders of regular C corporations, meaning that federal income tax generally will be applied at both the corporate and shareholder levels.

If we fail to qualify for taxation as a REIT in any year, then we will be subject to federal income taxation as if we were a corporation taxed under subchapter C of the IRC, or a C

corporation, and our shareholders will be taxed like shareholders of a regular C corporation, meaning that federal income tax generally will be applied at both the corporate and shareholder levels.

In this event, we could be subject to significant tax liabilities, and the amount of cash available for distribution to our shareholders could be reduced or eliminated.

2 unchanged sentences

• We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income,” determined by including our undistributed ordinary income and net capital gains, if any.

We may elect to retain and pay income tax on our net capital gain.

In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the tax we paid.

• If we have net income from the disposition of “foreclosure property,” as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate.

8 unchanged sentences

• If we acquire a corporation in a transaction where we succeed to its tax attributes, to preserve our qualification for taxation as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, no later than the end of our taxable year in which the acquisition occurs.

However, if we fail to do so, relief provisions would allow us to maintain our qualification for taxation as a REIT provided we distribute any subsequently discovered C corporation earnings and profits and pay an interest charge in respect of the period of delayed distribution.

However, if we fail to do so, relief provisions would allow us to maintain our qualification for taxation as a REIT provided we distribute

any subsequently discovered C corporation earnings and profits and pay an interest charge in respect of the period of delayed distribution.

• Our subsidiaries that are C corporations, including our TRSs, generally will be required to pay federal corporate income tax on their earnings, and a 100% tax may be imposed on any transaction between us and one of our TRSs that does not reflect arm's length terms.

25 unchanged sentences

If we comply with applicable Treasury regulations to ascertain the ownership of our outstanding shares and do not know, or by exercising reasonable diligence would not have known, that we failed condition (6), then we will be treated as having met condition (6).

Accordingly, we have complied and will continue to comply with these regulations, including by requesting annually from holders of significant percentages of our shares information regarding the ownership of our shares.

Accordingly, we have complied and will continue to comply with these regulations, including by requesting annually from holders of significant percentages of our shares

information regarding the ownership of our shares.

Under our declaration of trust, our shareholders are required to respond to these requests for information.

11 unchanged sentences

The assets, liabilities and items of income, deduction and credit of a qualified REIT subsidiary are treated as the REIT's.

We believe that each of our direct and indirect wholly owned subsidiaries, other than the TRSs discussed below (and entities whose equity is owned in whole or in part by such TRSs), will be either a qualified REIT subsidiary within the meaning of Section 856(i)(2) of the IRC or a noncorporate entity that for federal income tax purposes is not treated as separate from its

owner under Treasury regulations issued under Section 7701 of the IRC, each such entity referred to as a QRS.

Thus, in applying all of the REIT qualification requirements described in this summary, all assets, liabilities and items of income, deduction and credit of our QRSs are treated as ours, and our investment in the stock and other securities of such QRSs will be disregarded.

7 unchanged sentences

However, failure of the subsidiary to separately satisfy the various REIT qualification requirements described in this summary or that are otherwise applicable (and failure to qualify for the applicable relief provisions) would generally result in (a) the subsidiary being subject to regular U.S.

corporate income tax, as described above, and (b) the REIT parent's ownership in the subsidiary (i) ceasing to be qualifying real estate assets for purposes of the 75% asset test and (ii) becoming subject to the 5% asset test, the 10% vote test and the 10% value test generally applicable to a REIT's ownership in corporations other than REITs and TRSs.

In such a situation, the REIT parent's own REIT qualification and taxation could be jeopardized on account of the subsidiary's failure cascading up to the REIT parent, all as described below under the heading “—Asset Tests”.

corporate income tax, as described above, and (b) the REIT parent's ownership in the subsidiary (i) ceasing to be qualifying real estate assets for purposes of the 75% asset test and (ii) becoming subject to the 5% asset test, the 10% vote test and the 10% value test, each as described below, generally applicable to a REIT's ownership in corporations other than REITs and TRSs.

In such a situation, the REIT parent's own qualification and taxation as a REIT could be jeopardized on account of the subsidiary's failure cascading up to the REIT parent, all as described below under the heading “—Asset Tests”.

We have joined with our subsidiary REITs in filing protective TRS elections, and we may continue to annually make such elections unless and until our ownership of these subsidiaries falls below 10%.

Pursuant to these protective TRS elections, we believe that if one of these subsidiaries is not a REIT for some reason, then that subsidiary would instead be considered one of our TRSs, and as such its value would fit within our REIT gross asset tests described below.

We expect to make similar protective TRS elections with respect to any other subsidiary REIT that we form or acquire.

We expect to make similar

protective TRS elections with respect to any other subsidiary REIT that we form or acquire and may implement other protective arrangements intended to avoid a cascading REIT failure if any of our intended subsidiary REITs were not to qualify for taxation as a REIT, but we cannot be sure that such protective elections or other arrangements will be effective to avoid or mitigate the resulting adverse consequences to us.

We do not expect protective TRS elections to impact our compliance with the 75% and 95% gross income tests described below, because we do not expect our gains and dividends from a subsidiary REIT's shares to jeopardize compliance with these tests even if for some reason the subsidiary is not a REIT.

30 unchanged sentences

We generally do not intend to lease property to any party if rents from that property would not qualify as “rents from real property,” but application of the 10% ownership rule is dependent upon complex attribution rules and circumstances that may be beyond our control.

In this regard, prior to the termination of our leases with Five Star, we owned close to, but less than, 10% of the outstanding common shares of AlerisLife.

Our declaration of trust generally disallows transfers or purported acquisitions, directly or by attribution, of our shares to the extent necessary to maintain our qualification for taxation as a REIT under the IRC.

14 unchanged sentences

however, our counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, “rents from real property” also includes charges we receive for services provided by our TRSs when the charges are separately stated, even if the services are not geographically customary.

Accordingly, we believe that our revenues from TRS-provided services, whether the charges are separately stated or not, qualify as “rents from real property” because the services satisfy the geographically customary standard, because the services have been provided by a TRS, or for both reasons.

Accordingly, we believe that our revenues

from TRS-provided services, whether the charges are separately stated or not, qualify as “rents from real property” because the services satisfy the geographically customary standard, because the services have been provided by a TRS, or for both reasons.

We believe that all or substantially all of our rents and related service charges have qualified and will continue to qualify as “rents from real property” for purposes of Section 856 of the IRC.

5 unchanged sentences

• for which the REIT makes a proper election to treat the property as foreclosure property.

Any gain that a REIT recognizes on the sale of foreclosure property held as inventory or primarily for sale to customers, plus any income it receives from foreclosure property that would not otherwise qualify under the 75% gross income test in the absence of foreclosure property treatment, reduced by expenses directly connected with the production of those items of income, would be subject to income tax at the highest regular corporate income tax rate under the foreclosure property

income tax rules of Section 857(b)(4) of the IRC.

Any gain that a REIT recognizes on the sale of foreclosure property held as inventory or primarily for sale to customers, plus any income it receives from foreclosure property that would not otherwise qualify under the 75% gross income test in the absence of foreclosure property treatment, reduced by expenses directly connected with the production of those items of income, would be subject to federal income tax at the highest regular corporate income tax rate under the foreclosure property income tax rules of Section 857(b)(4) of the IRC.

Thus, if a REIT should lease foreclosure property in exchange for rent that qualifies as “rents from real property” as described above, then that rental income is not subject to the foreclosure property income tax.

12 unchanged sentences

but, we cannot be sure whether or not the IRS might successfully assert that we are subject to the 100% penalty tax with respect to any particular transaction.

Gains subject to the 100% penalty tax are excluded from the 75% and 95% gross income tests, whereas real property gains that are not dealer gains or that are exempted from the 100% penalty tax on account of the safe harbors are considered qualifying gross income for purposes of the 75% and 95% gross income tests.

Gains subject to the 100% penalty tax are excluded from the 75% and 95% gross income tests, whereas real property gains that are not dealer gains

or that are exempted from the 100% penalty tax on account of the safe harbors are considered qualifying gross income for purposes of the 75% and 95% gross income tests.

We believe that any gain that we have recognized, or will recognize, in connection with our disposition of assets and other transactions, including through any partnerships, will generally qualify as income that satisfies the 75% and 95% gross income tests, and will not be dealer gains or subject to the 100% penalty tax.

11 unchanged sentences

At the close of each calendar quarter of each taxable year, we must also satisfy the following asset percentage tests in order to qualify for taxation as a REIT for federal income tax purposes:

• At least 75% of the value of our total assets must consist of “real estate assets,” defined as real property (including interests in real property and interests in mortgages on real property or on interests in real property), ancillary personal property to the extent that rents attributable to such personal property are treated as rents from real property in accordance with the rules described above, cash and cash items, shares in other REITs, debt instruments issued by “publicly offered REITs” as defined in Section 562(c)(2) of the IRC, government securities and temporary investments of new capital (that is, any stock or debt instrument that we hold that is attributable to any amount received by us (a) in exchange for our stock or (b) in a public offering of our five-year or longer debt instruments, but in each case only for the one-year period commencing with our receipt of the new capital).

• At least 75% of the value of our total assets must consist of “real estate assets,” defined as real property (including interests in real property and interests in mortgages on real property or on interests in real property), ancillary personal property to the extent that rents attributable to such personal property are treated as rents from real property in accordance with the rules described above, cash and cash items, shares in other REITs, debt instruments issued by “publicly offered REITs” as defined in Section 562(c)(2) of the IRC, government securities and temporary investments of new capital (that is, any stock or debt instrument that we hold that is attributable to any amount received by us (a) in exchange for our shares or (b) in a public offering of our five-year or longer debt instruments, but in each case only for the one-year period commencing with our receipt of the new capital).

• Not more than 25% of the value of our total assets may be represented by securities other than those securities that count favorably toward the preceding 75% asset test.

10 unchanged sentences

In addition, if we fail the 5% asset test, the 10% vote test or the 10% value test at the close of any quarter and we do not cure such failure within thirty days after the close of that quarter, that failure will nevertheless be excused if (a) the failure is de minimis and (b) within six months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% asset test, the 10% vote test and the 10% value test.

For purposes of this relief provision, the failure will be de minimis if the value of the assets causing the failure does not exceed $10,000,000.

For purposes of this relief provision, the failure will be de minimis if the value of the assets causing the failure does not exceed the lesser of (a) 1% of the total value of our assets at the end of the relevant quarter or (b) $10,000,000.

If our failure is not de minimis, or if any of the other REIT asset tests have been violated, we may nevertheless qualify for taxation as a REIT if (a) we provide the IRS with a description of each asset causing the failure, (b) the failure was due to reasonable cause and not willful neglect, (c) we pay a tax equal to the greater of (1) $50,000 or (2) the highest regular corporate income tax rate imposed on the net income generated by the assets causing the failure during the period of the failure, and (d) within six months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy all of the REIT asset tests.

4 unchanged sentences

Based on the discussion above, we believe that we have satisfied, and will continue to satisfy, the REIT asset tests outlined above on a continuing basis beginning with our first taxable year as a REIT.

Our Relationships with AlerisLife.

Prior to January 1, 2020, we owned a significant percentage (but less than 10%) of the outstanding common shares of AlerisLife.

Commencing with our 2002 taxable year and through and including our 2019 taxable year, we expect that the rental income we received from AlerisLife and its subsidiaries constituted “rents from real property” under Section 856(d) of the IRC, and therefore qualifying income under the 75% and 95% gross income tests described above.

From and after January 1, 2020, we have come to own (directly and indirectly through one of our TRSs) additional common shares of AlerisLife.

Our Relationship with AlerisLife.

We currently own (directly and indirectly through one of our TRSs) less than 35% of the outstanding common shares of AlerisLife (which are currently the subject of the tender offer described elsewhere in this Annual Report on Form 10-K).

We have not elected to treat AlerisLife as a TRS, and it is not otherwise an automatic TRS because no TRS of ours owns more than 35% of AlerisLife.

This structure for our AlerisLife ownership permits our continued engagement of a corporate subsidiary of AlerisLife to manage health care facilities leased to our TRSs, as described below in greater detail.

For further information regarding our relationship with AlerisLife, see Note 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Our Relationship with Our Taxable REIT Subsidiaries.

We currently own properties that we purchased to be leased to our TRSs or which are being leased to our TRSs as a result of modifications to, or expirations of, a prior lease, all as agreed to by applicable parties.

For example, in connection with past lease defaults and expirations, we have terminated occupancy of some of our health care properties by the defaulting or expiring tenants and immediately leased these properties to our TRSs and entered into new third-party management agreements for these properties.

For example, in connection with past lease defaults and expirations, we have terminated occupancy of some of our health care properties by the defaulting or expiring tenants and immediately leased these properties to our TRSs and entered into other third-party management agreements for these properties.

We may from time to time lease additional health care properties to our TRSs.

3 unchanged sentences

For these purposes, a contractor qualifies as an “eligible independent contractor” if it is less than 35% affiliated with the REIT and, at the time the contractor enters into the agreement with the TRS to operate the qualified health care property, that contractor or any person related to that contractor is actively engaged in the trade or business of operating qualified health care properties for persons unrelated to the TRS or its affiliated REIT.

For these purposes, an otherwise eligible independent contractor is not disqualified from that status on account of (a) the TRS bearing the expenses of the operation of the qualified health care property, (b) the TRS receiving the revenues from the operation of the qualified health care property, net of expenses for that operation and fees payable to the eligible independent contractor, or (c) the REIT receiving income from the eligible independent contractor pursuant to a preexisting or otherwise grandfathered lease of another property.

expenses for that operation and fees payable to the eligible independent contractor, or (c) the REIT receiving income from the eligible independent contractor pursuant to a preexisting or otherwise grandfathered lease of another property.

We have engaged as an intended eligible independent contractor a particular corporate subsidiary of AlerisLife.

5 unchanged sentences

If the relief provision were to apply to us, we would be subject to tax at a 100% rate upon the greater of the amount by which we failed the 75% gross income test or the amount by which we failed the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year;

even though we have little or no nonqualifying income from other sources in a typical taxable year, imposition of this 100% tax in this circumstance would be material because most of the properties leased to our TRSs are managed for the TRSs by this contractor.

even though we have little or no nonqualifying income from other sources in a typical taxable year, imposition of this 100% tax in this circumstance would be material because a significant number of the properties leased to our TRSs are managed for the TRSs by this contractor.

As explained above, we will be subject to a 100% tax on the rents paid to us by any of our TRSs if the IRS successfully asserts that those rents exceed an arm's length rental rate.

14 unchanged sentences

The 90% distribution requirements may be waived by the IRS if a REIT establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax discussed below.

To the extent that we do not distribute all of our net capital gain and all of our “real estate investment trust taxable income,” as adjusted, we will be subject to federal income tax at regular corporate income tax rates on undistributed amounts.

To the extent that we do

not distribute all of our net capital gain and all of our “real estate investment trust taxable income,” as adjusted, we will be subject to federal income tax at regular corporate income tax rates on undistributed amounts.

In addition, we will be subject to a 4% nondeductible excise tax to the extent we fail within a calendar year to make required distributions to our shareholders of 85% of our ordinary income and 95% of our capital gain net income plus the excess, if any, of the “grossed up required distribution” for the preceding calendar year over the amount treated as distributed for that preceding calendar year.

7 unchanged sentences

In addition to the other distribution requirements above, to preserve our qualification for taxation as a REIT we are required to timely distribute all C corporation earnings and profits that we inherit from acquired corporations, as described below.

We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such gain.

In addition, if we so elect by making a timely designation to our shareholders, our shareholders would include their proportionate share of such undistributed capital gain in their taxable income, and they would receive a corresponding credit for their share of the federal corporate income tax that we pay thereon.

Our shareholders would then increase the adjusted tax basis of their shares by the difference between (a) the amount of capital gain dividends that we designated and that they included in their taxable income, and (b) the tax that we paid on their behalf with respect to that capital gain.

Acquisitions of C Corporations

35 unchanged sentences

Shareholders.”

satisfies one of the tests set forth in Section 302(b) of the IRC enabling the redemption to be treated as a sale or exchange of the shares.

Section 302 of the IRC treats a redemption of our shares for cash only as a distribution under Section 301 of the IRC, and hence taxable as a dividend to the extent of our available current or accumulated earnings and profits, unless the redemption satisfies one of the tests set forth in Section 302(b) of the IRC enabling the redemption to be treated as a sale or exchange of the shares.

The redemption for cash only will be treated as a sale or exchange if it (a) is “substantially disproportionate” with respect to the surrendering shareholder's ownership in us, (b) results in a “complete termination” of the surrendering shareholder's entire share interest in us, or (c) is “not essentially equivalent to a dividend” with respect to the surrendering shareholder, all within the meaning of Section 302(b) of the IRC.

21 unchanged sentences

However, corporate shareholders may be required to treat up to 20% of any capital gain dividend as ordinary income under Section 291 of the IRC.

In addition, we may elect to retain net capital gain income and treat it as constructively distributed.

In that case:

(1) we will be taxed at regular corporate capital gains tax rates on retained amounts;

If for any taxable year we designate capital gain dividends for our shareholders, then a portion of the capital gain dividends we designate will be allocated to the holders of a particular class of shares on a percentage basis equal to the ratio of the amount of the total dividends paid or made available for the year to the holders of that class of shares to the total dividends paid or made available for the year to holders of all outstanding classes of our shares.

We will similarly designate the portion of any dividend that is to be taxed to noncorporate U.S.

shareholders at preferential maximum rates (including any qualified dividend income and any capital gains attributable to real estate depreciation recapture that are subject to a maximum 25% federal income tax rate) so that the designations will be proportionate among all outstanding classes of our shares.

We may elect to retain and pay income taxes on some or all of our net capital gain.

In addition, if we so elect by making a timely designation to our shareholders:

(1) each of our U.S.

6 unchanged sentences

(4) both we and our corporate shareholders will make commensurate adjustments in our respective earnings and profits for federal income tax purposes.

If we elect to retain our net capital gains in this fashion, we will notify our U.S.

shareholders of the relevant tax information within sixty days after the close of the affected taxable year.

We will similarly designate the portion of any dividend that is to be taxed to noncorporate U.S.

Distributions in excess of our current or accumulated earnings and profits will not be taxable to a U.S.

35 unchanged sentences

trade or business and a non-U.S.

shareholder will therefore not be subject to the often higher federal tax and withholding rates, branch profits taxes and increased reporting and filing requirements that apply to income effectively connected with a U.S.

shareholder will

therefore not be subject to the often higher federal tax and withholding rates, branch profits taxes and increased reporting and filing requirements that apply to income effectively connected with a U.S.

trade or business.

21 unchanged sentences

national securities exchange, capital gain dividends that we declare and pay to a non-U.S.

shareholder on those shares, as well as dividends to a non-U.S.

shareholder on those shares, as well as dividends to such a non-U.S.

shareholder on those shares attributable to our sale or exchange of “United States real property interests” within the meaning of Section 897 of the IRC, or USRPIs, will not be subject to withholding as though those amounts were effectively connected with a U.S.

22 unchanged sentences

shareholder, may owe the up to 30% branch profits tax under Section 884 of the IRC (or lower applicable tax treaty rate) in respect of these amounts.

Although the law is not entirely clear on the matter, it appears that amounts designated by us as undistributed capital gain in respect of our shares that are held by non-U.S.

shareholders generally should be treated in the same manner as actual distributions by us of capital gain dividends.

Under this approach, the non-U.S.

shareholder would be able to offset as a credit against its resulting U.S.

federal income tax liability its proportionate share of the tax paid by us on the undistributed capital gain treated as distributed to the non-U.S.

shareholder, and receive from the IRS a refund to the extent its proportionate share of the tax paid by us were to exceed the non-U.S.

shareholder's actual U.S.

federal income tax liability on such deemed

distribution.

If we were to designate any portion of our net capital gain as undistributed capital gain, a non-U.S.

shareholder should consult its tax advisors regarding taxation of such undistributed capital gain.

Dispositions of Our Shares .

27 unchanged sentences

To satisfy this withholding obligation, the applicable withholding agent may collect the amount of U.S.

federal income tax required to be withheld by reducing to cash for remittance to the IRS a sufficient portion of the property that

the shareholder would otherwise receive or own, and the shareholder may bear brokerage or other costs for this withholding procedure.

federal income tax required to be withheld by reducing to cash for remittance to the IRS a sufficient portion of the property that the shareholder would otherwise receive or own, and the shareholder may bear brokerage or other costs for this withholding procedure.

Amounts withheld under backup withholding are generally not an additional tax and may be refunded by the IRS or credited against the shareholder's federal income tax liability, provided that such shareholder timely files for a refund or credit with the IRS.

13 unchanged sentences

shareholder and to the IRS.

This information reporting requirement applies regardless of whether the non-U.S.

This information reporting requirement applies regardless

of whether the non-U.S.

shareholder is subject to withholding on distributions on our shares or whether the withholding was reduced or eliminated by an applicable tax treaty.

28 unchanged sentences

Congress, the IRS and the U.S.

Department of the Treasury, and statutory changes, new regulations, revisions to

existing regulations and revised interpretations of established concepts are issued frequently.

Department of the Treasury, and statutory changes, new regulations, revisions to existing regulations and revised interpretations of established concepts are issued frequently.

Likewise, the rules regarding taxes other than U.S.

24 unchanged sentences

A non-exempt prohibited transaction, in addition to imposing potential personal liability upon ERISA Plan fiduciaries, may also result in the imposition of an excise tax under the IRC or a penalty under ERISA upon the disqualified person or party in interest.

If the disqualified person who engages in the transaction is the individual on behalf of whom an IRA, Roth IRA or other tax-favored account is maintained (or his beneficiary), the IRA, Roth IRA or other tax-favored account may lose its tax-exempt status and its assets may be deemed to have been distributed to the individual in a taxable distribution on account of the non-exempt prohibited transaction, but no excise tax will be imposed.

If the disqualified person who engages in the transaction is the individual on behalf of whom an IRA, Roth IRA or other tax-favored account is maintained (or their beneficiary), the IRA, Roth IRA or other tax-favored account may lose its tax-exempt status and its assets may be deemed to have been distributed to the individual in a taxable distribution on account of the non-exempt prohibited transaction, but no excise tax will be imposed.

Fiduciaries considering an investment in our securities should consult their own legal advisors as to whether the ownership of our securities involves a non-exempt prohibited transaction.

21 unchanged sentences

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

What changed 10-K

Item 1. Business