What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-05 compared with 2024-11-04 · 183 added, 370 removed, 308 unchanged (64% 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 September 30, 2024, we owned 368 properties located in 36 states and Washington, D.C., including 25 properties classified as held for sale and three closed senior living communities.

At September 30, 2024, the gross book value of our real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, was $7.2 billion.

As of September 30, 2024, we owned an equity interest in each of the Seaport JV and the LSMD JV that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet that were 99% leased with an average (by annualized rental income) remaining lease term of 15.2 years.

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

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

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

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

Although the U.S.

Federal Reserve has lowered interest rates in 2024, we cannot be sure that it will continue to do so, or that any future interest rate decreases will be significant, and interest rates may remain at the current high levels or 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 expect that favorable supply and demand dynamics in the senior living industry will enable our managers to generate better returns at our communities than we experienced in the years following the COVID-19 pandemic.

As of March 31, 2025, we owned 343 properties located in 34 states and Washington, D.C., including 11 properties classified as held for sale and two closed senior living communities.

As of March 31, 2025, 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 14.9 years.

We are encouraged by positive trends, including increases in rates, margins and occupancy, in our SHOP segment.

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.

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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.

For further information and risks relating to these economic uncertainties, including changes related to the COVID-19 pandemic, and their impact on our business and financial condition, see Part I, Item 1, "Business" and Part I, Item 1A, "Risk Factors" in our Annual Report.

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 and tariffs, 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.

For further information and risks relating to these economic uncertainties and their impact on our business and financial condition, see Part I, Item 1, "Business" and Part I, Item 1A, "Risk Factors" in our Annual Report.

PORTFOLIO OVERVIEW

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

As of September 30, 2024 Number

The following tables present an overview of our portfolio as of March 31, 2025 (dollars in thousands, except investment per square foot or unit data):

As of March 31, 2025 Number

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

% of Total Gross Book Value of Real Estate Assets Investment per Square Foot or Unit (2)

Q3 2024 Revenues % of

Q3 2024 Revenues Q3 2024 NOI (3)

Q1 2025 Revenues

Q1 2025 NOI (3)

% of Q1 2025 NOI

Medical Office and Life Science Portfolio (4)

99 8,192,077 sq.

$ 2,183,759 30.4 % $ 267 $ 52,901 14.2 % $ 27,827 43.5 %

SHOP 231 25,005 units $ 4,639,619 67.8 % $ 185,548 $ 328,306 84.9 % $ 36,828 50.8 %

Medical Office and Life Science Portfolio 93 7,619,667 sq.

1,860,684 27.2 % $ 244 49,763 12.9 % 26,856 37.0 %

Triple net leased senior living communities 9 1,186 units 135,385 2.0 % $ 114,153 4,886 1.3 % 4,886 6.7 %

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Total 343 $ 6,843,798 100.0 % $ 386,864 100.0 % $ 72,538 100.0 %

As of and For the Three Months Ended September 30,

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As of and For the Three Months Ended March 31,

Medical Office and Life Science Portfolio (4)

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

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

(3) We calculate our net operating income, or NOI, on a consolidated basis and by reportable segment.

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

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

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

Three Months Ended September 30, 2024

New Leases Renewals Total

Square feet leased during the quarter 28 55 83

Weighted average rental rate change (by rentable square feet) 6.4 % 4.2 % 4.8 %

Weighted average lease term (years) 9.0 6.8 7.4

Total leasing costs and concession commitments (1)

$ 2,157 $ 1,652 $ 3,809

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

$ 77.08 $ 30.25 $ 46.12

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

$ 8.58 $ 4.44 $ 6.21

Nine Months Ended September 30, 2024

During the three months ended March 31, 2025, we entered into new and renewal leases in our Medical Office and Life Science Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):

Three Months Ended March 31, 2025

New Leases Renewals Total

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

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

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

Lease Expiration Schedules

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

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

Percent of Total Cumulative Percent of Total

As of March 31, 2025, lease expirations in our Medical Office and Life Science Portfolio segment were as follows (dollars in thousands):

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

% of Total Annualized Rental Income Cumulative % of Total Annualized Rental Income

2025 64 260,733 4.2 % 4.2 % $ 9,207 4.7 % 4.7 %

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Weighted average remaining lease term (in years) 4.9 5.2

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

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

(1) Annualized rental income is based on rents pursuant to existing leases as of March 31, 2025, 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.

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As of March 31, 2025, 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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2026 — — — — % — %

2027 4 533 units 4,659 15.8 % 15.8 %

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2031 — — — — % 34.8 %

2032 — — — — % 34.8 %

2033 1 215 units 5,177 17.6 % 52.4 %

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

2034 and thereafter 7 682,646 sq.

14,068 47.6 % 100.0 %

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Weighted average remaining lease term (in years) 9.3 10.5

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

(1) Annualized rental income is based on rents pursuant to existing leases as of March 31, 2025.

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

(2) We have entered into an agreement to sell these 18 communities for $135,000.

We expect this sale to close during the fourth quarter of 2024.

(3) Excludes one closed senior living community.

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

(2) Excludes one closed senior living community classified as held for sale as of March 31, 2025.

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

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Medical Office and Life Science Portfolio and SHOP.

We aggregate the operating results of our properties in these two reporting segments based on their similar operating and economic characteristics.

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.

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 on our behalf.

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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, which 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.

The following table summarizes the results of operations of each of our segments for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Medical Office and Life Science Portfolio $ 49,763 $ 54,149

SHOP 328,306 308,126

Non-Segment 8,734 8,332 25,550 25,753

All Other 8,795 8,501

Total revenues $ 386,864 $ 370,776

Net income (loss):

Medical Office and Life Science Portfolio $ (18,736) $ (7,113)

SHOP (3,087) (22,280)

Non-Segment (64,247) (49,596) (170,139) (136,827)

All Other 12,837 (56,866)

Net loss $ (8,986) $ (86,259)

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

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

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

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

Three Months Ended September 30,

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024 (dollars and square feet in thousands, except average monthly rate):

Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the three months ended March 31, 2025 to the three months ended March 31, 2024.

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

Three Months Ended March 31,

2025 2024 $ Change % Change

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SHOP 36,828 24,710 12,118 49.0 %

Non-Segment 8,683 8,129 554 6.8 %

All Other 8,854 8,210 644 7.8 %

Total NOI 72,538 63,172 9,366 14.8 %

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Impairment of assets 38,472 12,142 26,330 nm

Gain on sale of properties 111 — 111 nm

Gain (loss) on sale of properties 110,140 (5,874) 116,014 nm

Gain on insurance recoveries 7,522 — 7,522 nm

Interest and other income 2,099 2,237 (138) (6.2) %

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(57,831) (57,576) (255) 0.4 %

Loss before income tax expense and equity in net earnings (losses) of investees (99,068) (65,445) (33,623) 51.4 %

Loss on modification or early extinguishment of debt (29,071) — (29,071) nm

Loss before income taxes and equity in net earnings of investees (10,424) (87,970) 77,546 (88.2) %

Income tax expense (49) (187) 138 (73.8) %

Equity in net earnings (losses) of investees 527 (145) 672 nm

Equity in net earnings of investees 1,487 1,898 (411) (21.7) %

Net loss $ (8,986) $ (86,259) $ 77,273 (89.6) %

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All Properties

As of September 30, As of September 30,

As of March 31, As of March 31,

2025 2024 2025 2024

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Occupancy 90.1 % 91.9 % 80.6 % 82.9 %

Three Months Ended September 30,

Three Months Ended March 31,

Comparable (1)

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NOI $ 26,835 $ 26,710 $ 125 0.5 % $ 21 $ 3,542 $ 26,856 $ 30,252 $ (3,396) (11.2) %

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

(1) Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2024;

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

Rental income.

Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by increases in property operating expense reimbursements at certain of our properties.

Rental income decreased at our non-comparable properties primarily due to a vacancy at one of our properties classified as held for sale and dispositions since July 1, 2023, partially offset by a tenant default at one of our properties during the 2023 period.

Rental income increased at our comparable properties primarily due to increases in property operating expense reimbursements at certain of our properties and a termination fee totaling $600 paid during the three months ended March 31, 2025 by a former tenant at one of our properties.

This space was subsequently re-leased to another tenant in April 2025.

The increase in rental income at our comparable properties was partially offset by decreased transient parking at one of our properties.

income decreased at our non-comparable properties primarily due to dispositions since January 1, 2024 and vacancies at two of our properties classified as held for sale.

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 decrease in property operating expenses at our comparable properties is primarily due to a decrease in real estate taxes due to refunds realized and a reduction in assessed values as a result of successful appeals during the 2024 period as well as decreases in repairs and maintenance and utility expenses, partially offset by increases in other direct costs.

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

The increase in property operating expenses at our comparable properties is primarily due to an increase in snow removal expenses, repairs and maintenance and utilities due to increases in usage and rates at certain of our properties.

The increases in property operating expenses at our comparable properties were partially offset by a decrease in real estate taxes at certain of our properties due to refunds realized and a reduction in assessed values as a result of successful appeals during the three months ended March 31, 2025.

Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2024.

Net operating income.

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

Ended September 30, Ended September 30,

Ended March 31, Ended March 31,

2025 2024 2025 2024

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$ 5,303 $ 5,074 $ 5,413 $ 5,165

Three Months Ended September 30,

Three Months Ended March 31,

Comparable (1)

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NOI $ 38,368 $ 26,998 $ 11,370 42.1 % $ (1,540) $ (2,288) $ 36,828 $ 24,710 $ 12,118 49.0 %

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

(1) Consists of senior living communities that we have owned and which have been in service, reported in the same segment and operated by the same operator continuously since January 1, 2024;

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

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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.

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

The activity for our non-comparable properties primarily reflects the five communities classified as held for sale as of March 31, 2025 and the 13 communities transitioned to an existing third party manager during the 2024 period.

Property operating expenses.

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

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

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

Property operating expenses increased at our comparable properties primarily due to increases in labor costs, management fees as a result of higher revenues, utilities, marketing, real estate taxes and other direct costs, partially offset by reduced insurance costs due to a reduction in premiums.

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)

All Properties

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

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

2025 2024 2025 2024

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2.51 x 2.39 x 2.51 x 1.67 x

Three Months Ended September 30,

Three Months Ended March 31,

Comparable (2)

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NOI $ 7,179 $ 6,065 $ 1,114 18.4 % $ 1,675 $ 2,145 $ 8,854 $ 8,210 $ 644 7.8 %

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

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

(1) All Other operations consist of all of our other operations, including certain wellness centers and senior living communities 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, 2024;

excludes properties classified as held for sale, if any.

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We have not independently verified tenant operating data.

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

Excludes data for historical periods prior to our ownership of certain properties.

Rental income.

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

The activity for our non-comparable properties primarily reflects the 18 triple net leased senior living communities classified as held for sale as of September 30, 2024.

Rental income increased at our comparable properties primarily due to new leases for one of our wellness center tenants.

The activity for our non-comparable properties primarily reflects the 18 triple net leased senior living communities that we sold in February 2025.

Property operating expenses.

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 the 2023 period on behalf of a tenant previously in default under leases for six of our wellness centers.

We also continue to pay real estate taxes and other expenses for one wellness center until the lease commences, which we expect to occur during the first quarter of 2025.

The decrease in property operating expenses for our comparable properties primarily reflects real estate taxes and other expenses paid directly by our tenants during the three months ended March 31, 2025, which were previously paid by us during prior periods.

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, partially offset by certain depreciable assets becoming fully depreciated and dispositions since July 1, 2023.

Depreciation and amortization expense decreased primarily due to dispositions since January 1, 2024 and certain depreciable assets becoming fully depreciated, partially offset by the purchase of capital improvements at certain of our properties.

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 increased primarily due to $6,934 of estimated business management incentive fees that we recognized for the three months ended September 30, 2024 as a result of our total shareholder return exceeding the returns for the MSCI U.S.

REIT/Health Care REIT Index over the applicable measurement period and an increase in our business management fees of $622, 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.

General and administrative expense increased primarily due to $2,407 of estimated incentive management fees that we recognized for the three months ended March 31, 2025, compared to $849 for the three months ended March 31, 2024, as a result of our total shareholder return exceeding the returns for the MSCI U.S.

REIT/Health Care REIT Index over the applicable measurement period.

Acquisition and certain other transaction related costs.

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

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

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

Impairment of assets.

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

Gain on sale of properties.

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

Interest and other income.

The decrease in interest and other income is primarily due to lower average invested cash balances during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Interest expense.

Interest expense increased primarily due to the issuance of $940,534 of our senior secured notes due 2026 in December 2023, resulting in discount accretion of $22,034 during the 2024 period.

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

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

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

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.

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

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

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

Nine Months Ended September 30,

2024 2023 $ Change % Change

NOI by segment:

Medical Office and Life Science Portfolio $ 88,352 $ 92,211 $ (3,859) (4.2) %

SHOP 81,127 60,839 20,288 33.3 %

Non-Segment 24,963 24,983 (20) (0.1) %

Total NOI 194,442 178,033 16,409 9.2 %

Depreciation and amortization 207,449 200,430 7,019 3.5 %

General and administrative 27,763 20,111 7,652 38.0 %

Acquisition and certain other transaction related costs 2,243 9,812 (7,569) (77.1) %

Impairment of assets 41,718 18,380 23,338 127.0 %

Loss (gain) on sale of properties (18,976) 1,233 (20,209) nm

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

Interest and other income 7,215 12,572 (5,357) (42.6) %

Interest expense

(175,721) (142,922) (32,799) 22.9 %

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

Loss before income tax expense and equity in net (losses) earnings of investees (272,422) (192,766) (79,656) 41.3 %

Income tax expense (505) (379) (126) 33.2 %

Equity in net (losses) earnings of investees (9,882) 2,137 (12,019) nm

Net loss $ (282,809) $ (191,008) $ (91,801) 48.1 %

nm - not meaningful

Medical Office and Life Science Portfolio :

Comparable Properties (1)

All Properties

As of September 30, As of September 30,

2024 2023 2024 2023

Total properties

Total square feet 7,287 7,277 8,192 8,809

Occupancy 87.8 % 93.7 % 80.8 % 85.8 %

Nine Months Ended September 30,

Comparable (1)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2024 2023 Change Change 2024 2023 2024 2023 Change Change

Rental income $ 155,258 $ 155,127 $ 131 0.1 % $ 6,347 $ 10,321 $ 161,605 $ 165,448 $ (3,843) (2.3) %

Property operating expenses (64,079) (62,231) 1,848 3.0 % (9,174) (11,006) (73,253) (73,237) 16 0.0 %

NOI $ 91,179 $ 92,896 $ (1,717) (1.8) % $ (2,827) $ (685) $ 88,352 $ 92,211 $ (3,859) (4.2) %

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

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

Rental income.

Rental income 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 a vacancy at one of our properties classified as held for sale and dispositions since January 1, 2023, partially offset by a tenant default at one of our properties during the 2023 period and an increase in rental income at one of our recently redeveloped properties.

Property operating expenses.

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

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

Net operating income.

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

Comparable Properties (1)

All Properties

As of and For the Nine Months Ended September 30, As of and For the Nine Months Ended September 30,

2024 2023 2024 2023

Total properties 213 213 232 234

Number of units 23,968 23,968 25,152 25,302

Occupancy 80.0 % 78.3 % 79.1 % 77.7 %

Average monthly rate (2)

$ 5,155 $ 4,865 $ 5,175 $ 4,877

Nine Months Ended September 30,

Comparable (1)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2024 2023 Change Change 2024 2023 2024 2023 Change Change

Residents fees and services $ 890,354 $ 821,057 $ 69,297 8.4 % $ 38,299 $ 36,515 $ 928,653 $ 857,572 $ 71,081 8.3 %

Property operating expenses (803,499) (755,932) 47,567 6.3 % (44,027) (40,801) (847,526) (796,733) 50,793 6.4 %

NOI $ 86,855 $ 65,125 $ 21,730 33.4 % $ (5,728) $ (4,286) $ 81,127 $ 60,839 $ 20,288 33.3 %

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

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

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

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

Residents fees and services.

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

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

Property operating expenses.

Property operating expenses increased at our comparable properties primarily due to increases in labor costs, dietary expenses, maintenance and repairs, 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 the 2024 period.

Net operating income.

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

Non-Segment (1) :

Comparable Properties (2)

All Properties

As of and For the Nine Months Ended September 30, As of and For the Nine Months Ended September 30,

2024 2023 2024 2023

Total properties:

Triple net leased senior living communities 8 8 27 27

Wellness centers 10 10 10 10

Rent coverage:

Triple net leased senior living communities (3)

1.82 x 1.82 x 1.79 x 1.60 x

Wellness centers (3)

2.50 x 2.69 x 2.50 x 2.69 x

Nine Months Ended September 30,

Comparable (2)

Non-Comparable

Properties Results Properties Results Consolidated Properties Results

2024 2023 Change Change 2024 2023 2024 2023 Change Change

Rental income $ 19,313 $ 19,676 $ (363) (1.8) % $ 6,237 $ 6,077 $ 25,550 $ 25,753 $ (203) (0.8) %

Property operating expenses (543) (770) (227) (29.5) % (44) — (587) (770) (183) (23.8) %

NOI $ 18,770 $ 18,906 $ (136) (0.7) % $ 6,193 $ 6,077 $ 24,963 $ 24,983 $ (20) (0.1) %

(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.

Rental income.

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

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

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 September 30, 2024.

Property operating expenses.

We also continue to pay real estate taxes and other expenses for one wellness center until the lease commences, which we expect to occur during the first quarter of 2025.

Net operating income.

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

Consolidated :

Depreciation and amortization expense.

General and administrative expense .

General and administrative expense increased primarily due to $6,934 of estimated business management incentive fees that we recognized for the nine months ended September 30, 2024 as a result of our total shareholder return exceeding the returns for the MSCI U.S.

REIT/Health Care REIT Index over the applicable measurement period and an increase in our business management fees of $2,038, 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.

Acquisition and certain other transaction related costs.

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

For more information

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

Impairment of assets.

Loss (gain) on sale of properties.

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

Gains on equity securities, net.

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

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

Gain (loss) on sale of properties.

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

Gain on insurance recoveries.

During the three months ended March 31, 2025, we recognized a gain on insurance recoveries related to cash received from our insurance provider in excess of our losses for a claim that was finalized.

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

Interest and other income.

The decrease in interest and other income is primarily due to lower average invested cash balances during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 and $1,581 of funds we received from certain programs under the Coronavirus Aid, Relief, and Economic Security Act, the American Rescue Plan Act and various state programs during the 2023 period.

The decrease in interest and other income is primarily due to lower average invested cash balances during the three months ended March 31, 2025 compared to the 2024 period.

Interest expense.

Interest expense increased primarily due to the issuance of $940,534 of our senior secured notes due 2026 in December 2023, resulting in discount accretion of $64,133 during the 2024 period.

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

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

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

Interest expense increased primarily due to the execution of a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum and an increase in the discount accretion for our senior secured notes due 2026.

During the three months ended March 31, 2025 and 2024, we recognized discount accretion of $22,122 and $20,659, respectively, for our senior secured notes due 2026.

These increases were partially offset by the redemption during 2024 of an aggregate $120,000 of our outstanding 9.75% senior unsecured notes due 2025.

Loss on modification or early extinguishment of debt.

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

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

During the three months ended March 31, 2025 we recorded a loss on early extinguishment of debt in connection with the partial redemption of an aggregate $299,158 of our outstanding senior secured notes due 2026.

Income tax expense .

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

Equity in net (losses) earnings of investees.

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

Equity in net earnings of investees.

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

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

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

We present certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or the SEC, including funds from operations, or FFO, normalized funds from operations, or Normalized FFO, and NOI for the three and nine months ended September 30, 2024 and 2023.

We present certain "non-GAAP financial measures" within the meaning of the applicable rules of the Securities and Exchange Commission, or the SEC, including funds from operations, or FFO, normalized funds from operations, or Normalized FFO, and NOI for the three months ended March 31, 2025 and 2024.

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

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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, and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year.

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

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

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

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

Our calculations of FFO and Normalized FFO for the three months ended March 31, 2025 and 2024 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO and Normalized FFO appear in the following table.

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Net loss $ (8,986) $ (86,259)

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Impairment of assets 38,472 12,142

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

Equity in net (earnings) losses of investees (527) 145 9,882 (2,137)

Equity in net earnings of investees (1,487) (1,898)

Share of FFO from unconsolidated joint ventures 2,737 2,014

1 unchanged sentence

FFO (10,006) 2,588

Business management incentive fees (1)

6,934 — 6,934 —

Incentive management fees (1)

Acquisition and certain other transaction related costs 24 86

Gain on insurance recoveries (7,522) —

Loss on modification or early extinguishment of debt 29,071 —

7 unchanged sentences

Distributions declared $ 0.01 $ 0.01

(1) Incentive fees under our business management agreement are payable after the end of each calendar year, are calculated based on common share total return, as defined, and are included in general and administrative expense in our condensed consolidated statements of comprehensive income (loss).

In calculating net income (loss) in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in the first, second and third quarters.

Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net income (loss), we do not include these amounts in the calculation of Normalized FFO until the fourth quarter, when the amount of the business management incentive fee expense for the calendar year, if any, is determined.

(1) Incentive management fees are estimated and accrued for during the applicable measuring period.

Actual incentive management fees will be calculated based on common share total return, as defined in our business management agreement, for the three-year period ending December 31 for the applicable calendar year, are included in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss) and will be payable to RMR in January of the following calendar year.

In calculating net income (loss) in accordance with GAAP, we recognize estimated incentive management fees expense, if any, in the first, second and third quarters.

Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net income (loss), we do not include these amounts in the calculation of Normalized FFO until the fourth quarter, when the amount of the incentive management fees expense for the calendar year, if any, is determined.

Property Net Operating Income (NOI)

2 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

The following table includes the reconciliation of net loss to NOI for the three months ended March 31, 2025 and 2024.

Three Months Ended March 31,

Reconciliation of Net Loss to NOI:

Net loss $ (8,986) $ (86,259)

Equity in net (earnings) losses of investees (527) 145 9,882 (2,137)

Equity in net earnings of investees (1,487) (1,898)

Income tax expense 49 187

Loss before income tax expense and equity in net (earnings) losses of investees (99,068) (65,445) (272,422) (192,766)

Loss before income taxes and equity in net earnings of investees

(10,424) (87,970)

Loss on modification or early extinguishment of debt 29,071 —

1 unchanged sentence

Interest and other income (2,099) (2,237)

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

Gain on insurance recoveries (7,522) —

(Gain) loss on sale of properties (110,140) 5,874

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SHOP NOI 36,828 24,710

Non-Segment NOI 8,683 8,129 24,963 24,983

All Other NOI 8,854 8,210

Total NOI $ 72,538 $ 63,172

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)

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.

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.

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

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

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

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

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.

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

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

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

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

As a result of these transactions, we have no significant debt maturities until June 2025 when $440.0 million of our senior notes will become due, and as of September 30, 2024, we had $256.5 million of cash and cash equivalents.

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

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

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

During the nine months ended September 30, 2024, we sold four properties for an aggregate sales price of $29.1 million, excluding closing costs.

Subsequent to September 30, 2024, we sold one of these properties for a sales price of $6.6 million, excluding closing costs.

As of November 4, 2024, we had 28 properties under agreements or letters of intent to sell for an aggregate sales price of $348.1 million, excluding closing costs.

If these sales are completed, approximately $302.1 million of the proceeds are required to be used to partially redeem our outstanding senior secured notes due 2026.

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

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

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

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

Nine Months Ended September 30,

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

Three Months Ended March 31,

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

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Our Operating Liquidity and Resources

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

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

Additionally, cash interest payments decreased during the 2024 period compared to the 2023 period primarily

due to the repayment and termination of our former credit facility and the redemption of $250.0 million of our senior notes in December 2023.

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 communities monthly, quarterly or annually.

The change in cash (used in) provided by operating activities for the three months ended March 31, 2025 compared to the prior period was primarily due to the accreted interest of $34,700 paid during the 2025 period as a result of the partial redemption of our outstanding senior secured notes due 2026.

Our Investing Liquidity and Resources

The decrease in cash used in investing activities for the nine months ended September 30, 2024 compared to the prior period was primarily due to a decrease in real estate improvements and an increase in proceeds from the sale of properties during the 2024 period compared to the 2023 period.

The decrease was partially offset by our purchase on February 16, 2024 of approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price of $1.31 per share for a total purchase price, including transaction related costs, of $15.5 million.

During the 2023 period, 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):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

The change in cash provided by (used in) investing activities for the three months ended March 31, 2025 compared to the prior period was primarily due to an increase in proceeds from the sale of properties, a $17,000 cash dividend paid to us by AlerisLife, our purchase on February 16, 2024 of approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price of $1.31 per share for a total purchase price, including transaction related costs, of $15,459 and a decrease in real estate improvements.

These changes were partially offset by $5,800 of contributions made to the Seaport JV.

The following is a summary of capital expenditures, development, redevelopment and other activities for the periods presented:

Three Months Ended March 31,

Medical Office and Life Science Portfolio capital expenditures:

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Building improvements (2)

1,359 4,036 4,130 7,453

Recurring capital expenditures - Medical Office and Life Science Portfolio 5,371 6,948

Wellness centers lease related costs (1)

5,488 3,909 17,002 4,793

SHOP segment fixed assets and capital improvements 27,923 25,978 59,637 68,029

SHOP fixed assets and capital improvements 21,115 10,091

Total recurring capital expenditures $ 26,486 $ 23,962

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

$ 537 $ 2,410 $ 2,362 $ 9,124

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

11,714 23,020 18,608 59,648

Development, redevelopment and other activities - SHOP (3)

Total development, redevelopment and other activities $ 5,568 $ 1,902

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SHOP 26,683 11,280

Wellness centers 5,488 3,909 17,002 4,793

All Other - wellness centers

Total capital expenditures $ 32,054 $ 25,864

(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.

(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 change of use or 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.

As of September 30, 2024, we had estimated unspent leasing related obligations at our triple net leased wellness centers and our medical office and life science properties of approximately $31.4 million, of which we expect to spend approximately $20.3 million during the next 12 months.

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

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

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

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

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.

As of March 31, 2025, we had estimated unspent leasing related obligations at our medical office and life science properties of approximately $28,429, of which we expect to spend approximately $23,627 during the next 12 months.

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 three months ended March 31, 2025, we sold 24 properties for an aggregate sales price of $320,825, excluding closing costs.

Subsequent to March 31, 2025, we sold one property for a sales price of $11,150, excluding closing costs.

As of May 2, 2025, we had 19 properties under agreements or letters of intent to sell for an aggregate sales price of $115,773, excluding closing costs.

The net proceeds from the sales of two of these properties, which have an expected aggregate sales price, excluding closing costs, of $13,118, are required to 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.

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 $50,000 to its stockholders.

Our pro rata share of this cash dividend was $17,000.

Our Financing Liquidity and Resources

The change in cash provided by financing activities for the nine months ended September 30, 2024 compared to cash used in financing activities for the prior period was primarily due to our execution of a $120.0 million mortgage loan during the 2024 period and $250.0 million in repayments of borrowings under our former credit facility during the 2023 period, which was partially offset by the redemption of $60.0 million of our senior notes during the 2024 period.

As of September 30, 2024, we had $256.5 million of cash and cash equivalents.

The change in cash used in financing activities for the three months ended March 31, 2025 compared to the prior period was primarily due to the partial redemption of our outstanding senior secured notes due 2026, partially offset by our execution of a $140,000 mortgage loan in the 2025 period.

As of March 31, 2025, we had $302,577 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.

During the nine months ended September 30, 2024, we paid quarterly cash distributions to our shareholders totaling approximately $7.2 million using existing cash balances.

On October 16, 2024, we declared a quarterly distribution payable to common shareholders of record on October 28, 2024 in the amount of $0.01 per share, or approximately $2.4 million.

We expect to pay this distribution on or about November 14, 2024 using cash on hand.

During the three months ended March 31, 2025, we paid a quarterly cash distribution to our shareholders totaling approximately $2,413 using existing cash balances.

On April 10, 2025, we declared a quarterly distribution payable to common shareholders of record on April 22, 2025 in the amount of $0.01 per share, or approximately $2,413.

We expect to pay this distribution on or about May 15, 2025 using cash on hand.

For further information regarding the distribution we paid during 2025, see Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We believe we may have access to certain 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 credit market conditions and our then creditworthiness and our ability to be in compliance with our debt covenants.

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.

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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.

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

Our $641,376 in outstanding senior secured notes due 2026 are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries.

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

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

We are currently under agreements or letters of intent to sell 22 of the properties securing our senior secured notes due 2026 for an aggregate sales price of $302.1 million, excluding closing costs.

If these sales are completed, the proceeds are required to be used to partially redeem our outstanding senior secured notes due 2026.

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

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

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

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

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%.

In June 2024, we redeemed $60.0 million of our outstanding 9.75% senior unsecured notes due 2025 using proceeds from the $120.0 million mortgage loan executed in May 2024.

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

In January 2024, Standard & Poor's Rating Services, or 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.

We have a one-time option to extend the maturity date of these senior secured notes by one year, to January 15, 2027, subject to satisfaction of certain conditions and payment of an extension fee.

If we exercise this option, interest payments will be due semiannually during the extension period at an initial interest rate of 11.25% with increases of 50 basis points every 90 days these senior secured notes remain outstanding.

We are currently under letters of intent to sell two additional properties securing our senior secured notes due 2026 for an aggregate sales price of $13,118, excluding closing costs.

The net proceeds from these sales are required to be used to partially redeem these senior secured notes, if these sales are completed.

In March 2025, we executed a $140,000 floating rate mortgage loan secured by 14 SHOP communities.

This mortgage loan matures in March 2028 and requires that interest be paid at an annual rate of SOFR plus a premium of 2.50% with interest-only payments through March 2027, and we have two six-month extension options of the interest-only period, subject to satisfaction of certain conditions.

In connection with this mortgage loan, we have purchased an interest rate cap with a SOFR strike rate equal to 4.50% pursuant to the terms of the applicable loan agreement.

The net proceeds from this mortgage loan were

approximately $136,228 after deducting estimated closing costs, and in April 2025, we used these proceeds and cash on hand to partially redeem $140,000 of our then outstanding 9.75% senior unsecured notes due 2025.

In April 2025, we executed a $108,873 fixed rate mortgage loan secured by seven SHOP communities.

This mortgage loan matures in May 2035 and requires that interest be paid at an annual rate of 6.22%, with interest-only payments through May 2030.

Also in April 2025, we provided notice to the holders of our 9.75% senior unsecured notes due June 2025 to redeem $140,000 of these notes in May 2025 using these loan proceeds and cash on hand.

Additionally, we have executed term sheets with additional lenders for expected aggregate proceeds of $94,030 for loans that will be secured by an aggregate of six SHOP communities.

We intend to use these proceeds and cash on hand to fully redeem the remaining outstanding principal amount of our 9.75% senior unsecured notes due in June 2025, which is our next significant debt maturity.

The closings of the additional loans are subject to conditions;

accordingly, we cannot be sure if we will close such loans for the expected proceeds or at all or that these closings will not be delayed.

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

Debt Covenants

Our principal debt obligations at September 30, 2024 were:

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

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

and (3) $127.9 million aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by nine properties.

Debt Covenants (dollars in thousands)

Our principal debt obligations at March 31, 2025 were:

(1) $1,980,000 outstanding principal amount of senior unsecured notes;

(2) $641,376 outstanding principal amount of senior secured notes;

and (3) $267,044 aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by 23 properties.

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

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

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

As of March 31, 2025, we believe we were in compliance with all of the covenants under our senior notes indentures and their supplements and our other debt obligations.

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

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See "—Our Financing Liquidity and Resources" above for information regarding recent changes to our issuer credit rating and senior debt ratings.

Our senior unsecured notes indentures and their supplements contain cross default provisions to any other debts of more than $20.0 million ($50.0 million or more in the case of our senior notes indentures and supplements entered in February 2016, February 2018, June 2020, February 2021 and December 2023).

The loan agreements governing the aggregate $620.0 million secured debt financing related to the Seaport JV contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.

We no longer include this $620.0 million of secured debt financing in our condensed consolidated balance sheet following the deconsolidation of the net assets of this joint venture;

Our senior unsecured notes indentures and their supplements contain cross default provisions to any other debts of more than $20,000 ($50,000 or more in the case of our senior notes indentures and supplements entered in February 2016, February 2018, June 2020, February 2021 and December 2023).

The loan agreements governing the aggregate $620,000 secured debt financing related to the Seaport JV contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.

We no longer include this $620,000 of secured debt financing in our condensed consolidated balance sheet following the deconsolidation of the net assets of this joint venture;

however, we continue to provide certain guaranties on this debt.

The debt secured by the properties included in the LSMD JV in which we own a 20% equity interest is guaranteed by this joint venture and is non-recourse to us.

Supplemental Guarantor Information

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

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

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

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

The notes and related guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the applicable collateral, and are structurally subordinated to all indebtedness and

other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes.

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

Supplemental Guarantor Information (dollars in thousands)

On May 28, 2020, we issued $1,000,000 of our 9.75% senior notes due 2025.

We subsequently redeemed $500,000, $120,000 and $140,000 of this debt during 2022, 2024 and 2025 respectively, with $240,000 remaining outstanding as of May 2, 2025.

On February 3, 2021, we issued $500,000 of our 4.375% senior notes due 2031.

As of March 31, 2025, all $380,000 of our 9.75% senior notes due 2025 and all $500,000 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.

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 $1,100,000 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.

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As a result, our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 and the respective guarantees are structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, including guarantees of other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Real estate properties, net $ 3,089,969 $ 3,147,884

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Total liabilities $ 2,746,534 $ 3,018,147

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Revenues $ 311,706

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Actual results could differ from those estimates.

Significant estimates in our condensed consolidated

financial statements include purchase price allocations, useful lives of fixed assets and impairments of real estate and intangible assets.

Significant estimates in our condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairments of real estate and intangible assets.

A discussion of our critical accounting estimates is included in our Annual Report.

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Impact of Government Reimbursement

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

For the three months ended March 31, 2025, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis