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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-26 · 223 added, 264 removed, 443 unchanged (52% of the section changed)

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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 December 31, 2023, we owned 371 properties located in 36 states and Washington, D.C., including one property classified as held for sale and three closed senior living communities.

At December 31, 2023, 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 December 31, 2024, we owned 367 properties located in 36 states and Washington, D.C., including 32 properties classified as held for sale and three closed senior living communities.

As of December 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 99% leased with an average (by annualized rental income) remaining lease term of 15.1 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 continued volatility in labor, insurance and food costs in our SHOP segment.

For further information and risks relating to these economic uncertainties 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 1, "Business" and Part I, Item 1A, "Risk Factors".

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

Federal Reserve has raised interest rates multiple times since the beginning of 2022.

Although the U.S.

Federal Reserve has indicated that it may lower interest rates in 2024, we cannot be sure that it will do so, and interest rates may remain at the current high levels or continue to increase.

These inflationary pressures in the United States, as well as global geopolitical instability and tensions, have given rise to uncertainty regarding economic downturns or a possible recession and potential disruptions in the financial markets.

An economic recession, 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 or willingness of our managers, operators, tenants or residents to pay amounts owed to us, could impair our ability to effectively deploy our capital or realize our target returns on our investments, 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 are encouraged by positive trends, including increases in rates and occupancy in our SHOP segment.

Additionally, we also expect favorable supply and demand dynamics in the senior living industry to enable our operators to generate better returns at our communities than we have experienced in the years following the COVID-19 pandemic.

While certain costs, primarily labor, insurance and food costs, have increased, we expect these cost increases to moderate and decline, which will provide our operators the opportunity to increase rates in excess of increases in costs, resulting in improving returns to us.

On April 11, 2023, we and Office Properties Income Trust, or OPI, entered into an Agreement and Plan of Merger, or the Merger Agreement, pursuant to which we and OPI agreed that we would merge with and into OPI, with OPI as the surviving entity in the merger.

On September 1, 2023, we and OPI mutually terminated the Merger Agreement, effective September 1, 2023.

Neither we nor OPI were required to pay any termination fee as a result of the mutual decision to terminate the Merger Agreement, and we and OPI bore our and its respective costs and expenses related to the Merger Agreement in accordance with the terms of the Merger Agreement.

We recorded $9.9 million of expenses during the year ended December 31, 2023 related to the terminated merger with OPI, which is included in acquisition and certain other transaction related costs in our consolidated statement of operations.

For more information regarding the merger, see Note 8 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Additionally, we expect that favorable supply and demand dynamics in the senior living industry will enable our managers to continue to grow occupancy and drive positive performance.

While certain costs, primarily labor, insurance and food costs, have increased, we expect these cost increases to moderate, which will provide our managers the opportunity to increase rates in excess of increases in costs, resulting in improving returns to us.

In an effort to optimize performance, our asset management team reviews the results of each of our senior living communities and our operators, taking into account various factors such as performance metric benchmarks, location and other relevant data points.

This comprehensive review process ensures that our decisions are data-driven and strategically aligned with our overall objectives.

As a result of these reviews, our strategy to drive positive performance includes analyzing non-performing communities for potential disposition or transition to different operators.

We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, uncertainties surrounding interest rates and inflation, volatility in the public debt and equity markets, global geopolitical hostilities and tensions, economic uncertainties, labor market conditions and changes in real estate utilization.

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

Inflationary pressures in the United States, as well as global geopolitical instability and tensions, have given rise to uncertainty regarding potential disruptions in the financial markets.

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 or willingness of our managers, operators, tenants or residents to pay amounts owed to us, could impair our ability to effectively deploy our capital or realize our target returns on our investments, 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.

PORTFOLIO OVERVIEW

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2024 Revenues % of 2024 Revenues 2024

Office Portfolio (4)

102 8,609,921 sq.

Medical Office and Life Science Portfolio 98 7,952,711 sq.

$ 2,136,386 29.8 % $ 269 $ 213,320 14.3 % $ 115,683 44.7 %

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As of and for the Year Ended December 31,

Office Portfolio (5)

Medical Office and Life Science Portfolio (4)

82.2 % 86.9 %

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Triple net leased senior living communities 100.0 % 100.0 %

80.7 % 79.9 %

Wellness centers 100.0 % 100.0 %

100.0 % 100.0 %

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

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

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

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.

(4) Medical office and life science property occupancy data is as of December 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.

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

(7) Operating data for our triple net leased senior living communities leased to third party operators and wellness centers are presented based upon the operating results provided by our tenants for the 12 months ended September 30, 2023 and 2022, or the most recent prior period for which tenant operating results are made available to us.

We have not independently verified tenant operating data.

We operate in, and report financial information for, the following two segments:

Office Portfolio and SHOP.

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

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

We also report “non-segment” operations, which consists of triple net leased senior living communities that are leased to third party operators from which we receive rents and wellness centers.

Office Portfolio

Medical Office and Life Science Portfolio and SHOP.

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

We also report “all other” operations, which consists of triple net leased wellness centers and senior living communities that are leased to third party operators from which we receive rents.

Medical Office and Life Science Portfolio

As of December 31, 2024, we owned 98 medical office and life science properties located in 24 states and Washington, D.C.

These properties have a total of 8.0 million square feet.

During the year ended December 31, 2023, we entered into new and renewal leases in our Office Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):

During the year ended December 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):

Year Ended December 31, 2024

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

As of December 31, 2023, lease expirations in our Office Portfolio segment were as follows (dollars in thousands):

As of December 31, 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)

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(1) Annualized rental income is based on rents pursuant to existing leases as of December 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.

The following table presents information concerning our Office Portfolio tenants that represent 1% or more of total Office Portfolio annualized rental income as of December 31, 2023 (dollars in thousands):

The following table presents information concerning our Medical Office and Life Science Portfolio tenants that represent 1% or more of total Medical Office and Life Science Portfolio annualized rental income as of December 31, 2024 (dollars in thousands):

Tenant Square Feet

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54,633 0.8% 5,434 2.6% 2032

Boston Children's Hospital 99,063 1.4% 5,573 2.6% 2028

Merck & Co., Inc.

55,102 0.8% 5,335 2.6% 2033

Medtronic, Inc.

201,522 3.1% 5,297 2.5% 2027 - 2028

Sonova Holding AG 116,444 1.8% 5,085 2.4% 2033

Boston Children's Hospital 99,063 1.5% 4,809 2.3% 2028

Magellan Health Inc.

232,521 3.6% 4,688 2.3% 2025

Medtronic, Inc.

201,522 2.8% 4,512 2.1% 2027 - 2028

Tokio Marine Holdings Inc.

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149,719 2.3% 3,926 1.9% 2026

Cigna Holding Co.

219,644 3.0% 3,914 1.8% 2024

PerkinElmer Health Sciences, Inc.

105,462 1.5% 3,681 1.7% 2028

McKesson Corporation 477,772 7.3% 3,823 1.8% 2028 - 2030

Hawaii Pacific Health 85,956 1.3% 3,803 1.8% 2026 - 2029

Revvity, Inc.

105,462 1.6% 3,681 1.8% 2028

HCA Holdings Inc.

72,097 1.1% 3,455 1.7% 2025 - 2029

Duke University 126,225 1.7% 3,359 1.6% 2024

Hawaii Pacific Health 85,956 1.2% 3,289 1.5% 2024 - 2029

New York University 109,983 1.7% 3,245 1.6% 2025 - 2028

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63,048 1.0% 3,107 1.5% 2026

Virginia Commonwealth University Health System 135,375 1.9% 2,920 1.4% 2032

Sentara Health 139,212 2.1% 3,015 1.4% 2027 - 2032

WRA Management, Inc.

35,067 0.5% 2,594 1.2% 2025 - 2045

The University of Kansas Health System 104,815 1.4% 2,462 1.1% 2027 - 2028

Organogenesis Holdings Inc.

22,966 0.4% 2,463 1.2% 2031

Covenant Health System 55,807 0.8% 2,376 1.1% 2034

Warner Chilcott Limited 81,712 1.1% 2,280 1.1% 2027

The University of Kansas Health System 104,815 1.6% 2,453 1.2% 2027 - 2028

Cytek BioSciences, Inc.

99,378 1.5% 2,260 1.1% 2029

Warner Chilcott Limited 81,712 1.2% 2,258 1.1% 2027

Think Surgical, Inc.

75,920 1.2% 2,141 1.0% 2026

Covenant Health System 55,807 0.9% 2,121 1.0% 2034

All Other Tenants 3,101,788 47.4% 101,124 48.6% 2025 - 2043

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(2) In January 2025, we sold three life science properties, including properties leased by these tenants, for a sales price of $159,025, excluding closing costs.

Senior Housing Operating Portfolio

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Five Star, which is an operating division of AlerisLife, manages many of our SHOP communities, and we lease nearly all of our senior living communities, including those managed by third party managers, to our TRSs.

In June 2021, we amended our then existing management arrangements with Five Star and Five Star agreed to cooperate with us in transitioning 108 of our senior living communities to other third party managers.

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.

Pursuant to the Master Management Agreement, Five Star receives a

management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for its direct costs and expenses related to such communities.

Five Star manages 118 of our senior living communities for our account pursuant to an amended and restated master management agreement, or the Master Management Agreement.

Pursuant to the Master Management Agreement, Five Star receives a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for its direct costs and expenses related to such communities.

Five Star may receive an annual incentive fee equal to 15% of the amount by which the annual EBITDA of all communities on a combined basis exceeds the target EBITDA for all communities on a combined basis for such calendar year.

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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, 2023, Five Star managed 119 senior living communities for our account.

We completed the transition of 107 senior living communities from Five Star to other third party managers in 2021 and we have closed the remaining senior living community.

Our other third party managers manage 114 of our senior living communities.

In October 2022, we and one of our operators agreed to terminate the lease agreements for three of these senior living communities and replaced them with management agreements under our TRS structure, and an affiliate of the same operator will continue to operate these properties.

Additionally, effective October 31, 2022, Five Star ceased managing our active adult community, and RMR assumed management of that community.

For the years ended December 31, 2023, 2022 and 2021, we recorded $0, $2.1 million and $17.4 million, respectively, of costs that we incurred related to retention and other transition costs to acquisition and certain other transaction related costs in our consolidated statements of operations.

In March 2024, we terminated our management agreement with one of our third party managers, Cedarhurst Senior Living, which manages certain of our communities located in Wisconsin and Illinois and transitioned these communities to another third party manager, Charter Senior Living, with which we have an existing relationship.

For the years ended December 31, 2024, 2023 and 2022, we recorded $2.2 million, $0.0 million and $2.1 million, respectively, of costs that we incurred related to retention, transition, termination and other costs to acquisition and certain other transaction related costs in our consolidated statements of comprehensive income (loss).

The terms of the management agreements with the other third party managers are generally as follows:

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The management agreements with the other third party managers also generally provide us with the right to terminate the management agreements for communities that do not earn 70% to 80% of the target EBITDA for such communities, after an agreed upon stabilized period.

In December 2023, we notified one of our third party managers, Cedarhurst Senior Living, which manages certain of our communities located in Wisconsin and Illinois, that we will be terminating our management agreement with respect to these communities.

We expect to transition these communities during the first half of 2024 to another third party manager, Charter Senior Living, which we have an existing relationship with.

We expect the terms of the management agreement for these communities to be generally consistent with the terms outlined above.

We expect to pay a termination fee of approximately $1.0 million in connection with this transition.

The following table presents a summary of the other third party managers as of December 31, 2024:

Manager Location Number of Communities Number of Units

Cedarhurst Senior Living IL/WI 13 767

Charter Senior Living FL/MD/TN/VA 17 977

Charter Senior Living FL/MD/TN/VA/IL/WI 30 1,759

IntegraCare Senior Living PA 2 146

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Stellar Senior Living CO/TX/WY 10 1,094

Total 111 7,554

(1) Excludes three closed senior living communities.

For further information regarding the terms of the Master Management Agreement and of the management agreements with the other third party managers and our other business arrangements with Five Star, see Note 6 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, and for more information about our dealings and relationships with Five Star generally, and the risks which may arise as a result of these related person transactions, see “Risk Factors—Risks Related to Our Relationships with RMR and AlerisLife (including Five Star)” in Part I, Item 1A of this Annual Report on Form 10-K, “Related Person Transactions” below and Note 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

As of December 31, 2023, lease expirations at our triple net leased senior living communities leased to third party operators and wellness centers were as follows (dollars in thousands):

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

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

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2025 — — $ — — % — %

2025 3 129,500 sq.

2026 — — — — % — %

2027 4 533 units 4,659 11.7 % 11.7 %

2028 — — — — % 11.7 %

2029 1 155 units 547 1.4 % 13.1 %

2030 5 283 units and 129,600 sq.

5,046 12.7 % 25.8 %

2031 — — — — % 25.8 %

18 876 units 10,254 25.8 % 51.6 %

2033 1 215 units 5,177 13.0 % 64.6 %

2034 and thereafter 7 682,646 sq.

14,068 35.4 % 100.0 %

2032 18 876 units 9,836 25.1 % 50.9 %

2033 and thereafter 8 215 units and 682,500 sq.

36 $ 39,751 100.0 %

Total 37 $ 39,176 100.0 %

Weighted average remaining lease term (in years) (4)

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

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

During the year ended December 31, 2023 we entered into new leases at certain of our wellness centers in our "non-segment" operations as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):

Year Ended December 31, 2023

Square feet leased during the period 225

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

Weighted average lease term (years)

Total leasing costs and concession commitments (1)

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

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

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

(2) We have entered into an agreement to sell these 18 communities for a sales price of $135.0 million, excluding closing costs.

We expect this sale to close during the first quarter of 2025.

(3) Excludes one closed senior living community classified as held for sale as of December 31, 2024.

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

During the year ended December 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.

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

GENERAL INDUSTRY TRENDS

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The healthcare sector’s continued expansion has been driven by rising standards of care, increasing life expectancies and other demographic trends, as well as funding from both public and private sources.

In the medical office sector, the industry has been trending toward a greater proportion of outpatient care resulting in an increasing number of multi-practice medical office buildings, anchor leased by hospital systems, and a decline in free-standing medical practices, a potential benefit to our Office Portfolio.

The pandemic further accelerated this trend because of stronger consumer preference for off-campus care in more convenient locations.

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In the life science sector, particularly with properties that provide laboratory or medical manufacturing space, over the years there has been significant capital invested across the bio-medical research space, driving a large increase in demand for laboratory and research space.

Venture capital funding reached an all-time high in 2021;

however, such funding significantly declined in 2022 and 2023.

Funding in the past two years has been increasingly concentrated on companies located in the top three markets of Boston, San Francisco and San Diego with more stringent requirements.

New construction of life science properties hit record levels in 2021 and 2023 across major markets, and the construction pipeline, while decreasing, remains elevated into 2024.

Venture capital funding significantly declined in 2022, 2023 and 2024.

Funding in the past three years has been increasingly concentrated on companies located in the top three markets of Boston, San Francisco and San Diego with more stringent requirements.

New construction of life science properties hit record levels in 2023 across major markets, and the construction pipeline, while decreasing, remains elevated into 2025.

This has been met by softening demand from tenants and resulted in rising vacancy rates across the major life science markets.

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We believe there is a favorable mix of increased demand and limited supply for senior living communities which we expect will benefit us and our existing portfolio of senior living communities in the future.

As a result of elevated financing and construction costs over recent years, inventory growth for senior living communities has reached a new low.

As a result of elevated financing and construction costs over recent years, inventory growth for senior living communities has been historically low.

According to NIC, annual inventory growth was 1.2% across all markets during the fourth quarter of 2024.

Additionally, annual absorption was

4.1% for the fourth quarter of 2023, according to NIC.

Additionally, annual absorption was 3.7% for the fourth quarter of 2024, according to NIC.

We expect improving market fundamentals and constrained supply to continue to result in increased occupancy at our senior living communities over the next 12 to 24 months.

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For the Year Ended December 31,

Office Portfolio $ 220,530 $ 222,390

Medical Office and Life Science Portfolio $ 213,320 $ 220,530

SHOP 1,244,389 1,151,908

Non-Segment 37,870 38,350

All Other 37,718 37,870

Total revenues $ 1,495,427 $ 1,410,308

Net income (loss):

Office Portfolio $ (12,183) $ 378,282

Medical Office and Life Science Portfolio $ (66,668) $ (12,183)

SHOP (89,807) (99,620)

Non-Segment (181,769) (254,467)

Net income (loss) $ (293,572) $ (15,774)

All Other (213,780) (181,769)

Net loss $ (370,255) $ (293,572)

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

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NOI by segment:

Office Portfolio $ 122,566 $ 128,091 $ (5,525) (4.3) %

SHOP 76,817 8,726 68,091 nm

Non-Segment 36,774 37,679 (905) (2.4) %

Medical Office and Life Science Portfolio $ 115,683 $ 122,566 $ (6,883) (5.6) %

SHOP 106,060 76,817 29,243 38.1 %

All Other 37,142 36,774 368 1.0 %

Total NOI 258,885 236,157 22,728 9.6 %

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General and administrative 26,518 26,131 387 1.5 %

Acquisition and certain other transaction related costs 10,853 2,605 8,248 nm

Impairment of assets 18,380 — 18,380 100.0 %

Gain on sale of properties 1,205 321,862 (320,657) (99.6) %

Gains and losses on equity securities, net 8,126 (25,660) 33,786 (131.7) %

Acquisition and certain other transaction related costs 2,510 10,853 (8,343) (76.9) %

Impairment of assets 70,734 18,380 52,354 nm

(Loss) gain on sale of properties (18,938) 1,205 (20,143) nm

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

Interest and other income 8,950 15,536 (6,586) (42.4) %

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Loss on modification or early extinguishment of debt (324) (2,468) 2,144 (86.9) %

Loss before income tax expense and equity in net (losses) earnings of investees (272,666) (21,119) (251,547) nm

Loss before income taxes and equity in net earnings (losses) of investees (371,385) (272,666) (98,719) 36.2 %

Income tax expense (467) (445) (22) 4.9 %

Equity in net (losses) earnings of investees (20,461) 6,055 (26,516) nm

Net loss $ (293,572) $ (15,774) $ (277,798) nm

Equity in net earnings (losses) of investees 1,597 (20,461) 22,058 nm

Net loss $ (370,255) $ (293,572) $ (76,683) 26.1 %

nm – not meaningful

Office Portfolio:

Medical Office and Life Science Portfolio:

Comparable Properties (1)

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2024 2023 2024 2023

Total buildings 91 91 102 105

Total properties 87 87 98 102

Total square feet 6,976 6,971 7,953 8,610

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Rental income.

Rental income decreased due to a tenant default at one of our properties resulting in a write off of the corresponding unamortized straight line rent receivable, the deconsolidation of 10 medical office and life science properties currently owned by an unconsolidated joint venture in which we own an equity interest and certain of our properties being taken out of service and/or currently undergoing redevelopment, partially offset by the acquisition of one property since January 1, 2022 and an increase in rental income at our comparable properties and at certain of our recently redeveloped properties.

Rental income increased at our comparable properties primarily due to higher average rents resulting from our new and renewal leasing activity, increases in property operating expense reimbursements at certain of our comparable properties, an early termination fee recognized at one of our properties and increased parking revenue at certain of our comparable properties.

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

Rental income decreased at our non-comparable properties primarily due to vacancies at one of our properties sold during the fourth quarter of 2024 and one of our properties classified as held for sale as of December 31, 2024 and dispositions since January 1, 2023, partially offset by a tenant default at one of our properties during 2023 and an increase in rental income at one of our properties classified as held for sale as of December 31, 2024.

Property operating expenses.

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

The increase in property operating expenses is primarily due to an increase in property operating expenses at our comparable properties and at certain of our recently developed properties, and our acquisition of one property since January 1, 2022, partially offset by the deconsolidation of 10 medical office and life science properties currently owned by an unconsolidated joint venture in which we own an equity interest.

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

The increase in property operating expenses at our comparable properties is primarily due to increased insurance costs recorded in 2024 and increases in cleaning costs and utility expenses, 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 during 2024.

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

Net operating income.

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

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

(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.

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

Residents fees and services increased primarily due to increases in occupancy and average monthly rate at our communities and the transfer of three previously leased communities to our SHOP segment in October 2022 as described below, partially offset by one community that was taken out of service due to damage sustained by Hurricane Ian.

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

We expect residents fees and services to continue to increase in the short term at our comparable SHOP communities due to favorable market fundamentals, inflation and operational improvements at our communities.

The activity for our non-comparable properties primarily reflects the 13 communities transitioned to an existing third party manager during 2024 and six properties classified as held for sale as of December 31, 2024.

Property operating expenses.

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

Property operating expenses increased primarily due to increases in labor costs, dietary expenses, insurance costs, increased sales and marketing costs to improve occupancy and the transfer of three previously leased communities to our SHOP segment as described below, partially offset by one community that was taken out of service due to damage sustained by Hurricane Ian.

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, maintenance and repairs, dietary expenses, insurance costs and other direct costs, partially offset by reduced contract labor.

The activity for our non-comparable properties primarily reflects the 13 communities transitioned to an existing third party manager during 2024 and six properties classified as held for sale.

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) :

All Other (1) :

Comparable Properties (2)

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Wellness centers 10 10 10 10

Rent coverage:

Other triple net leased senior living communities (3)

1.95 x 1.65 x 1.85 x 1.49 x

Wellness centers (3)

2.56 x 2.64 x 2.56 x 2.64 x

Year Ended December 31,

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NOI $ 26,775 $ 26,102 $ 673 2.6 % $ 10,367 $ 10,672 $ 37,142 $ 36,774 $ 368 1.0 %

(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.

(1) All Other operations consist 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 reportable segment, and any other income or expenses that are not attributable to a specific reportable 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 January 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.

Rental income.

Rental income decreased primarily due to the termination of the lease agreements for three of our senior living communities which were replaced with management agreements under our TRS structure in October 2022, partially offset by an increase in rental income at our comparable properties.

The increase in comparable properties rental income was primarily due to net leasing activity and increased property operating expense reimbursements at our wellness centers.

Rental income increased at our comparable properties primarily due to higher cash rents received during 2024, partially offset by increased 2023 revenue from a cash settlement 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.

In February 2023, we entered into a 15 year lease, which commenced in June 2023, with a private operator for

one of these repossessed wellness centers.

In March 2023, we entered into two separate 20 year leases, which are expected to commence in 2024, with an operator for the remaining two repossessed wellness centers.

The three wellness centers we repossessed were subsequently re-leased to other tenants.

The activity for our non-comparable properties primarily reflects the 18 triple net leased senior living communities classified as held for sale as of December 31, 2024.

Property operating expenses.

Property operating expenses consist of real estate taxes and other direct costs of operating certain of our wellness centers.

Pursuant to an agreement with a previously defaulted tenant in January 2023, we expect to continue to incur real estate taxes and other direct costs for three of these wellness centers.

We will also continue to pay real estate taxes and other direct costs for two wellness centers until the leases commence, which we expect to occur in 2024.

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

The decrease in property operating expenses for our comparable properties primarily reflects real estate taxes and other expenses we paid during 2023 on behalf of a tenant previously in default under leases for six of our wellness centers.

We also continued to pay real estate taxes and other expenses for two wellness centers until the leases commenced during 2024.

Net operating income.

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Depreciation and amortization expense.

Depreciation and amortization expense increased primarily due to the purchase of capital improvements at certain of our properties, the write off of unamortized assets as a result of a tenant default at one property in our Office Portfolio and the acquisition of one property since January 1, 2022.

Increases in depreciation and amortization expenses were partially offset by the deconsolidation of 10 medical office and life science properties owned by an unconsolidated joint venture in which we own an equity interest and certain depreciable assets becoming fully depreciated since January 1, 2022.

Depreciation and amortization expense increased primarily due to the purchase of capital improvements at certain of our properties, partially offset by certain depreciable assets becoming fully depreciated and dispositions since January 1, 2023.

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 a decrease in our base business management fees expense as a result of lower consolidated indebtedness and lower trading prices for our common shares during 2023 compared to 2022, partially offset by an increase in legal and other professional fees.

General and administrative expense increased primarily due to an increase in fees incurred to RMR under our business management agreement of $2,503 as a result of an increase in average share price and weighted average debt, partially offset by a decrease in legal and other professional fees and franchise taxes.

Acquisition and certain other transaction related costs.

For the years ended December 31, 2023 and 2022, acquisition and certain other transaction related costs also include costs related to the transition of certain senior living communities to other third party managers.

For the year ended December 31, 2024, acquisition and certain other transaction related costs primarily represent termination and other fees as a result of our transition of 13 communities to an existing third party manager.

For the year ended December 31, 2023, acquisition and certain other transaction related costs primarily represent costs incurred in connection with our terminated merger with Office Properties Income Trust, costs incurred for financial advisory services regarding our then existing 2024 debt maturities and costs related to the transition of certain senior living communities to other third party managers.

Impairment of assets.

For information about our asset impairment charges, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Gain on sale of properties.

Gain on sale of properties is the net result of our sales of certain of our properties and joint venture equity interests during 2023 and 2022.

Our aggregate gain on sale of properties during 2023 was not significant.

The gain on sale of properties during the year ended December 31, 2022 reflects our sale of 10 medical office and life science properties to the LSMD JV in which we retained a 20% equity interest and our sale of a 10% equity interest in the Seaport JV.

For further information regarding gain on sale of properties, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Gains and losses on equity securities, net.

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

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

(Loss) gain on sale of properties.

For information regarding (loss) gain on sale of properties, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Gains on equity securities, net.

Gains on equity securities, net, represent the net gains to adjust our investment in AlerisLife to its fair value during 2023.

For further information regarding our investment in AlerisLife, see Notes 2 and 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Interest and other income.

The decrease in interest and other income is primarily due to $1,581 of funds we received from certain programs under the CARES Act, ARPA and various state programs during the year ended December 31, 2023 compared to $4,327 received during the year ended December 31, 2022, partially offset by higher interest earned during the year ended December 31, 2023, as a result of higher interest rates compared to the year ended December 31, 2022.

The decrease in interest and other income is primarily due to lower average invested cash balances during the year ended December 31, 2024 compared to the year ended December 31, 2023 and $1,581 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 during the year ended December 31, 2023.

Interest expense.

Interest expense decreased primarily due to our redemption in June 2022 of $500,000 of our 9.75% senior notes due 2025 and a decrease in average borrowings under our former credit facility in connection with repayments aggregating $700,000 during 2023 related to amendments to and repayment in full of such credit facility in December 2023.

This decrease was partially offset by an increase in interest rates under our former credit facility during 2023 and the issuance of $940,534 of our senior secured notes due 2026 in December 2023, resulting in accretion of the discount totaling $2,720 in the 2023 period.

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 $86,778 during 2024.

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

These increases were 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.

Additionally, in June 2024, we redeemed $60,000 of our outstanding 9.75% senior unsecured notes due 2025 using proceeds from the $120,000 mortgage loan executed in May 2024 and in November 2024 we redeemed another $60,000 of our outstanding 9.75% senior unsecured notes due 2025 using cash on hand.

Loss on modification or early extinguishment of debt.

During the year ended December 31, 2023, we recorded a loss on modification or early extinguishment of debt in connection with amendments to and repayment in full of our then credit facility as well as redemption of $250,000 of our 4.750% senior notes due May 2024.

During the year ended December 31, 2022, we also recorded a loss on early extinguishment of debt in connection with our redemption of $500,000 of our 9.75% senior notes due 2025, partially offset by a gain on early extinguishment of debt in connection with our prepayment of a mortgage note in April 2023.

During the year ended December 31, 2024, we recorded a loss on early extinguishment of debt in connection with the partial redemption of an aggregate $120,000 of our outstanding 9.75% senior unsecured notes due 2025.

During the year ended December 31, 2023, we recorded a loss on modification or early

extinguishment of debt in connection with amendments to and repayment in full of our then credit facility as well as redemption of $250,000 of our 4.750% senior notes due 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 earnings of investees.

Equity in net earnings of investees is the change in the fair value of our investments in our unconsolidated joint ventures.

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.

For further information regarding our investments in our joint ventures and AlerisLife see Notes 2, 3 and 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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

We present certain "non-GAAP financial measures" within the meaning of applicable SEC rules, including FFO, Normalized FFO and NOI for the years ended December 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) or net income (loss) attributable to common shareholders as indicators of our operating performance or as measures of our liquidity.

These measures should be considered in conjunction with net income (loss) and net income (loss) attributable to common shareholders as presented in our consolidated statements of operations.

We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) attributable to common shareholders.

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.

These measures should be considered in conjunction with net income (loss) as presented in our consolidated statements of comprehensive income (loss).

We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss).

We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

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We calculate FFO and Normalized FFO as shown below.

FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of properties, equity in net earnings or losses of unconsolidated joint ventures, loss on impairment of real estate assets, gains or losses on equity securities, net, if any, and including adjustments to reflect our proportionate share of FFO of our former equity method investment in AlerisLife for the periods we had an equity investment in AlerisLife that we accounted for as an equity method investment and our proportionate share of FFO from our unconsolidated joint ventures, plus real estate depreciation and amortization of consolidated properties, as well as certain other adjustments currently not applicable to us.

FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of properties, equity in net earnings or losses of investees, loss on impairment of real estate assets, gains or losses on equity securities, net, if any, and including adjustments to reflect our proportionate share of FFO of our equity method investees, plus real estate depreciation and amortization of consolidated properties, as well as certain other adjustments currently not applicable to us.

In calculating Normalized FFO, we adjust for the items shown below including similar adjustments for our unconsolidated joint ventures, if any.

FFO and Normalized FFO are among the factors considered by our Board when determining the amount of distributions to our shareholders.

FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders.

Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.

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Depreciation and amortization 284,957 284,083

Gain on sale of properties (1,205) (321,862)

Loss (gain) on sale of properties 18,938 (1,205)

Impairment of assets 70,734 18,380

Gains and losses on equity securities, net (8,126) 25,660

Equity in net losses (earnings) of unconsolidated joint ventures 20,461 (6,055)

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

Equity in net (earnings) losses of investees (1,597) 20,461

Share of FFO from unconsolidated joint ventures 9,006 7,738

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We define NOI as income from our real estate less our property operating expenses.

NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization.

NOI excludes depreciation and amortization.

We use NOI to evaluate individual and company-wide property level performance.

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Net loss $ (370,255) $ (293,572)

Equity in net losses (earnings) of investees 20,461 (6,055)

Equity in net (earnings) losses of investees (1,597) 20,461

Income tax expense 467 445

Loss from continuing operations before income tax expense and equity in net (losses) earnings of investees (272,666) (21,119)

Loss before income taxes and equity in net earnings (losses) of investees (371,385) (272,666)

Loss on modification or early extinguishment of debt 324 2,468

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Interest and other income (8,950) (15,536)

Gains and losses on equity securities, net (8,126) 25,660

Gain on sale of properties (1,205) (321,862)

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

Loss (gain) on sale of properties 18,938 (1,205)

Impairment of assets 70,734 18,380

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Total NOI $ 258,885 $ 236,157

Office Portfolio NOI $ 122,566 $ 128,091

Medical Office and Life Science Portfolio NOI $ 115,683 $ 122,566

SHOP NOI 106,060 76,817

Non-Segment NOI 36,774 37,679

All Other NOI 37,142 36,774

Total NOI $ 258,885 $ 236,157

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of cash to meet operating and capital expenses, pay debt service obligations and make distributions to our shareholders are the operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities and proceeds from the disposition of certain properties.

We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for at least the next 12 months.

Our principal sources of cash to meet operating and capital expenses, pay our debt service obligations and make distributions to our shareholders are the operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities and proceeds from the disposition of certain properties.

We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay our debt service obligations and make distributions to our shareholders for at least the next 12 months and for the foreseeable future thereafter.

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

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• our managers' abilities to maintain or increase our returns from our managed senior living communities.

The senior living industry has been adversely affected by a slow recovery from the COVID-19 pandemic, as well as economic and market conditions.

These conditions continue to have a significant negative impact on our results of operations, financial position and cash flows.

Although there have been signs of recovery and increased demand when compared to the low levels during the COVID-19 pandemic, the recovery of our SHOP segment has been slower than previously anticipated and uneven, and we cannot be sure when or if the senior living business will return to historic pre-pandemic levels.

To mitigate the effects of the slow recovery coming from the COVID-19 pandemic and the increased variability in operating cash flows from our SHOP communities, we continue to work with our senior living operators to manage costs, especially labor costs, and to increase rates and occupancy.

However, increased operating costs resulting from difficult labor market conditions, wage and

commodity price inflation and increased insurance costs, among other things, continue to negatively impact margins.

Additionally, while our senior living operators have increased rates, those rates are increasing gradually and are not increasing at the same pace as our costs, putting further pressure on our margins.

In order to increase the probability of a recovery of our cash flows, we have continued to invest capital in our SHOP segment.

As a result of the slow recovery of our SHOP segment and having $700.0 million of outstanding debt then becoming due within one year and only $338.4 million in cash and cash equivalents as of June 30, 2023, we concluded as of May 8, 2023 that there was a substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of those condensed consolidated financial statements.

Additionally, as of November 1, 2023 we were unable to demonstrate that our plans to alleviate the substantial doubt about our ability to continue as a going concern would be probable in mitigating the conditions that raised the substantial doubt given our plans were beyond our control.

On December 21, 2023, we completed a private offering of $940.5 million in aggregate principal amount at maturity of senior secured notes due January 2026, with a one-year extension option.

The net proceeds from the offering were approximately $730.4 million after deducting initial purchaser discounts and estimated offering costs.

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 December 31, 2023, we had $245.9 million of cash and cash equivalents.

Additionally, as of December 31, 2023, 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.

As a result, 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.

Our management has concluded that these transactions have successfully alleviated the conditions that raised the substantial doubt about our ability to continue as a going concern and that no substantial doubt about our ability to continue as going concern exists as of February 26, 2024.

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

In January 2022, we entered into a joint venture with two unrelated third party institutional investors for 10 medical office and life science properties we owned for aggregate proceeds, before closing costs and other adjustments, of $653.3 million.

The equity interests that the investors acquired from us equaled 41% and 39%, respectively, of the total equity interests in the joint venture and we retained a 20% equity interest in the joint venture.

Following the sale, we account for this joint venture using the equity method of accounting under the fair value option.

The initial investment amounts were based upon a property valuation of approximately $702.5 million, less approximately $456.6 million of secured debt on the properties incurred by this joint venture.

In June 2022, we sold an additional 10% equity interest in the Seaport JV to an existing joint venture investor for aggregate proceeds, before closing costs and other adjustments, of $108.0 million.

After giving effect to this sale, we continue to own a 10% equity interest in this joint venture.

Our initial investment amount was based on a property valuation of $1.7 billion, less $620.0 million of existing mortgage debts on the property that this joint venture assumed.

In February 2023, we sold three properties for an aggregate sales price of $2.8 million, excluding closing costs.

In October 2023, we sold three properties for an aggregate sales price of $10.8 million, excluding closing costs.

In November 2023, we sold one property for $1.8 million, excluding closing costs.

In December 2023, we sold one property for $3.5 million, excluding closing costs.

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

The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our Consolidated Statements of Cash Flows included in Part IV, Item 15 of this Annual Report on Form 10-K (dollars in thousands):

Year Ended December 31,

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Cash and cash equivalents and restricted cash at end of period $ 149,854 $ 246,961

We have a significant number of unencumbered properties in our SHOP segment.

As of December 31, 2024, our unencumbered gross book value of real estate assets was $5.0 billion.

As of February 21, 2025, we have executed term sheets with various lenders for proceeds of approximately $276.0 million, and are in active negotiations with an additional lender for expected proceeds of $64.0 million, for loans that will be secured by certain of our unencumbered SHOP communities.

We believe that with $144.6 million of cash and cash equivalents as of December 31, 2024, the above referenced loan proceeds and proceeds from sales of certain unencumbered properties, we will satisfy the $380.0 million outstanding principal amount of 9.75% senior unsecured notes due in June 2025, which is our next significant debt maturity.

Our Operating Liquidity and Resources

We generally receive minimum rents from tenants at our Office Portfolio 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 (used in) operating activities for the year ended December 31, 2023 compared to the prior year was primarily due to increased NOI as a result of increased rates and occupancy at the senior living communities in our SHOP segment.

Additionally, interest payments decreased in 2023 compared to 2022 primarily due to our redemption of $500,000 of our 9.75% senior notes due 2025 in June 2022.

These increases were partially offset by an increase in costs incurred in connection with our terminated merger with OPI.

Although we have seen signs of recovery as it relates to our SHOP segment, the recovery of our SHOP segment has been slower than previously anticipated and uneven, and we face and may continue to face issues with limited labor availability and wage inflation along with cost pressures from increased insurance premiums and commodity price inflation and possible reduced demand for senior living communities.

We generally receive minimum rents from tenants at our medical office and life science properties, triple net leased wellness centers and senior living communities 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 triple net senior living senior living communities monthly, quarterly or annually.

The increase in cash provided by operating activities for the year ended December 31, 2024 compared to 2023 was primarily due to higher cash flows from our properties as a result of increased rates and occupancy at the senior living communities in our SHOP segment.

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

Our Investing Liquidity and Resources

The change in cash (used in) provided by investing activities for the year ended December 31, 2023 compared to the prior year was primarily due to proceeds in 2022 from our sale of 10 medical office and life science properties to the LSMD JV in which we retained a 20% equity interest and our sale of a 10% equity interest in the Seaport JV, partially offset by a property acquisition in 2022, a decrease in real estate improvements in 2023 compared to 2022, additional proceeds from the sale of properties in 2023 as compared to 2022 and the proceeds received from the tender of all of the 10,691,658 AlerisLife common shares we owned at a price of $1.31 per share in 2023.

The decrease in cash used in investing activities for the year ended December 31, 2024 compared to 2023 was primarily due to a decrease in real estate improvements and an increase in proceeds from the sale of properties during 2024 compared to 2023.

The decrease was partially offset by our purchase in February 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.

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

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

For the Year Ended December 31,

Office Portfolio segment capital expenditures:

Year Ended December 31,

Medical Office and Life Science Portfolio capital expenditures:

Lease related costs (1)

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Building improvements (2)

12,984 11,955

Recurring capital expenditures - Office Portfolio segment 51,054 37,182

Recurring capital expenditures - Medical Office and Life Science Portfolio 27,291 51,054

SHOP fixed assets and capital improvements 93,043 100,981

100,981 109,529

Wellness centers lease related costs (1)

Recurring capital expenditures $ 161,756 $ 146,711

Development, redevelopment and other activities - Office Portfolio segment (3)

Total recurring capital expenditures $ 140,952 $ 161,756

Development, redevelopment and other activities - Medical Office and Life Science Portfolio (3)

$ 3,012 $ 9,244

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

Development, redevelopment and other activities - SHOP (3)

46,558 82,207

Total development, redevelopment and other activities $ 49,570 $ 91,451

(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.

(2) Building improvements generally include capital expenditures to replace obsolete building components that extend the useful life of existing assets or other improvements to increase the marketability of the property.

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

Capital expenditures by segment:

Medical Office and Life Science Portfolio $ 30,303 $ 60,298

SHOP 139,601 183,188

All Other - wellness centers 20,618 9,721

Total capital expenditures $ 190,522 $ 253,207

(1) Includes 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.

(2) Includes capital expenditures to replace obsolete building components that extend the useful life of existing assets or other improvements to increase the marketability of the property.

(3) Includes capital expenditures that reposition a property or result in new sources of revenue.

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 in the future defer, our capital expenditures to preserve liquidity.

As of December 31, 2023, we had estimated unspent leasing related obligations at our triple net leased wellness centers and our medical office and life science properties of approximately $54.1 million, of which we expect to spend approximately $43.3 million during calendar year 2024.

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, future financing activities with unencumbered properties and proceeds related to distributions from our two unconsolidated joint ventures.

We are currently in the process of redeveloping certain properties in our Office Portfolio and a number of 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 Office 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.

In July 2022, we acquired one life science property located in California with approximately 88,508 square feet for approximately $75.1 million, including closing costs and credits.

We funded this acquisition using cash on hand.

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 acquisitions and dispositions, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

As of December 31, 2024, we had estimated unspent leasing related obligations at our medical office and life science properties of approximately $22.6 million, of which we expect to spend approximately $19.7 million during calendar year 2025.

We expect to fund these obligations using operating cash flows, cash on hand, proceeds from the disposition of certain properties and future financing activities.

We are currently in the process of redeveloping certain properties, primarily our managed senior living communities.

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

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

Additionally, 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.

During the year ended December 31, 2024, we sold five properties for an aggregate sales price of $35.7 million, excluding closing costs.

Subsequent to December 31, 2024, we sold five properties for an aggregate sales price of $178.7 million, excluding closing costs.

The net proceeds from three of these properties sold in 2025, which have a sales price, excluding closing costs, of $159.0 million, will be used to partially redeem our outstanding senior secured notes due 2026.

As of February 24, 2025, we had 26 properties under agreements or letters of intent to sell for an aggregate sales price of $219.6 million, excluding closing costs.

The net proceeds from 19 of these properties, which have an expected aggregate sales price, excluding closing costs, of $142.1 million, will be used to partially redeem our outstanding senior secured notes due 2026, if the sales of such properties are completed.

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 Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

On February 14, 2025, AlerisLife paid an aggregate cash dividend of $50.0 million to its stockholders.

Our pro rata share of this cash dividend was $17.0 million.

Our Financing Liquidity and Resources

The change in cash used in financing activities for the year ended December 31, 2023 compared to the prior year was primarily due to the issuance of $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.

Additionally, we redeemed in June 2022 $500.0 million of our outstanding 9.75% senior notes due 2025.

We also made repayments under our former credit facility aggregating $700.0 million during 2023 as compared to $100.0 million during 2022, and we redeemed in December 2023 all $250.0 million of our outstanding 4.750% senior notes due May 2024.

The decrease in cash used in financing activities for the year ended December 31, 2024 compared to 2023 was primarily due to $700.0 million in repayments of borrowings under our former credit facility during 2023, the redemption in December 2023 of all $250.0 million of our outstanding 4.750% senior notes due May 2024 and our execution of a $120.0 million mortgage loan during 2024.

The decrease was partially offset by the issuance of $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, and the redemption of $120.0 million of our 9.75% senior notes due June 2025 during 2024.

As of December 31, 2024, we had $144.6 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 $450,000 credit facility that was fully drawn.

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

During the year ended December 31, 2023, we paid quarterly cash distributions to our shareholders totaling approximately $9.6 million using existing cash balances.

During the year ended December 31, 2024, we paid quarterly cash distributions to our shareholders totaling approximately $9.6 million using cash on hand.

For further information regarding the distributions we paid during 2024, see Note 5 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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We paid this distribution on February 20, 2025, using cash on hand.

We believe we may have access to certain types of financings, including debt or equity offerings, to fund our operations and to repay our debts and other obligations as they become due.

Our ability to complete, and the costs associated with, future debt or equity transactions depends primarily upon credit market conditions and our then creditworthiness and our ability to be in compliance with our debt covenants as discussed below.

We believe we may have access to various types of financings, including debt or equity offerings, to fund our operations and repay our debts and other obligations as they become due.

Our ability to complete, and the costs associated with, future debt or equity transactions depends primarily upon market conditions and our then creditworthiness and our ability to be in compliance with our debt covenants.

We have no control over market conditions.

Our credit and debt ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes.

Our credit and debt ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, our liquidity position, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes.

Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows.

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 February 2022, we and our lenders amended our credit agreement.

Pursuant to the amendment, among other things, the facility commitments were reduced from $800.0 million to $700.0 million following our repayment of $100.0 million.

In February 2022, we exercised our option to extend the maturity date of our former credit facility by one year to January 2024.

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

In February 2023, we and our lenders further amended our credit agreement.

Pursuant to the amendment the facility commitments were reduced from $586.4 million to $450.0 million following our repayment of $136.4 million in then outstanding borrowings.

In April 2022, we prepaid a mortgage note secured by one of our medical office properties with an outstanding principal balance of approximately $10.9 million, a maturity date in July 2022 and an annual interest rate of 6.28%, using cash on hand.

In June 2022, we redeemed $500.0 million of our outstanding 9.75% senior notes due 2025 for a redemption price equal to 104.875% of the $500.0 million principal amount of the notes being redeemed plus accrued and unpaid interest of $1.1 million, using restricted cash on hand.

In July 2022, we prepaid a mortgage note secured by two of our senior living communities with an outstanding principal balance of approximately $15.3 million, a maturity date in October 2022 and an annual interest rate of 5.75%, using cash on hand.

In October 2022, we repaid at maturity a mortgage note secured by one of our life science properties with an outstanding principal balance of approximately $10.3 million and an annual interest rate of 4.85%, using cash on hand.

In April 2023, we prepaid a mortgage note secured by one of our senior living communities with an outstanding principal balance of approximately $14.6 million, a maturity date in June 2023 and an annual interest rate of 6.64% using cash on hand.

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 certain of our subsidiaries that own 95 properties, or the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors, except for certain excluded subsidiaries.

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

These notes require no cash interest payments to accrue prior to maturity.

The accreted value of these secured 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 2023, Moody's downgraded our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 ratings from B3 to Caa3 and our senior unsecured debt rating from Caa1 to Ca.

In September 2023, Moody's downgraded our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 ratings from Caa3 to Ca and our senior unsecured debt rating from Ca to C.

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 further reduced the commitments 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.

On December 21, 2023, we completed a private offering of $940.5 million in aggregate principal amount at maturity of senior secured notes due January 2026, with a one-year extension option.

The net proceeds from the offering were approximately $730.4 million after deducting initial purchaser discounts and estimated offering costs.

No cash interest will accrue on these senior secured notes prior

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

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 certain of our subsidiaries that own 95 properties, or 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.

In January 2025, we sold three properties that secure these senior secured notes for a sales price of $159.0 million, excluding closing costs.

As of February 24, 2025, we are under agreements to sell 19 additional properties that secure these senior secured notes for an expected aggregate sales price of $142.1 million, excluding closing costs.

The net proceeds from these sales will be used to partially redeem these senior secured notes.

In May 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 in June 2024 we used $60.0 million of the net proceeds to partially redeem our then outstanding $500.0 million 9.75% senior notes due 2025.

In November 2024, we redeemed $60.0 million of our outstanding 9.75% senior unsecured notes due 2025 using cash on hand.

In January 2024, 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.

In February 2023, Standard & Poor's downgraded our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 ratings from BB- to B and our senior unsecured debt rating from B to CCC+.

In September 2023, Standard & Poor's downgraded our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 ratings from B to CCC+ and our senior unsecured debt rating from CCC+ to CCC-.

In January 2024, Standard & Poor's upgraded our 9.75% senior notes due 2025 rating from CCC+ to B, our 4.375% senior notes due 2031 rating from CCC+ to B and our senior unsecured debt rating from CCC- to CCC, and Standard & Poor's also assigned a B rating to our senior secured notes due 2026.

Our next significant debt maturity is $500.0 million of senior unsecured notes that mature in June 2025.

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

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

and (3) $9.1 million aggregate principal amount of mortgage notes (excluding premiums, discounts and net debt issuance costs) secured by one property.

and (3) $127.5 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 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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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 $120.0 million of this debt during 2022 and 2024, respectively, with $380.0 million remaining outstanding.

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

As of December 31, 2023, 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 the guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes.

Our remaining $1.1 billion of senior unsecured notes do not have the benefit of any guarantees as of December 31, 2023.

As of December 31, 2024, all $380.0 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.

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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however, we are ultimately responsible for the purchase price allocations and determinations of useful lives.

We allocate a portion of the purchase price to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases.

place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases.

The terms of below market leases that include bargain renewal options, if any, are further adjusted if we determine that renewal is probable.

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If the value of tenant relationships becomes material in the future, we may separately allocate those amounts and amortize the allocated amount over the estimated life of the relationships.

We regularly evaluate our properties for indicators of impairment.

Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of a property.

If indicators of impairment are present, we evaluate the carrying value of the related property by comparing it to the expected future cash flows to be generated from that property.

If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.

We regularly evaluate our assets for indicators of impairment.

Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of an asset.

This analysis requires us to judge whether indicators of impairment exist and to estimate likely future cash flows.

If indicators of impairment are present, we evaluate the carrying value of the affected assets by comparing it to the expected future undiscounted cash flows to be generated from those assets.

The future cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates.

If we misjudge or estimate incorrectly or if future tenant operations, market or industry factors differ from our expectations, we may record an impairment charge that is inappropriate or fail to record a charge when we should have done so, or the amount of any such charges may be inaccurate.

If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value.

These accounting policies involve significant judgments made based upon our experience and the experience of our management and our Board of Trustees, including judgments about current valuations, ultimate realizable value, estimated useful lives, salvage or residual value, the ability and willingness of our tenants to perform their obligations to us and the current and likely future operating and competitive environments in which our properties are operated.

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Examples of these, and other information regarding such matters and developments, are provided under the caption “Business—Government Regulation and Reimbursement” above in Part I, Item 1 of this Annual Report on Form 10-K.

healthcare programs to fail to provide rates that match our and our tenants' increasing expenses and that such changes may be material and adverse to our future financial results.

During the years ended December 31, 2023, December 31, 2022 and December 31, 2021, we recognized $1.6 million, $4.3 million and $19.6 million, respectively, in interest and other income in our consolidated statements of operations related to funds received under the CARES Act and ARPA.

We cannot currently predict the type and magnitude of the potential Medicare and Medicaid policy changes, rate changes or other changes that may be implemented, but we believe that some of these changes will cause these government funded healthcare programs to fail to provide rates that match our and our tenants' increasing expenses and that such changes may be material and adverse to our future financial results.

During the years ended December 31, 2024, 2023 and 2022, we recognized $0.0 million, $1.6 million and $4.3 million, respectively, in interest and other income in our consolidated statements of comprehensive income (loss) related to funds received under the CARES Act and ARPA.

Senior housing operations have historically reflected modest seasonality.

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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-K

Item 7. Management’s Discussion and Analysis