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Item 2. Management’s Discussion and Analysis

2025-11-03 compared with 2025-08-04 · 157 added, 127 removed, 529 unchanged (35% of the section changed)

2 unchanged sentences

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

As of June 30, 2025, we owned 341 properties located in 34 states and Washington, D.C., including 21 properties classified as held for sale and one closed senior living community.

As of June 30, 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 14.7 years.

As of September 30, 2025, we owned 335 properties located in 34 states and Washington, D.C., including 50 properties classified as held for sale.

As of September 30, 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 14.4 years.

On September 3, 2025, we announced that we entered into agreements with AlerisLife and seven different third party managers to transition the management of 116 of our senior living communities managed by Five Star to these managers.

As of September 30, 2025 , management agreements for 21 of our senior living communities had been transitioned from Five Star to new and existing managers.

As of November 3, 2025, management agreements for 85 communities had been transitioned to new managers and we expect to complete the management transitions for the remaining senior living communities by December 31, 2025.

We may experience temporary disruption, including reductions in our cash flows, as we transition these communities from Five Star.

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

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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.

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.

government shutdown, 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.

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PORTFOLIO OVERVIEW

The following tables present an overview of our portfolio as of June 30, 2025 (dollars in thousands, except investment per square foot or unit data):

As of June 30, 2025 Number

The following tables present an overview of our portfolio as of September 30, 2025 (dollars in thousands, except investment per square foot or unit data):

As of September 30, 2025 Number

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

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Total 335 $ 6,659,811 100.0 % $ 388,706 100.0 % $ 63,319 100.0 %

As of and For the Three Months Ended June 30,

As of and For the Three Months Ended September 30,

SHOP 81.5 % 79.4 %

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(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 six months ended June 30, 2025, 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 June 30, 2025

During the three and nine months ended September 30, 2025, 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, 2025

New Leases Renewals Total

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$ 8.42 $ 3.54 $ 4.14

Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

New Leases Renewals Total

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Lease Expiration Schedules

As of June 30, 2025, lease expirations in our Medical Office and Life Science Portfolio segment were as follows (dollars in thousands):

As of September 30, 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)

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Weighted average remaining lease term (in years) 4.7 5.0

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

As of June 30, 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):

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

As of September 30, 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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Weighted average remaining lease term (in years) 10.1

(1) Annualized rental income is based on rents pursuant to existing leases as of June 30, 2025.

(1) Annualized rental income is based on rents pursuant to existing leases as of September 30, 2025.

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

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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 and six months ended June 30, 2025 and 2024:

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

The following table summarizes the results of operations of each of our segments for the three and nine months ended September 30, 2025 and 2024:

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

2025 2024 2025 2024

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

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 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 June 30, 2025 to the three months ended June 30, 2024.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 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 September 30, 2025 to the three months ended September 30, 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 June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

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General and administrative 12,789 13,933 (1,144) (8.2) %

Acquisition and certain other transaction related costs 75 1,826 (1,751) (95.9) %

Acquisition and certain other transaction related costs 1,158 331 827 nm

Impairment of assets 93,243 23,031 70,212 nm

Loss on sale of properties (7,429) (13,213) 5,784 (43.8) %

Interest and other income 2,982 2,403 579 24.1 %

Gain on sale of properties 1,260 111 1,149 nm

Interest income and other expenses (774) 2,575 (3,349) (130.1) %

Interest expense

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Loss on modification or early extinguishment of debt (11,191) — (11,191) 100.0 %

Loss before income taxes and equity in net earnings (losses) of investees (93,878) (85,384) (8,494) 9.9 %

Income tax expense (843) (170) (673) nm

Equity in net earnings (losses) of investees 3,082 (12,307) 15,389 (125.0) %

Loss before income taxes and equity in net earnings of investees (168,786) (99,068) (69,718) 70.4 %

Income tax expense (337) (148) (189) 127.7 %

Equity in net earnings of investees 5,083 527 4,556 nm

Net loss $ (164,040) $ (98,689) $ (65,351) 66.2 %

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

Ended June 30, Ended June 30,

Ended September 30, Ended September 30,

2025 2024 2025 2024

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$ 5,413 $ 5,142 $ 5,472 $ 5,199

Three Months Ended June 30,

Three Months Ended September 30,

Comparable (1)

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NOI $ 32,034 $ 32,425 $ (391) (1.2) % $ (2,414) $ (4,992) $ 29,620 $ 27,433 $ 2,187 8.0 %

(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 April 1, 2024;

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

(1) Consists of senior living communities that we have owned, are in service and reported in the same segment since July 1, 2024;

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

Properties are included in same property once stabilized for the full period in both comparison periods presented.

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

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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 15 communities classified as held for sale as of June 30, 2025 and nine communities transitioned to an existing third party manager during the 2024 period.

The activity for our non-comparable properties primarily reflects the 15 communities classified as held for sale as of September 30, 2025 and nine communities transitioned to an existing third party manager during the 2024 period.

Property operating expenses.

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

Net operating income.

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All Properties

As of June 30, As of June 30,

As of September 30, As of September 30,

2025 2024 2025 2024

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Occupancy 93.3 % 93.3 % 86.6 % 80.8 %

Three Months Ended June 30,

Three Months Ended September 30,

Comparable (1)

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NOI $ 23,849 $ 23,550 $ 299 1.3 % $ 2,826 $ 4,277 $ 26,675 $ 27,827 $ (1,152) (4.1) %

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

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

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

Properties are included in same property once stabilized for the full period in both comparison periods presented.

Rental income.

Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties.

Rental income decreased at our non-comparable properties primarily due to dispositions since April 1, 2024.

Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by an increase in real estate tax reimbursements at certain of our properties.

Rental income decreased at our non-comparable properties primarily due to dispositions since July 1, 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 decrease in property operating expenses at our comparable properties is primarily due to a decrease in insurance costs and other direct costs.

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

The decrease in property operating expenses at our comparable properties is primarily due to a decrease in insurance costs, salaries and other direct costs.

These decreases were partially offset by an increase in real estate taxes as a result of successful appeals at certain of our properties during the three months ended September 30, 2024.

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

Net operating income.

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All Properties

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

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

2025 2024 2025 2024

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3.23 x 1.99 x 3.23 x 1.99 x

Three Months Ended June 30,

Three Months Ended September 30,

Comparable (2)

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(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 April 1, 2024;

excludes properties classified as held for sale, if any.

(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, 2024;

excludes properties classified as held for sale and planned dispositions, if any.

Properties are included in same property once stabilized for the full period in both comparison periods presented.

(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.

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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 paid directly by our tenants during the three months ended June 30, 2025, which were previously paid by us during prior periods.

Net operating income.

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

The change in NOI primarily reflects the change in rental income described above.

Consolidated :

Depreciation and amortization expense.

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

Depreciation and amortization expense decreased primarily due to dispositions since July 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 $4,148 of estimated incentive management fees that we recognized for the three months ended June 30, 2025, compared to a $849 reversal as of June 30, 2024, as a result of our total shareholder return exceeding the returns for the MSCI U.S.

General and administrative expense decreased primarily due to $5,676 of estimated incentive management fees that we recognized for the three months ended September 30, 2025, compared to $6,934 for the three months ended September 30, 2024.

These incentive management fees were recorded 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.

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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 during the three months ended September 30, 2025 as a result of the management transitions of 21 communities to both new and existing third party managers.

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

Impairment of assets.

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

Loss on sale of properties.

Gain on sale of properties.

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

Interest and other income.

The increase in interest and other income is primarily due to higher average invested cash balances during the three months ended June 30, 2025 compared to the 2024 period.

Interest income and other expenses.

The decrease in interest income and other expenses is primarily due to lower average invested cash balances and interest rates during the three months ended September 30, 2025 and other expenses.

Interest expense.

Interest expense decreased primarily due to the redemption during 2025 of an aggregate $380,000 of our remaining 9.75% senior unsecured notes due 2025.

Additionally, there was a decrease in discount accretion for our senior secured notes due 2026 due to the partial redemption of an aggregate $299,158 of these notes during 2025.

During the three months ended June 30, 2025 and 2024, we recognized discount accretion of $16,307 and $21,440, respectively, for our senior secured notes due 2026.

These decreases were partially offset by the execution of a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum and four mortgage financings totaling $343,157 during 2025.

Interest expense decreased primarily due to the redemption during 2025 of an aggregate $380,000 of our remaining 9.75% senior unsecured notes due 2025 and a decrease in discount accretion for our senior secured notes due 2026 due to the partial redemption of an aggregate $606,164 of these notes during 2025.

During the three months ended September 30, 2025 and 2024, we recognized discount accretion of $16,313 and $22,034, respectively, for our senior secured notes due 2026.

These decreases were partially offset by four mortgage financings totaling $343,157 during 2025 and the issuance of $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in September 2025.

Loss on modification or early extinguishment of debt.

During the three months ended June 30, 2025, we recorded a loss on early extinguishment of debt in connection with the redemption of all $380,000 of our remaining 9.75% senior secured notes due 2025.

During the three months ended September 30, 2025, we recorded a loss on early extinguishment of debt in connection with our partial redemption of our senior secured notes due 2026.

For more information regarding our loss on modification or early extinguishment of debt, see Note 5 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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.

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.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 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 six months ended June 30, 2025 to the six months ended June 30, 2024.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 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 nine months ended September 30, 2025 to the nine months ended September 30, 2024.

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

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Impairment of assets 162,708 41,718 120,990 nm

Gain (loss) on sale of properties 102,711 (19,087) 121,798 nm

Gain (loss) on sale of properties 103,971 (18,976) 122,947 (647.9) %

Gain on insurance recoveries 7,522 — 7,522 100.0 %

Interest and other income 5,081 4,640 441 9.5 %

Interest income and other expenses 4,307 7,215 (2,908) (40.3) %

Interest expense

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All Properties

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

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

2025 2024 2025 2024

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$ 5,385 $ 5,127 $ 5,442 $ 5,175

Six Months Ended June 30,

Nine Months Ended September 30,

Comparable (1)

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NOI $ 108,391 $ 94,296 $ 14,095 14.9 % $ (5,328) $ (13,169) $ 103,063 $ 81,127 $ 21,936 27.0 %

(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 January 1, 2024;

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

(1) Consists of senior living communities that we have owned, are in service and reported in the same segment since January 1, 2024;

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

Properties are included in same property once stabilized for the full period in both comparison periods presented.

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

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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 15 communities classified as held for sale as of June 30, 2025 and 13 communities transitioned to an existing third party manager during the 2024 period.

The activity for our non-comparable properties primarily reflects the 15 communities classified as held for sale as of September 30, 2025 and 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, management fees as a result of higher revenues, marketing and other direct costs, partially offset by decreased insurance costs due to a reduction in premiums.

Net operating income.

3 unchanged sentences

All Properties

As of June 30, As of June 30,

As of September 30, As of September 30,

2025 2024 2025 2024

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Occupancy 93.3 % 93.3 % 86.6 % 80.8 %

Six Months Ended June 30,

Nine Months Ended September 30,

Comparable (1)

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(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.

Properties are included in same property once stabilized for the full period in both comparison periods presented.

Rental income.

Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by a termination fee totaling $600 paid during the six months ended June 30, 2025 by a former tenant at one of our properties.

Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties and the write off of straight line rent for a former tenant at one of our properties, partially offset by a termination fee from this former tenant totaling $600 paid during the nine months ended September 30, 2025.

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

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Property operating expenses.

Property operating expenses decreased primarily due to dispositions since January 1, 2024.

Property operating expenses increased at our comparable properties primarily due to an increase in HVAC expenses and snow removal costs, partially offset by a decrease in insurance and other direct costs.

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

Net operating income.

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All Properties

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

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

2025 2024 2025 2024

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3.23 x 1.99 x 3.23 x 1.99 x

Six Months Ended June 30,

Nine Months Ended September 30,

Comparable (2)

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(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.

excludes properties classified as held for sale and planned dispositions, if any.

Properties are included in same property once stabilized for the full period in both comparison periods presented.

(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.

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Property operating expenses.

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 six months ended June 30, 2025, which were previously paid by us during prior periods.

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 nine months ended September 30, 2025, which were previously paid by us during prior periods.

Net operating income.

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General and administrative expense .

General and administrative expense increased primarily due to $6,555 of estimated incentive management fees that we recognized for the six months ended June 30, 2025 as a result of our total shareholder return exceeding the returns for the MSCI U.S.

General and administrative expense increased primarily due to $12,231 of estimated incentive management fees that we recognized for the nine months ended September 30, 2025 compared to $6,934 for the nine months ended September 30, 2024.

These incentive management fees were recorded 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.

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.

We incurred transition costs during the nine months ended September 30, 2025 as a result of our transition of 21 communities to both new and existing third party managers.

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

For more information about such management transitions 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.

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Gain on insurance recoveries.

During the six months ended June 30, 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.

During the nine months ended September 30, 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 increase in interest and other income is primarily due to higher average invested cash balances during the six months ended June 30, 2025 compared to the 2024 period.

Interest income and other expenses.

The decrease in interest income and other expenses is primarily due to lower average invested cash balances and interest rates during the nine months ended September 30, 2025 compared to the 2024 period.

Interest expense.

1 unchanged sentence

Additionally, there was a decrease in discount accretion for our senior secured notes due 2026 due to the partial redemption of an aggregate $606,164 of these notes during 2025.

During the six months ended June 30, 2025 and 2024, we recognized discount accretion of $38,429 and $42,099, respectively, for our senior secured notes due 2026.

These decreases were partially offset by the execution of a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum and four mortgage financings totaling $343,157 during 2025.

During the nine months ended September 30, 2025 and 2024, we recognized discount accretion of $54,742 and $64,133, respectively, for our senior secured notes due 2026.

These decreases were partially offset by four mortgage financings totaling $343,157 during 2025, the execution of a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum and the issuance of $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in September 2025.

Loss on modification or early extinguishment of debt.

During the six months ended June 30, 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 and with the redemption of all $380,000 of our remaining 9.75% senior secured notes due 2025.

During the nine months ended September 30, 2025, we recorded a loss on early extinguishment of debt in connection with the partial redemption of an aggregate $606,164 of our outstanding senior secured notes due 2026 and with the redemption of all $380,000 of our remaining 9.75% senior secured notes due 2025.

Income tax expense .

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

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 and six months ended June 30, 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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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 six months ended June 30, 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.

Our calculations of FFO and Normalized FFO for the three and nine months ended September 30, 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 June 30, Six Months Ended June 30,

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

2025 2024 2025 2024

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Depreciation and amortization 65,324 68,959 199,915 207,449

Loss (gain) on sale of properties 7,429 13,213 (102,711) 19,087

(Gain) loss on sale of properties (1,260) (111) (103,971) 18,976

Impairment of assets 93,243 23,031 162,708 41,718

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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 six months ended June 30, 2025 and 2024.

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

The following table includes the reconciliation of net loss to NOI for the three and nine months ended September 30, 2025 and 2024.

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

2025 2024 2025 2024

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Interest expense 48,886 59,443 157,643 175,721

Interest and other income (2,982) (2,403) (5,081) (4,640)

Interest income and other expenses 774 (2,575) (4,307) (7,215)

Gain on insurance recoveries — — (7,522) —

Loss (gain) on sale of properties 7,429 13,213 (102,711) 19,087

(Gain) loss on sale of properties (1,260) (111) (103,971) 18,976

Impairment of assets 93,243 23,031 162,708 41,718

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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:

Six Months Ended June 30,

Nine Months Ended September 30,

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

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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 decrease in cash provided by operating activities for the six months ended June 30, 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, partially offset by higher cash flows at our SHOP communities.

The decrease in cash provided by operating activities for the nine months ended September 30, 2025 compared to the prior period was primarily due to the accreted interest of $86,992 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 change in cash provided by (used in) investing activities for the six months ended June 30, 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 and 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.

The change in cash provided by (used in) investing activities for the nine months ended September 30, 2025 compared to the prior period was primarily due to an increase in proceeds from the sale of properties, a $28,000 cash distribution paid to us by the Seaport JV, aggregate cash dividends of $20,400 paid to us by AlerisLife, a reduction in real estate improvements and 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.

These changes were partially offset by $8,500 of contributions made to the Seaport JV in the 2025 period.

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

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

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

2025 2024 2025 2024

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

As of June 30, 2025, we had estimated unspent leasing related obligations at our medical office and life science properties of approximately $25,528, of which we expect to spend approximately $22,968 during the next 12 months.

As of September 30, 2025, we had estimated unspent leasing related obligations at our medical office and life science properties of approximately $22,615, of which we expect to spend approximately $20,405 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.

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

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 six months ended June 30, 2025, we sold 26 properties for an aggregate sales price of $337,225, excluding closing costs.

Subsequent to June 30, 2025, we sold three properties for an aggregate sales price of $8,800, excluding closing costs.

As of August 1, 2025, we had 49 properties under agreements or letters of intent to sell for an aggregate sales price of $279,923, excluding closing costs.

During the nine months ended September 30, 2025, we sold 32 properties for an aggregate sales price of $353,675, excluding closing costs.

Subsequent to September 30, 2025, we sold 12 properties for an aggregate sales price of $42,130, excluding closing costs.

As of November 3, 2025, we had 38 properties under agreements or letters of intent to sell for an aggregate sales price of $237,219, excluding closing costs.

The net proceeds from the sales of 12 of these properties, which have an expected aggregate sales price, excluding closing costs, of $90,529, are required to be used to partially redeem our outstanding senior secured notes due 2026, if the sales of such properties are completed.

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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.

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.

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Our pro rata share of this cash dividend was $3,400.

On August 21, 2025, the Seaport JV paid an aggregate cash distribution of $280,000 to its investors in connection with the $1,000,000 refinancing of its prior mortgage loan in August 2025.

Our pro rata share of this cash distribution was $28,000.

Our Financing Liquidity and Resources

The change in cash (used in) provided by financing activities for the six months ended June 30, 2025 compared to the prior period was primarily due to the redemption of our outstanding senior secured notes due 2025 and partial redemption of our outstanding senior secured notes due 2026, partially offset by our execution of four mortgage financings for aggregate proceeds, excluding closing costs, of $343,157 in the 2025 period.

The change in cash (used in) provided by financing activities for the nine months ended September 30, 2025 compared to the prior period was primarily due to the redemption of our outstanding senior secured notes due 2025 and partial redemption of our outstanding senior secured notes due 2026, partially offset by our issuance of $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in a private offering raising net proceeds of $364,726, after deducting discounts and commissions to the initial purchasers and other estimated fees and expenses.

Additionally, we executed four mortgage financings for aggregate proceeds, excluding closing costs, of $343,157 in the 2025 period.

In June 2025, we obtained a $150,000 revolving credit facility secured by 14 SHOP communities.

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Our revolving credit facility matures in June 2029 and we have two six-month extension options for the maturity date of the facility, subject to satisfaction of certain conditions and payment of an extension fee.

Interest payable on borrowings under our revolving credit facility is based on SOFR plus a premium of 2.50% to 3.00%, depending on our net leverage ratio, as defined in our credit agreement, which was 2.50% as of June 30, 2025.

We also pay an unused commitment fee of 25 to 35 basis points per annum based on amounts outstanding under our revolving credit facility.

As of June 30, 2025, the annual interest rate payable on borrowings under our revolving credit facility was 7.05%.

As of June 30, 2025 and August 1, 2025, we had no borrowings under our revolving credit facility and $150,000 available for borrowings.

As of June 30, 2025, we had $141,769 of cash and cash equivalents.

As of September 30, 2025, the annual interest rate payable on borrowings under our revolving credit facility was 6.84%.

As of September 30, 2025 and November 3, 2025, we had no borrowings under our revolving credit facility and $150,000 available for borrowings.

As of September 30, 2025, we had $201,371 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 six months ended June 30, 2025, we paid quarterly cash distributions to our shareholders totaling approximately $4,826 using existing cash balances.

On July 10, 2025, we declared a quarterly distribution payable to common shareholders of record on July 21, 2025 in the amount of $0.01 per share, or approximately $2,414.

We expect to pay this distribution on or about August 14, 2025 using cash on hand.

During the nine months ended September 30, 2025, we paid quarterly cash distributions to our shareholders totaling approximately $7,240 using existing cash balances.

On October 9, 2025, we declared a quarterly distribution payable to common shareholders of record on October 27, 2025 in the amount of $0.01 per share, or approximately $2,421.

We expect to pay this distribution on or about November 13, 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.

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

A protracted negative impact on the economy or the industries in which our properties and businesses operate 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.

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.

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.

Our $334,370 in outstanding senior secured notes due 2026 are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by the 2026 Collateral Guarantors, and on a joint, several and unsecured basis, by all of our subsidiaries other than the 2026 Collateral Guarantors and certain excluded subsidiaries.

These notes and the guarantees provided by the 2026 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 2026 Collateral Guarantors.

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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.

During the nine months ended September 30, 2025, we sold 22 properties that secured our senior secured notes due 2026 and used aggregate net proceeds of $299,158 from the sales of these properties to partially redeem these senior secured notes.

In October 2025, we used net proceeds of $10,249 from the sale of one property to partially redeem our outstanding senior secured notes due 2026.

We are currently under agreements or letters of intent to sell 12 properties securing our senior secured notes due 2026 for an aggregate sales price of $90,529, excluding closing costs.

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Our next significant debt maturity is $334,370 in outstanding senior secured notes with a maturity date of January 15, 2026, which is subject to a one-time option to extend the maturity date by one year, to January 15, 2027.

In September 2025, we issued $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in a private offering raising net proceeds of $364,726, after deducting discounts and commissions to the initial purchasers and other estimated fees and expenses.

These notes are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by the 2030 Collateral Guarantors, and on a joint, several and unsecured basis, by all of our subsidiaries other than the 2030 Collateral Guarantors and certain excluded subsidiaries.

These notes and the guarantees provided by the 2030 Collateral Guarantors are secured by a first priority lien and security interest on 100% of the equity interests in each of the 2030 Collateral Guarantors.

These notes require semi-annual interest payments through maturity.

We used the net proceeds from this offering to partially redeem $307,006 of our then outstanding $641,376 senior secured notes due 2026.

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.

In August 2025, Moody's Investors Service, or Moody's, upgraded our issuer credit rating from Caa3 to Caa1, senior secured notes due 2026 rating from Caa2 to B3, our 4.375% senior notes due 2031 rating from Caa3 to Caa1, and our senior unsecured notes from Ca to Caa2.

In September 2025, S&P Global, or S&P, upgraded our issuer credit rating from CCC+ to B-, our senior secured notes due 2026 and our 4.375% senior notes due 2031 ratings from B to B+ and our senior unsecured notes note rating from CCC+ to B-.

Additionally, S&P rated our 7.25% senior secured notes due 2030 as B+.

Debt Covenants (dollars in thousands)

Our principal debt obligations at June 30, 2025 were:

Our principal debt obligations at September 30, 2025 were:

(1) $1,600,000 outstanding principal amount of senior unsecured notes;

(2) $709,370 outstanding principal amount of senior secured notes;

and (3) $329,809 aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by 36 properties.

(3) $329,175 aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by 36 properties;

and (4) $140,000 principal amount floating rate mortgage loan (excluding discounts, premiums and net debt issuance costs) secured by 14 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 credit agreement and 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 June 30, 2025, we believe we were in compliance with all of the covenants under our debt agreements.

As of September 30, 2025, we believe we were in compliance with all of the covenants under our debt agreements.

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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The loan agreements governing the aggregate $1,000,000 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.

We provide certain limited recourse guaranties on this debt, with our liability limited to $100,000.

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.

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

As of June 30, 2025, 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.

As of September 30, 2025, 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.

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.

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

The rights of holders of our 4.375% senior notes due 2031 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.

The rights of holders of our 4.375% senior notes due 2031

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.

As a result, our 4.375% senior notes due 2031 and their guarantees are structurally subordinated to all indebtedness, guarantees and other liabilities of our subsidiaries that do not guarantee 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:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Real estate properties, net $ 2,081,469 $ 2,216,534

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Total liabilities $ 2,420,585 $ 3,003,428

Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

Revenues $ 656,309

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Impact of Government Reimbursement

For the six months ended June 30, 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.

For the nine months ended September 30, 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.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis