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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-06 · 281 added, 103 removed, 381 unchanged (50% of the section changed)

2 unchanged sentences

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

As of March 31, 2024, we owned 371 properties located in 36 states and Washington, D.C., including four properties classified as held for sale and two closed senior living communities.

At March 31, 2024, 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 $7.2 billion.

As of March 31, 2024, we owned an equity interest in each of the Seaport JV and the LSMD JV 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 98% leased with an average (by annualized rental income) remaining lease term of 5.1 years.

We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, geopolitical risks, economic downturns or a possible recession and changes in real estate utilization.

We expect to experience continued volatility in labor, insurance and food costs in our SHOP segment.

As of June 30, 2024, we owned 370 properties located in 36 states and Washington, D.C., including five properties classified as held for sale and two closed senior living communities.

At June 30, 2024, 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 $7.2 billion.

As of June 30, 2024, we owned an equity interest in each of the Seaport JV and the LSMD JV 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 98% leased with an average (by annualized rental income) remaining lease term of 5.1 years.

We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, high interest rates, prolonged high inflation, labor market challenges, volatility in the public equity and debt markets, geopolitical risks, economic downturns or a possible recession and changes in real estate utilization.

We expect to experience continued variability in labor, insurance and food costs in our SHOP segment.

In response to significant and prolonged increases in inflation, the U.S.

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

As of March 31, 2024 Number

As of June 30, 2024 Number

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

11 unchanged sentences

Total 370 $ 7,198,061 100.0 % $ 371,392 100.0 % $ 67,327 100.0 %

As of and For the Three Months Ended March 31,

As of and For the Three Months Ended June 30,

Medical Office and Life Science Portfolio (5)

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

(5) Medical office and life science property occupancy data is as of March 31, 2024 and 2023 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.

During the three months ended March 31, 2024, we entered into new and renewal leases in our Medical Office and Life Science Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):

Three Months Ended March 31, 2024

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

During the three and six months ended June 30, 2024, we entered into new and renewal leases in our Medical Office and Life Science Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):

Three Months Ended June 30, 2024

New Leases Renewals Total

8 unchanged sentences

$ 11.30 $ 3.06 $ 7.32

Six Months Ended June 30, 2024

New Leases Renewals Total

Square feet leased during the quarter 62 140 202

Weighted average rental rate change (by rentable square feet) 23.1 % 8.0 % 11.8 %

Weighted average lease term (years) 7.4 3.5 4.6

Total leasing costs and concession commitments (1)

$ 4,720 $ 1,518 $ 6,238

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

$ 76.13 $ 10.85 $ 30.89

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

$ 10.34 $ 3.13 $ 6.77

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

During the three months ended March 31, 2024, we entered into renewal leases at three of our wellness centers totaling 129,600 square feet at rates that were 7.5% higher than prior rents for the same space at a weighted average lease term of five years.

During the six months ended June 30, 2024, we entered into renewal leases at three of our wellness centers totaling 129,600 square feet at rates that were 7.5% higher than prior rents for the same space at a weighted average lease term of five years.

We did not incur any leasing costs or concessions commitments for these renewals.

Lease Expiration Schedules

As of March 31, 2024, lease expirations in our Medical Office and Life Science Portfolio segment were as follows (dollars in thousands):

As of June 30, 2024, lease expirations in our Medical Office and Life Science Portfolio segment were as follows (dollars in thousands):

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

12 unchanged sentences

Weighted average remaining lease term (in years) 5.0 5.4

(1) Annualized rental income is based on rents pursuant to existing leases as of March 31, 2024, including straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our medical office and life science properties.

As of March 31, 2024, lease expirations at our triple net leased senior living communities leased to third party operators and wellness centers were as follows (dollars in thousands):

(1) Annualized rental income is based on rents pursuant to existing leases as of June 30, 2024, including straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excluding lease value amortization at certain of our medical office and life science properties.

As of June 30, 2024, lease expirations at our triple net leased senior living communities leased to third party operators and wellness centers were as follows (dollars in thousands):

Year Number of Properties Number of Units or Square Feet Annualized Rental Income (1)

13 unchanged sentences

Total 37 $ 39,267 100.0 %

(1) Annualized rental income is based on rents pursuant to existing leases as of March 31, 2024.

Weighted average remaining lease term (in years) (2)

(1) Annualized rental income is based on rents pursuant to existing leases as of June 30, 2024.

Annualized rental income includes estimated percentage rents and straight line rent adjustments and excludes lease value amortization.

(2) Weighted average lease term is calculated based on square feet and annualized rental income.

RESULTS OF OPERATIONS (dollars and square feet in thousands, unless otherwise noted)

5 unchanged sentences

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

The following table summarizes the results of operations of each of our segments for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table summarizes the results of operations of each of our segments for the three and six months ended June 30, 2024 and 2023:

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

2024 2023 2024 2023

Medical Office and Life Science Portfolio $ 54,555 $ 53,368 $ 108,704 $ 110,390

8 unchanged sentences

The following section analyzes and discusses the results of operations of each of our segments for the periods presented.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 (dollars and square feet in thousands, except average monthly rate):

Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the three months ended March 31, 2024 to the three months ended March 31, 2023.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023 (dollars and square feet in thousands, except average monthly rate):

Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the three months ended June 30, 2024 to the three months ended June 30, 2023.

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

Three Months Ended March 31,

Three Months Ended June 30,

2024 2023 $ Change % Change

8 unchanged sentences

Impairment of assets 6,545 11,299 (4,754) (42.1) %

(Loss) gain on sale of properties (5,874) 1,233 (7,107) nm

Gains and losses on equity securities, net — 8,126 (8,126) (100.0) %

Loss on sale of properties (13,213) — (13,213) (100.0) %

Gains and losses on equity securities, net — — — nm

Interest and other income 2,403 5,134 (2,731) (53.2) %

2 unchanged sentences

Loss on modification or early extinguishment of debt (209) — (209) (100.0) %

Loss before income tax (expense) benefit and equity in net earnings (losses) of investees (87,970) (52,042) (35,928) 69.0 %

Income tax (expense) benefit (187) 31 (218) nm

Equity in net earnings (losses) of investees 1,898 (647) 2,545 nm

Loss before income tax expense and equity in net (losses) earnings of investees (85,384) (75,279) (10,105) 13.4 %

Income tax expense (170) (221) 51 (23.1) %

Equity in net (losses) earnings of investees (12,307) 2,929 (15,236) nm

Net loss $ (97,861) $ (72,571) $ (25,290) 34.8 %

3 unchanged sentences

All Properties

As of March 31, As of March 31,

As of June 30, As of June 30,

2024 2023 2024 2023

2 unchanged sentences

Occupancy 87.4 % 94.0 % 81.5 % 85.8 %

Three Months Ended March 31,

Three Months Ended June 30,

Comparable (1)

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NOI $ 31,078 $ 32,895 $ (1,817) (5.5) % $ (805) $ (3,465) $ 30,273 $ 29,430 $ 843 2.9 %

(1) Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2023;

(1) Consists of medical office and life science properties that we have owned and which have been in service continuously since April 1, 2023;

excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and properties owned by unconsolidated joint ventures in each of which we own an equity interest.

1 unchanged sentence

Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by increased parking revenue at one of our properties.

Rental income also decreased at our non-comparable

properties primarily due to a tenant default at one of our properties, partially offset by an increase in rental income at one of our recently redeveloped properties.

Rental income increased at our non-comparable properties

primarily due to a tenant default at one of our properties in the 2023 period and an increase in rental income at one of our recently redeveloped properties, partially offset by dispositions since April 1, 2023.

Property operating expenses.

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

The increase in property operating expenses at our comparable properties is primarily due to an increase in repairs and maintenance expense, real estate taxes and other direct costs.

Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2023.

The increase in property operating expenses at our comparable properties is primarily due to increased insurance costs recorded in the 2024 period, partially offset by a decrease in real estate taxes due to refunds realized and a reduction in assessed values as a result of successful appeals in the 2024 period.

Property operating expenses decreased at our non-comparable properties primarily due to dispositions since April 1, 2023.

Net operating income.

3 unchanged sentences

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

Ended March 31, Ended March 31,

Ended June 30, Ended June 30,

2024 2023 2024 2023

4 unchanged sentences

$ 5,171 $ 4,877 $ 5,161 $ 4,862

Three Months Ended March 31,

Three Months Ended June 30,

Comparable (1)

5 unchanged sentences

NOI $ 30,378 $ 23,963 $ 6,415 26.8 % $ (1,394) $ (1,076) $ 28,984 $ 22,887 $ 6,097 26.6 %

(1) Consists of senior living communities that we have owned and which have been in service, reported in the same segment and operated by the same operator continuously since January 1, 2023;

(1) Consists of senior living communities that we have owned and which have been in service, reported in the same segment and operated by the same operator continuously since April 1, 2023;

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

5 unchanged sentences

Residents fees and services increased at our comparable properties primarily due to increases in occupancy and average monthly rate at our communities.

The activity for our non-comparable properties reflects the 13 communities transitioned to an existing third party manager during the 2024 period.

Property operating expenses.

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

Property operating expenses increased at our comparable properties primarily due to increases in labor costs, dietary expenses, insurance costs and other direct costs, partially offset by reduced contract labor.

Property operating expenses increased at our comparable properties primarily due to increases in labor costs, insurance costs, repairs and maintenance, dietary expenses and other direct costs, partially offset by reduced contract labor.

The activity for our non-comparable properties reflects the 13 communities transitioned to an existing third party manager during the 2024 period.

Net operating income.

3 unchanged sentences

All Properties

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

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

2024 2023 2024 2023

7 unchanged sentences

1.80 x 1.67 x 1.80 x 1.67 x

Three Months Ended March 31,

Three Months Ended June 30,

Comparable (2)

6 unchanged sentences

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

(2) Consists of properties that we have owned and which have been reported in the same segment and leased to the same operator continuously since April 1, 2023;

excludes properties classified as held for sale, if any.

(3) All tenant operating data presented are based upon the operating results provided by our tenants for the most recent prior period for which tenant operating results are available to us.

Rent coverage is calculated using the annualized operating cash flows from our triple net lease tenants' operations of our properties, before subordinated charges, if any, divided by annualized rental income.

We have not independently verified tenant operating data.

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

Excludes rent coverage for one of our closed senior living communities, the tenant of which was in default under the applicable lease with us as of June 30, 2024.

Rental income.

Rental income increased at our comparable properties primarily due to a new lease at one of our wellness centers.

Property operating expenses.

Property operating expenses consist of real estate taxes, insurance and other expenses that are not paid directly by our tenants.

Net operating income.

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

Consolidated :

General and administrative expense .

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

General and administrative expense decreased primarily due to the reversal of $849 of estimated business management incentive fees as of June 30, 2024 as a result of our total shareholder return no longer exceeding the returns for the MSCI U.S.

REIT/Health Care REIT Index over the applicable measurement period and a decrease in legal and other professional fees, partially offset by an increase in our business management fees of $656.

Acquisition and certain other transaction related costs.

Acquisition and certain other transaction related costs primarily represent costs incurred with acquisitions and non-recurring transactions that we expensed under GAAP.

We incurred transition costs, including termination and other fees, during the 2024 period as a result of our transition of 13 communities to an existing third party manager.

For more information about such transition of communities, see Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Impairment of assets.

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

Loss on sale of properties.

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

Interest and other income.

The decrease in interest and other income is primarily due to $1,466 of funds we received from certain programs under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, the American Rescue Plan Act, or ARPA, and various state programs in the 2023 period and lower average invested cash balances during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Interest expense.

Interest expense increased primarily due to the issuance of $940,534 of our senior secured notes due 2026 in December 2023, resulting in discount accretion of $21,440 in the 2024 period.

Additionally, we executed a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum.

The increase was partially offset by the repayment and termination of our former credit facility and the redemption of $250,000 of our senior notes that were scheduled to mature in May 2024.

The net proceeds from our $940,534 senior secured notes due 2026 were used to make these repayments aggregating $700,000 in December 2023.

Loss on modification or early extinguishment of debt .

During the three months ended June 30, 2024, we recorded a loss on early extinguishment of debt in connection with the redemption of $60,000 of our outstanding 9.75% senior unsecured notes due 2025 using proceeds from the $120,000 mortgage loan executed in May 2024.

Income tax expense .

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

Equity in net (losses) earnings of investees.

Equity in net (losses) earnings of investees is the change in the fair value of our investments in our joint ventures and also represents our proportionate share of the earnings of our equity method investment in AlerisLife.

For further information regarding our investment in AlerisLife, see Notes 3 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023 (dollars and square feet in thousands, except average monthly rate):

Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the six months ended June 30, 2024 to the six months ended June 30, 2023.

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

Six Months Ended June 30,

2024 2023 $ Change % Change

NOI by segment:

Medical Office and Life Science Portfolio $ 60,525 $ 62,937 $ (2,412) (3.8) %

SHOP 53,694 40,150 13,544 33.7 %

Non-Segment 16,280 16,854 (574) (3.4) %

Total NOI 130,499 119,941 10,558 8.8 %

Depreciation and amortization 138,490 133,194 5,296 4.0 %

General and administrative 13,830 13,157 673 5.1 %

Acquisition and certain other transaction related costs 1,912 6,136 (4,224) (68.8) %

Impairment of assets 18,687 17,224 1,463 8.5 %

Loss (gain) on sale of properties (19,087) 1,233 (20,320) nm

Gains and losses on equity securities, net — 8,126 (8,126) (100.0) %

Interest and other income 4,640 9,329 (4,689) (50.3) %

Interest expense

(116,278) (95,164) (21,114) 22.2 %

Loss on modification or early extinguishment of debt (209) (1,075) 866 (80.6) %

Loss before income tax expense and equity in net (losses) earnings of investees (173,354) (127,321) (46,033) 36.2 %

Income tax expense (357) (190) (167) 87.9 %

Equity in net (losses) earnings of investees (10,409) 2,282 (12,691) nm

Net loss $ (184,120) $ (125,229) $ (58,891) 47.0 %

nm - not meaningful

Medical Office and Life Science Portfolio :

Comparable Properties (1)

All Properties

As of June 30, As of June 30,

2024 2023 2024 2023

Total properties

92 92 101 105

Total square feet 7,590 7,580 8,396 8,797

Occupancy 87.4 % 94.0 % 81.5 % 85.8 %

Six Months Ended June 30,

Comparable (1)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2024 2023 Change Change 2024 2023 2024 2023 Change Change

Rental income $ 105,047 $ 107,216 $ (2,169) (2.0) % $ 3,657 $ 3,174 $ 108,704 $ 110,390 $ (1,686) (1.5) %

Property operating expenses (43,481) (41,509) 1,972 4.8 % (4,698) (5,944) (48,179) (47,453) 726 1.5 %

NOI $ 61,566 $ 65,707 $ (4,141) (6.3) % $ (1,041) $ (2,770) $ 60,525 $ 62,937 $ (2,412) (3.8) %

(1) Consists primarily of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2023;

excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and properties owned by unconsolidated joint ventures in each of which we own an equity interest.

Rental income.

Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by increased parking revenue at one of our properties.

Rental income increased at our non-comparable properties

Property operating expenses.

The increase in property operating expenses at our comparable properties is primarily due to increased insurance costs recorded in the 2024 period and increases in utility expenses and cleaning costs, partially offset by a decrease in real estate taxes due to refunds realized and a reduction in assessed values as a result of successful appeals in the 2024 period.

Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2023.

Net operating income.

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

Comparable Properties (1)

All Properties

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

2024 2023 2024 2023

Total properties 217 217 232 234

Number of units 24,446 24,446 25,230 25,322

Occupancy 79.5 % 77.6 % 78.9 % 77.4 %

Average monthly rate (2)

$ 5,173 $ 4,867 $ 5,163 $ 4,850

Six Months Ended June 30,

Comparable (1)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2024 2023 Change Change 2024 2023 2024 2023 Change Change

Residents fees and services $ 603,264 $ 551,281 $ 51,983 9.4 % $ 13,384 $ 13,157 $ 616,648 $ 564,438 $ 52,210 9.2 %

Property operating expenses (546,979) (508,971) 38,008 7.5 % (15,975) (15,317) (562,954) (524,288) 38,666 7.4 %

NOI $ 56,285 $ 42,310 $ 13,975 33.0 % $ (2,591) $ (2,160) $ 53,694 $ 40,150 $ 13,544 33.7 %

(1) Consists of senior living communities that we have owned and which have been in service, reported in the same segment and operated by the same operator continuously since January 1, 2023;

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

(2) Average monthly rate reflects the average monthly residents fees and services per occupied unit for the period presented.

The average monthly rate is calculated based on the actual number of days during the period.

Residents fees and services.

Residents fees and services increased at our comparable properties primarily due to increases in occupancy and average monthly rate at our communities.

The activity for our non-comparable properties reflects the 13 communities transitioned to an existing third party manager during the 2024 period.

Property operating expenses.

Property operating expenses increased at our comparable properties primarily due to increases in labor costs, insurance costs, dietary expenses and other direct costs, partially offset by reduced contract labor.

The activity for our non-comparable properties reflects the 13 communities transitioned to an existing third party manager during the 2024 period.

Net operating income.

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

Non-Segment (1) :

Comparable Properties (2)

All Properties

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

2024 2023 2024 2023

Total properties:

Triple net leased senior living communities 26 26 27 27

Wellness centers 10 10 10 10

Rent coverage:

Triple net leased senior living communities (3)

1.89 x 1.80 x 1.89 x 1.80 x

Wellness centers (3)

1.80 x 1.67 x 1.80 x 1.67 x

Six Months Ended June 30,

Comparable (2)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2024 2023 Change Change 2024 2023 2024 2023 Change Change

Rental income $ 16,676 $ 17,421 $ (745) (4.3) % $ 140 $ — $ 16,816 $ 17,421 $ (605) (3.5) %

Property operating expenses (493) (567) (74) (13.1) % (43) — (536) (567) (31) (5.5) %

NOI $ 16,183 $ 16,854 $ (671) (4.0) % $ 97 $ — $ 16,280 $ 16,854 $ (574) (3.4) %

(2) Consists of properties that we have owned and which have been reported in the same segment and leased to the same operator continuously since January 1, 2023;

4 unchanged sentences

Excludes rent coverage for one of our closed senior living communities, the tenant of which was in default under the applicable lease with us as of March 31, 2024.

Excludes rent coverage for one of our closed senior living communities, the tenant of which was in default under the applicable lease with us as of June 30, 2024.

Rental income.

Rental income decreased at our comparable properties primarily due to a cash settlement and higher cash rents received during the three months ended March 31, 2023 from a tenant previously in default under leases for six of our wellness centers.

Rental income decreased at our comparable properties primarily due to a cash settlement and higher cash rents received during the 2023 period from a tenant previously in default under leases for six of our wellness centers.

In January 2023, we agreed to amend the lease for three of these wellness centers and repossess the remaining three wellness centers.

2 unchanged sentences

Property operating expenses consist of real estate taxes, insurance and other expenses that are not paid directly by our tenants.

There was not a significant change in property operating expenses.

Net operating income.

4 unchanged sentences

General and administrative expense .

General and administrative expense increased primarily due to $849 of estimated business management incentive fees that we recognized for the three months ended March 31, 2024 as a result of our total shareholder return exceeding the returns for the MSCI U.S.

REIT/Health Care REIT Index over the applicable measurement period and an increase in our business management fees of $759.

General and administrative expense increased primarily due to an increase in our business management fees of $1,416, partially offset by a reduction in legal and other professional fees.

Acquisition and certain other transaction related costs.

Acquisition and certain other transaction related costs primarily represent costs incurred with acquisitions and non-recurring transactions that we expensed under GAAP.

We incurred transition costs, including termination and other fees, during the 2024 period as a result of our transition of 13 communities to an existing third party manager.

For more information about such transition of communities, see Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Impairment of assets.

6 unchanged sentences

Interest and other income.

The decrease in interest and other income is primarily due to lower average invested cash balances, partially offset by increased interest rates on invested cash balances during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

The decrease in interest and other income is primarily due to lower average invested cash balances during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 and $1,466 of funds we received from certain programs under the CARES Act, ARPA and various state programs in the 2023 period.

Interest expense.

Interest expense increased primarily due to the issuance of $940,534 of our senior secured notes due 2026 in December 2023, resulting in discount accretion of $42,099 in the 2024 period.

This increase was partially offset by the repayment and termination of our former credit facility and the redemption of $250,000 of our senior notes that were scheduled to mature in May 2024.

The net proceeds from our $940,534 senior secured notes due 2026 were used to make these repayments aggregating $700,000.

Income tax (expense) benefit .

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

Equity in net earnings (losses) of investees.

Equity in net earnings (losses) of investees is the change in the fair value of our investments in our joint ventures and also represents our proportionate share of the earnings of our equity method investment in AlerisLife.

Additionally, we executed a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum.

The increase was partially offset by the repayment and termination of our former credit facility and the redemption of $250,000 of our senior notes that were scheduled to mature in May 2024.

The net proceeds from our $940,534 senior secured notes due 2026 were used to make these repayments in December 2023 aggregating $700,000.

Loss on modification or early extinguishment of debt .

During the six months ended June 30, 2024, we recorded a loss on early extinguishment of debt in connection with the redemption of $60,000 of our outstanding 9.75% senior unsecured notes due 2025 using proceeds from the $120,000 mortgage loan executed in May 2024.

During the six months ended June 30, 2023, we recorded a loss on modification or early extinguishment of debt in connection with an amendment to our then credit agreement.

Income tax expense .

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

Equity in net (losses) earnings of investees.

For further information regarding our investment in AlerisLife, see Notes 3 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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

We present certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or the SEC, including funds from operations, or FFO, normalized funds from operations, or Normalized FFO, and NOI for the three months ended March 31, 2024 and 2023.

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

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Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.

Our calculations of FFO and Normalized FFO for the three months ended March 31, 2024 and 2023 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO and Normalized FFO appear in the following table.

Our calculations of FFO and Normalized FFO for the three and six months ended June 30, 2024 and 2023 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO and Normalized FFO appear in the following table.

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Net loss $ (97,861) $ (72,571) $ (184,120) $ (125,229)

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Gains on equity securities, net — — — (8,126)

Equity in net (earnings) losses of investees (1,898) 647

Equity in net losses (earnings) of investees 12,307 (2,929) 10,409 (2,282)

Share of FFO from unconsolidated joint ventures 2,047 1,897 4,061 3,896

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

The following table includes the reconciliation of net loss to NOI for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

The following table includes the reconciliation of net loss to NOI for the three and six months ended June 30, 2024 and 2023.

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

2024 2023 2024 2023

Reconciliation of Net Loss to NOI:

Net loss $ (97,861) $ (72,571) $ (184,120) $ (125,229)

Equity in net (earnings) losses of investees (1,898) 647

Income tax expense (benefit) 187 (31)

Loss before income tax (expense) benefit and equity in net earnings (losses) of investees (87,970) (52,042)

Equity in net losses (earnings) of investees 12,307 (2,929) 10,409 (2,282)

Income tax expense 170 221 357 190

Loss before income tax expense and equity in net losses (earnings) of investees (85,384) (75,279) (173,354) (127,321)

Loss on modification or early extinguishment of debt 209 — 209 1,075

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Gains on equity securities, net — — — (8,126)

Loss (gain) on sale of properties 5,874 (1,233)

Losses (gains) on sale of properties 13,213 — 19,087 (1,233)

Impairment of assets 6,545 11,299 18,687 17,224

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While we are encouraged by positive trends, including increases in rates and occupancy in our SHOP segment and favorable supply and demand dynamics in the senior living industry, generally, we cannot be sure that these trends will continue to benefit us and any benefits we do realize may be uneven.

While we continue to experience volatility in labor, insurance and food costs in our SHOP segment, we expect increases in these costs to moderate and we continue to work with our senior living operators to manage these costs and to increase rates and occupancy at our communities, which we believe will enable our managers to generate better returns to us.

While we continue to experience variability in labor, insurance and food costs in our SHOP segment, we expect increases in these costs to moderate and we continue to work with our senior living operators to manage these costs and to increase rates and occupancy at our communities, which we believe will enable our managers to generate better returns to us.

We also continue to invest capital in our SHOP segment in order to capitalize on these positive trends and increase the probability of higher cash flows to us.

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We used a portion of the net proceeds to repay in full the $450.0 million outstanding under our then secured credit facility and to redeem $250.0 million of our senior notes that were scheduled to mature in May 2024.

As a result of these transactions, we have no significant debt maturities until June 2025 when $500.0 million of our senior notes will become due, and as of March 31, 2024, we had $207.1 million of cash and cash equivalents.

Additionally, as of March 31, 2024, our ratio of consolidated income available for debt service to debt service is above the 1.5x incurrence requirement under our senior notes, on a pro forma basis.

We are able to refinance existing or maturing debt and issue new debt as long as this ratio is at or above 1.5x on a pro forma basis at the time of such refinancing or issuance.

Until its repayment in full and termination on December 21, 2023, we had a $450.0 million credit facility that was fully drawn.

During the three months ended March 31, 2024, we sold one property for a sales price of $3.6 million, excluding closing costs.

As of May 2, 2024, we had two properties under agreements to sell for an aggregate sales price of approximately $10.4 million, excluding closing costs.

On May 30, 2024, we executed a $120.0 million fixed rate, interest only mortgage loan secured by eight medical office and life science properties.

This mortgage loan matures in June 2034 and requires that interest be paid at an annual rate of 6.864%.

The net proceeds from this mortgage loan were approximately $117.1 million after deducting estimated closing costs, and we used $60.0 million of the net proceeds to partially redeem our then outstanding $500.0 million senior notes due 2025.

As a result of these transactions, we have no significant debt maturities until June 2025 when $440.0 million of our senior notes will become due, and as of June 30, 2024, we had $265.6 million of cash and cash equivalents.

Additionally, as of June 30, 2024, our ratio of consolidated income available for debt service to debt service is above the 1.5x incurrence requirement under our senior notes, on a pro forma basis.

We are able to refinance existing or maturing debt and issue new debt as long as this ratio is at or above 1.5x on a pro forma basis at the time of such refinancing or issuance.

Based on the significant number of unencumbered properties in our SHOP segment and our demonstrated ability to execute debt financings, we believe we will likely be able to obtain additional debt financing that will allow us to satisfy the $440.0 million outstanding principal amount of our 9.75% senior unsecured notes due 2025.

During the six months ended June 30, 2024, we sold two properties for an aggregate sales price of $7.8 million, excluding closing costs.

Subsequent to June 30, 2024, we sold two properties for an aggregate sales price of $21.3 million, excluding closing costs, and as of July 31, 2024, we had an additional property under agreement to sell for a sales price of $5.5 million, excluding closing costs.

We may not complete the sales of any or all of the properties we currently plan to sell.

Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result.

For further information regarding our dispositions, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents and restricted cash at beginning of period $ 246,961 $ 688,302

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We generally receive minimum rents from tenants at our medical office and life science properties, triple net leased senior living communities and wellness centers monthly, we receive residents fees and services revenues, net of expenses, from our managed senior living communities monthly and we receive percentage rents from tenants at certain of our senior living communities monthly, quarterly or annually.

The change in cash provided by operating activities for the three months ended March 31, 2024 compared to the prior period was primarily due to increased NOI as a result of increased rates and occupancy at the senior living communities in our SHOP segment.

Additionally, cash interest payments decreased in the 2024 period compared to the 2023 period primarily due to the repayment and termination of our former credit facility and the redemption of $250.0 million of senior notes that were scheduled to mature in May 2024.

The increase in cash provided by operating activities for the six months ended June 30, 2024 compared to the prior period was primarily due to increased NOI as a result of increased rates and occupancy at the senior living communities in our SHOP segment.

Our Investing Liquidity and Resources

The change in cash used in investing activities for the three months ended March 31, 2024 compared to the prior period was primarily due to our purchase on February 16, 2024 of approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price of $1.31 per share for a total purchase price, including transaction related costs, of $15.5 million, partially offset by a decrease in real estate improvements in the 2024 period compared to the 2023 period.

The increase in cash used in investing activities for the six months ended June 30, 2024 compared to the prior period was primarily due to our purchase on February 16, 2024 of approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price of $1.31 per share for a total purchase price, including transaction related costs, of $15.5 million.

In the 2023 period, we tendered all of our AlerisLife common shares at $1.31 per share.

The increase was partially offset by a decrease in real estate improvements and an increase in proceeds from the sale of properties in the 2024 period compared to the 2023 period.

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Medical Office and Life Science Portfolio capital expenditures:

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Building improvements (2)

1,852 2,561 2,771 3,417

Recurring capital expenditures - Medical Office and Life Science Portfolio 8,261 11,845 15,209 19,449

Wellness centers lease related costs (1)

4,591 884 11,514 884

SHOP segment fixed assets and capital improvements 21,623 18,407 31,714 42,051

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

5,705 20,405 6,894 36,628

Total development, redevelopment and other activities $ 6,817 $ 25,197 $ 8,719 $ 43,342

Capital expenditures by segment:

Medical Office and Life Science Portfolio $ 9,373 $ 16,637 $ 17,034 $ 26,163

SHOP 27,328 38,812 38,608 78,679

Wellness centers 4,591 884 11,514 884

Total capital expenditures $ 41,292 $ 56,333 $ 67,156 $ 105,726

(1) Lease related costs generally include capital expenditures to improve tenants' space or amounts paid directly to tenants to improve their space and other leasing related costs, such as brokerage commissions and tenant inducements.

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We generally plan to continue investing capital in our properties, including redevelopment projects, to better position these properties in their respective markets in order to increase our returns in future years.

However, we have deferred, and may continue to defer, our capital expenditures to preserve liquidity.

As of March 31, 2024, we had estimated unspent leasing related obligations at our triple net leased wellness centers and our medical office and life science properties of approximately $43.2 million, of which we expect to spend approximately $33.1 million during the next 12 months.

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

We are currently in the process of redeveloping certain properties in our Medical Office and Life Science Portfolio and a number of our managed senior living communities, which projects are expected to be completed at various times between 2024 and 2025.

As of June 30, 2024, we had estimated unspent leasing related obligations at our triple net leased wellness centers and our medical office and life science properties of approximately $37.9 million, of which we expect to spend approximately $26.7 million during the next 12 months.

We are currently in the process of redeveloping certain properties, primarily our managed senior living communities, which projects are expected to be completed at various times between 2024 and 2025.

We continue to assess opportunities to redevelop other properties in our Medical Office and Life Science Portfolio and SHOP segment.

These redevelopment projects may require significant capital expenditures and time to complete, and we have deferred, and may in the future defer, certain redevelopment projects to preserve liquidity.

These redevelopment projects may require significant capital expenditures and time to complete, and we may defer certain redevelopment projects to preserve liquidity.

Due to labor availability constraints and wage and commodity price inflation, the capital investments we plan to make may be delayed or cost more than we expect.

For further information regarding our dispositions, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our Financing Liquidity and Resources

The change in cash used in financing activities for the three months ended March 31, 2024 compared to the prior period was primarily due to higher repayments of borrowings under our former credit facility during the 2023 period.

As of March 31, 2024, we had $207.1 million of cash and cash equivalents.

The change in cash provided by financing activities for the six months ended June 30, 2024 compared to cash used in financing activities for the prior period was primarily due to our execution of a $120.0 million mortgage loan in the 2024 period and our redemption of $250.0 million of our senior notes in the 2023 period, partially offset by the redemption of $60.0 million of our senior notes in the 2024 period.

As of June 30, 2024, we had $265.6 million of cash and cash equivalents.

We typically use cash balances, net proceeds from offerings of securities, debt issuances or dispositions of assets and cash flows from our operations to fund our operations, debt repayments, distributions, acquisitions, investments, capital expenditures and other general business purposes.

Until its repayment in full and termination on December 21, 2023, we had a $450.0 million credit facility that was fully drawn.

At December 21, 2023, our former credit facility required interest to be paid on borrowings at an annual rate of 8.4%, plus a facility fee of $0.3 million per quarter.

During the three months ended March 31, 2024, we paid quarterly cash distributions to our shareholders totaling approximately $2.4 million using existing cash balances.

On April 11, 2024, we declared a quarterly distribution payable to common shareholders of record on April 22, 2024 in the amount of $0.01 per share, or approximately $2.4 million.

We expect to pay this distribution on or about May 16, 2024 using cash on hand.

During the six months ended June 30, 2024, we paid quarterly cash distributions to our shareholders totaling approximately $4.8 million using existing cash balances.

On July 11, 2024, we declared a quarterly distribution payable to common shareholders of record on July 22, 2024 in the amount of $0.01 per share, or approximately $2.4 million.

We expect to pay this distribution on or about August 15, 2024 using cash on hand.

For further information regarding the distribution we paid during 2023, see Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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

A protracted negative impact on the economy or the industries in which our properties and businesses operate, wage and commodity price inflation, high interest rates, increased insurance costs, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, economic downturns and a possible recession, may have various negative consequences including a decline in financing availability and increased costs for financing.

A protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from wage and commodity price inflation, high interest rates, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, economic downturns and a possible recession, may have various negative consequences including a decline in financing availability and increased costs for financing.

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

In January 2023, pursuant to the then existing credit agreement, we repaid $113.6 million in outstanding borrowings under our former credit facility and the commitments were reduced to $586.4 million.

In February 2023, we and our lenders amended the credit agreement to reduce the commitments from $586.4 million to $450.0 million following our repayment of $136.4 million in outstanding borrowings under our former credit facility.

In December 2023, we issued $940.5 million in aggregate principal amount at maturity of our senior secured notes due 2026 in a private offering, raising net proceeds of $730.4 million, after deducting initial purchaser discounts and estimated offering costs.

These notes are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries.

In January 2023, we repaid $113.6 million in outstanding borrowings under our former credit facility and the commitments were reduced to $586.4 million.

In February 2023, we reduced the commitments from $586.4 million to $450.0 million following our repayment of $136.4 million in outstanding borrowings under our former credit facility.

Until its repayment in full and termination on December 21, 2023, we had a $450.0 million credit facility that was fully drawn.

At December 21, 2023, our former credit facility required interest to be paid on borrowings at an annual rate of 8.4%, plus a facility fee of $0.3 million per quarter.

Our $940.5 million in outstanding senior secured notes due 2026 are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries.

These notes and the guarantees provided by the Collateral Guarantors are secured by a first priority lien and security interest in each of the collateral properties and 100% of the equity interests in each of the Collateral Guarantors.

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The accreted value of these notes will increase at a rate of 11.25% per annum compounded semiannually on January 15 and July 15 of each year.

We used the net proceeds from this offering to repay in full and terminate our then $450.0 million secured credit facility and to redeem $250.0 million of our senior notes which were scheduled to mature in May 2024.

In January 2024, Moody's Investors Service, or Moody's, upgraded our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 ratings from Ca to Caa3 and our senior unsecured debt rating from C to Ca, and Moody's also assigned a Caa2 rating to our senior secured notes due 2026.

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Debt Covenants

Our principal debt obligations at March 31, 2024 were:

Our principal debt obligations at June 30, 2024 were:

(1) $2.0 billion outstanding principal amount of senior unsecured notes;

(2) $940.5 million outstanding principal amount of senior secured notes;

and (3) $8.7 million aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by one property.

and (3) $128.3 million aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by nine properties.

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

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

As of March 31, 2024, we believe we were in compliance with all of the covenants under our senior notes indentures and their supplements and our other debt obligations.

As of June 30, 2024, we believe we were in compliance with all of the covenants under our senior notes indentures and their supplements and our other debt obligations.

Although we continue to take steps to enhance our ability to maintain sufficient liquidity, as noted elsewhere in this Quarterly Report on Form 10-Q, a protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from wage or commodity price inflation, high interest rates, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, economic downturns or a possible recession, may cause increased pressure on our ability to satisfy financial and other covenants.

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

We subsequently redeemed $500.0 million of this debt in June 2022, with $500.0 million remaining outstanding.

We subsequently redeemed $500.0 million and $60.0 million of this debt in June 2022 and June 2024, respectively, with $440.0 million remaining outstanding.

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

As of March 31, 2024, all $500.0 million of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint, several and unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries.

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

As of June 30, 2024, all $440.0 million of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint, several and unsecured basis, by all of our subsidiaries except certain excluded subsidiaries.

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

Our remaining $1.1 billion of senior unsecured notes do not have the benefit of any guarantees.

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

Our non-guarantor subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on our 9.75% senior notes due 2025 or our 4.375% senior notes due 2031 or the respective guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments.

dividend, distribution, loan or other payments.

The rights of holders of our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, as applicable, to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries' creditors and any preferred equity holders.

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Real estate properties, net $ 3,391,406 $ 3,667,818

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Total liabilities $ 3,005,125 $ 3,045,346

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Revenues $ 635,495

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Impact of Government Reimbursement

For the three months ended March 31, 2024, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments.

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

For the six months ended June 30, 2024, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments.

Nonetheless, we own, and our

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis