DIVERSIFIED HEALTHCARE TRUST 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with our Annual Report. OVERVIEW We are a REIT organized under Maryland law that primarily owns senior living communities, medical office and life science properties and other healthcare related properties throughout the United States. As of March 31, 2026, we owned 285 properties located in 33 states and Washington, D.C. As of March 31, 2026, 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 13.9 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 revenue in excess of increases in costs, resulting in improving returns to us. In an effort to optimize performance, our asset management team reviews the results of each of our senior living communities and our operators, taking into account various factors such as performance metric benchmarks, location and other relevant data points. This comprehensive review process ensures that our decisions are data-driven and strategically aligned with our overall objectives. As a result of these reviews, our strategy to drive positive performance includes analyzing non-performing communities for potential disposition or transition to different operators. We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, uncertainties surrounding interest rates and inflation, volatility in the public debt and equity markets, global geopolitical hostilities and tensions, any U.S. 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. 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. 20 Table of Contents Portfolio Overview The following tables present an overview of our portfolio as of and for the three months ended March 31, 2026 (dollars in thousands, except average monthly rate): Gross Number of Units Book Value Number of or of Real Estate Properties Square Feet Assets (1) NOI (2) % of NOI (2) SHOP 199 22,573 units $ 4,375,739 $ 43,626 57.5 % Medical Office and Life Science Portfolio 67 5,558,089 sq. ft. 1,491,588 25,064 33.0 % Triple net leased senior living communities 9 1,328 units 155,162 3,440 4.5 % Wellness centers 10 812,246 sq. ft. 208,110 3,785 5.0 % Total 285 $ 6,230,599 $ 75,915 100.0 % (1) Represents gross book value of real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, if any. (2) 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.” Comparable Properties (1) All Properties As of and for the As of and for the Three Months Ended March 31, Three Months Ended March 31, 2026 2025 2026 2025 SHOP Total properties 184 184 199 231 Number of units 21,226 21,226 22,573 25,005 Occupancy 82.4 % 81.3 % 81.7 % 80.2 % Average monthly rate (2) $ 5,656 $ 5,341 $ 5,613 $ 5,413 Medical Office and Life Science Portfolio (3) Total properties 65 65 67 93 Total square feet 5,349,272 5,349,272 5,558,089 7,619,667 Occupancy 95.3 % 94.7 % 91.8 % 80.6 % All Other Total properties: Triple net leased senior living communities 8 8 9 9 Wellness centers 10 10 10 10 Rent coverage: (4) Triple net leased senior living communities 1.84 x 1.73 x 1.84 x 1.73 x Wellness centers 3.09 x 2.51 x 3.09 x 2.51 x Weighted average 2.49 x 2.12 x 2.49 x 2.12 x (1) Consists of properties that we have owned and are in service and which have been reported in the same segment and leased to the same operator continuously since January 1, 2025; excludes properties classified as held for sale, planned for sale, closed or out of service, if any, and medical office and life science properties owned by unconsolidated joint ventures in which we own an equity interest. 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. The average monthly rate is calculated based on the actual number of days during the period. (3) 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. (4) All tenant operating data presented are based upon the operating results provided by our tenants for the most recent prior period for which tenant operating results are available to us. Rent coverage is calculated using the annualized operating cash flows from our triple net lease tenants' operations of our properties, before subordinated charges, if any, divided by annualized rental income. We have not independently verified tenant operating data. Excludes data for historical periods prior to our ownership of certain properties. 21 Table of Contents During the three months ended March 31, 2026, 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, 2026 New Leases Renewals Total Square feet leased during the quarter 113 56 169 Weighted average rental rate change (by rentable square feet) 15.7 % 5.1 % 12.0 % Weighted average lease term (years) 10.1 8.2 9.5 Total leasing costs and concession commitments (1) $ 3,815 $ 1,228 $ 5,043 Total leasing costs and concession commitments per square foot (1) $ 33.80 $ 21.78 $ 29.79 Total leasing costs and concession commitments per square foot per year (1) $ 3.35 $ 2.66 $ 3.14 (1) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent. As of March 31, 2026, lease expirations in our Medical Office and Life Science Portfolio segment were as follows (dollars in thousands): Cumulative Cumulative % of Total % of Total % of Total % of Total Number Leased Leased Leased Annualized Annualized Annualized of Square Feet Square Feet Square Feet Rental Income Rental Income Rental Income Year Tenants Expiring Expiring Expiring Expiring (1) Expiring Expiring 2026 34 485,364 9.5 % 9.5 % $ 15,611 9.5 % 9.5 % 2027 45 510,390 10.0 % 19.5 % 13,447 8.2 % 17.7 % 2028 42 1,055,047 20.7 % 40.2 % 31,885 19.5 % 37.2 % 2029 44 472,459 9.3 % 49.5 % 15,249 9.3 % 46.5 % 2030 32 338,925 6.6 % 56.1 % 8,353 5.1 % 51.6 % Thereafter 96 2,237,515 43.9 % 100.0 % 79,346 48.4 % 100.0 % Total 293 5,099,700 100.0 % $ 163,891 100.0 % Weighted average remaining lease term (in years) 4.6 4.9 (1) Annualized rental income is based on rents pursuant to existing leases as of March 31, 2026, and includes straight line rent adjustments and estimated recurring expense reimbursements for certain net and modified gross leases and excludes lease value amortization. 22 Table of Contents As of March 31, 2026, lease expirations at our triple net leased wellness centers and senior living communities leased to third party operators were as follows (dollars in thousands): Cumulative % of Total % of Total Number of Units Annualized Annualized Annualized Number of Or Rental Income Rental Income Rental Income Year Properties Square Feet Expiring (1) Expiring Expiring 2026 — — $ — — % — % 2027 (2) 4 533 units 4,841 16.0 % 16.0 % 2028 — — — — % 16.0 % 2029 1 155 units 547 1.8 % 17.8 % 2030 5 277 units and 129,600 square feet 5,062 16.7 % 34.5 % Thereafter 9 363 units and 682,646 square feet 19,891 65.5 % 100.0 % Total 19 $ 30,341 100.0 % Weighted average remaining lease term (in years) 9.4 (1) Annualized rental income is based on rents pursuant to existing leases as of March 31, 2026. Annualized rental income includes estimated percentage rents and straight line rent adjustments and excludes lease value amortization. (2) In April 2026, Stellar Senior Living LLC exercised its renewal option to extend its lease through 2037. RESULTS OF OPERATIONS (dollars in thousands, unless otherwise noted) We operate in, and report financial information for, the following two segments: SHOP and Medical Office and Life Science Portfolio. 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. Our Medical Office and Life Science Portfolio segment primarily consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties primarily leased to biotech laboratories and other similar tenants. We also report “All Other” operations, which consists of triple net leased wellness centers and senior living communities that are leased to third party operators from which we receive rents, 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, 2026 and 2025: Three Months Ended March 31, 2026 2025 Revenues: SHOP $ 317,225 $ 328,306 Medical Office and Life Science Portfolio 41,895 49,763 All Other 7,351 8,795 Total revenues $ 366,471 $ 386,864 Net loss: SHOP $ (11,056) $ (3,087) Medical Office and Life Science Portfolio 9,464 (18,736) All Other (41,683) 12,837 Net loss $ (43,275) $ (8,986) The following section analyzes and discusses the results of operations of each of our segments for the periods presented. 23 Table of Contents Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 (dollars in thousands): 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, 2026 to the three months ended March 31, 2025. 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, 2026 2025 $ Change % Change NOI by segment: SHOP $ 43,626 $ 36,828 $ 6,798 18.5 % Medical Office and Life Science Portfolio 25,064 26,856 (1,792) (6.7) % All Other 7,225 8,854 (1,629) (18.4) % Total NOI 75,915 72,538 3,377 4.7 % Depreciation and amortization 62,914 68,325 (5,411) (7.9) % General and administrative 14,038 9,000 5,038 56.0 % Acquisition and certain other transaction related costs 3,693 24 3,669 n/m Impairment of assets — 38,472 (38,472) (100.0) % (Loss) gain on sale of real estate (1,207) 110,140 (111,347) (101.1) % Gain on insurance recoveries — 7,522 (7,522) (100.0) % Interest and other income 233 2,099 (1,866) (88.9) % Interest expense (37,045) (57,831) 20,786 (35.9) % Loss on modification or early extinguishment of debt — (29,071) 29,071 (100.0) % Loss before income taxes and equity in net earnings of investees (42,749) (10,424) (32,325) n/m Income tax expense (622) (49) (573) n/m Equity in net earnings of investees 96 1,487 (1,391) (93.5) % Net loss $ (43,275) $ (8,986) $ (34,289) n/m n/m - not meaningful SHOP: Comparable (1) Non-Comparable Consolidated Properties Results Properties Results Properties Results Three Months Ended Three Months Ended Three Months Ended March 31, March 31, March 31, $ % $ % 2026 2025 Change Change 2026 2025 2026 2025 Change Change Residents fees and services $ 296,504 $ 283,106 $ 13,398 4.7 % $ 20,721 $ 45,200 $ 317,225 $ 328,306 $ (11,081) (3.4) % Property operating expenses (252,183) (244,069) $ 8,114 3.3 % (21,416) (47,409) (273,599) (291,478) $ (17,879) (6.1) % NOI $ 44,321 $ 39,037 $ 5,284 13.5 % $ (695) $ (2,209) $ 43,626 $ 36,828 $ 6,798 18.5 % (1) Consists of senior living communities that we have owned, are in service and reported in the same segment since January 1, 2025; excludes communities classified as held for sale, planned for sale, closed or out of service, if any. Properties are included in same property once stabilized for the full period in both comparison periods presented. Residents fees and services. Residents fees and services are the revenues earned at our managed senior living communities. We recognize these revenues as services are provided and related fees are accrued. Residents fees and services increased at our comparable properties primarily due to increases in occupancy and average monthly rate at our communities. Residents fees and services decreased at our non-comparable properties primarily due to dispositions since January 1, 2025. 24 Table of Contents 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, management fees as a result of higher revenues, insurance costs and other direct costs, partially offset by decreases in maintenance and repair costs. Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2025. Net operating income. The change in NOI reflects the net changes in residents fees and services and property operating expenses described above. Medical Office and Life Science Portfolio: Comparable (1) Non-Comparable Consolidated Properties Results Properties Results Properties Results Three Months Ended Three Months Ended Three Months Ended March 31, March 31, March 31, $ % $ % 2026 2025 Change Change 2026 2025 2026 2025 Change Change Rental income $ 41,849 $ 40,630 $ 1,219 3.0 % $ 46 $ 9,133 $ 41,895 $ 49,763 $ (7,868) (15.8) % Property operating expenses (16,481) (16,174) 307 1.9 % (350) (6,733) (16,831) (22,907) (6,076) (26.5) % NOI $ 25,368 $ 24,456 $ 912 3.7 % $ (304) $ 2,400 $ 25,064 $ 26,856 $ (1,792) (6.7) % (1) Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2025; excludes properties classified as held for sale, planned for sale or out of service undergoing redevelopment, if any, and properties owned by unconsolidated joint ventures in 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 increased at our comparable properties primarily due to increases from our net leasing activity and property operating expense reimbursements at certain of our properties. Rental income decreased at our non-comparable properties primarily due to dispositions since January 1, 2025. Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, management fees, salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense and other direct costs of operating these properties. The increase in property operating expenses at our comparable properties is primarily due to an increase in real estate taxes and other direct costs. Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2025. Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above. All Other: Comparable (1) Non-Comparable Consolidated Properties Results Properties Results Properties Results Three Months Ended Three Months Ended Three Months Ended March 31, March 31, March 31, $ % $ % 2026 2025 Change Change 2026 2025 2026 2025 Change Change Rental income $ 7,165 $ 7,120 $ 45 0.6 % $ 186 $ 1,675 $ 7,351 $ 8,795 $ (1,444) (16.4) % Property operating expenses (2) (126) 59 185 n/m — — (126) 59 185 n/m NOI $ 7,039 $ 7,179 $ (140) (2.0) % $ 186 $ 1,675 $ 7,225 $ 8,854 $ (1,629) (18.4) % n/m - not meaningful (1) 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, 2025; 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. (2) For the three months March 31, 2025, we recognized a net credit of $59 related to tax refunds received during the period. 25 Table of Contents Rental income. There have been no material changes in rental income at our comparable properties. The activity for our non-comparable properties primarily reflects the 18 triple net leased senior living communities that we sold in February 2025 as well as one senior living community that transitioned to a triple net lease in December 2025. Property operating expenses. Property operating expenses consist of real estate taxes, insurance and other expenses that are not paid directly by our tenants. There have been no material changes in property operating expenses. Net operating income. 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 January 1, 2025 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 $6,628 of estimated incentive management fees that we recognized for the three months ended March 31, 2026, compared to $2,407 for the three months ended March 31, 2025. 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. Acquisition and certain other transaction related costs primarily represent costs incurred with acquisitions and non-recurring transactions that we expensed under GAAP. During the three months ended March 31, 2026, we incurred transition costs as a result of our transition of 116 communities to both new and existing third party managers. 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) gain on sale of real estate. For information regarding (loss) gain on sale of real estate, 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 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 consolidated financial statements included in Part IV, Item 15 of our Annual Report. Interest and other income. The decrease in interest and other income is primarily due to lower average invested cash balances and interest rates during the three months ended March 31, 2026. Interest expense. Interest expense decreased primarily due to a decrease in discount accretion for our then senior secured notes due 2026 due to the full redemption of the remaining balance of these notes during 2025. During the three months ended March 31, 2025, we recognized discount accretion of $22,122 for our then outstanding senior secured notes due 2026. Interest expense also decreased due to the redemption during 2025 of an aggregate $380,000 of our then remaining 9.75% senior unsecured notes due 2025. These decreases were partially offset by the issuance of $375,000 in aggregate principal amount of our 7.25% senior secured notes due 2030 in September 2025 and four mortgage financings totaling $343,157 during 2025. Loss on modification or early extinguishment of debt. 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. 26 Table of Contents Equity in net earnings of investees. Equity in net earnings of investees is the change in the fair value of our investments in our unconsolidated joint ventures and also represented our proportionate share of the earnings of our equity method investment in AlerisLife. As of December 31, 2025, AlerisLife had ceased operations and was in the process of winding down its business. We recognized no equity in net earnings of AlerisLife for the three months ended March 31, 2026. 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 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, 2026 and 2025. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties. Funds From Operations and Normalized Funds From Operations We calculate FFO and Normalized FFO as shown below. FFO is calculated on the basis defined by the National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, excluding any gain or loss on sale of real estate, 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 unconsolidated joint venture properties and prior to the wind-down of AlerisLife’s business, our proportionate share of FFO of our former equity method investment, 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 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. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do. 27 Table of Contents Our calculations of FFO and Normalized FFO for the three months ended March 31, 2026 and 2025 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO and Normalized FFO appear in the following table. This table also provides a comparison of distributions to shareholders, FFO and Normalized FFO and net income (loss) per share for these periods. Three Months Ended March 31, 2026 2025 Net loss $ (43,275) $ (8,986) Depreciation and amortization 62,914 68,325 Loss (gain) on sale of real estate 1,207 (110,140) Impairment of assets — 38,472 Equity in net earnings of investees (96) (1,487) Share of FFO from unconsolidated joint ventures 2,027 2,737 Adjustments to reflect our share of FFO attributable to a former equity method investment — 1,073 FFO 22,777 (10,006) Incentive management fees (1) 6,628 2,407 Acquisition and certain other transaction related costs (2) 3,693 24 Gain on insurance recoveries — (7,522) Loss on modification or early extinguishment of debt — 29,071 Adjustments to reflect our share of Normalized FFO attributable to a former equity method investment — 331 Normalized FFO $ 33,098 $ 14,305 Weighted average common shares outstanding (basic and diluted) 240,689 239,957 Per common share data (basic and diluted): Net loss $ (0.18) $ (0.04) FFO $ 0.09 $ (0.04) Normalized FFO $ 0.14 $ 0.06 Distributions declared $ 0.01 $ 0.01 (1) Incentive management fees are estimated and accrued during the applicable measurement period. Actual incentive management fees are calculated based on common share total return, as defined in our business management agreement, for the three year period ending December 31 of the applicable calendar year, and are included in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss) and are 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. (2) Acquisition and certain other transaction related costs primarily represent costs incurred with acquisitions and non-recurring transactions that we expensed under GAAP. During the three months ended March 31, 2026, we incurred transition costs as a result of our transition of 116 communities to both new and existing third party managers. Property Net Operating Income (NOI) We calculate NOI as shown below. The calculation of NOI excludes certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations. We define NOI as income from our real estate less our property operating expenses. NOI excludes depreciation and amortization. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do. 28 Table of Contents The calculation of NOI by reportable segment is included above in this Item 2. The following table includes the reconciliation of net income (loss) to NOI for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Net loss $ (43,275) $ (8,986) Equity in net earnings of investees (96) (1,487) Income tax expense 622 49 Loss before income taxes and equity in net earnings of investees (42,749) (10,424) Loss on modification or early extinguishment of debt — 29,071 Interest expense 37,045 57,831 Interest and other income (233) (2,099) Gain on insurance recoveries — (7,522) Loss (gain) on sale of real estate 1,207 (110,140) Impairment of assets — 38,472 Acquisition and certain other transaction related costs 3,693 24 General and administrative 14,038 9,000 Depreciation and amortization 62,914 68,325 NOI $ 75,915 $ 72,538 NOI by segment: SHOP $ 43,626 $ 36,828 Medical Office and Life Science Portfolio 25,064 26,856 All Other 7,225 8,854 Total $ 75,915 $ 72,538 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 residents fees and services revenues from our managed communities, rental income from our leased properties and proceeds from the disposition of certain properties. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay our debt service obligations and make distributions to our shareholders for at least the next 12 months and for the foreseeable future thereafter. Our future cash flows from operating activities will depend primarily upon: • our ability to maintain or increase the occupancy of, and the rates at, our properties; • our ability to receive rents from our tenants; • our and our managers' abilities to control operating expenses and capital expenses at our properties, including increased operating expenses that we may incur in response to wage and commodity price inflation, limited labor availability and increased insurance costs; and • our managers' abilities to maintain or increase our returns from our managed senior living communities. 29 Table of Contents 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, 2026 2025 Cash and cash equivalents and restricted cash at beginning of period $ 121,799 $ 149,854 Net cash provided by (used in): Operating activities 8,342 (3,243) Investing activities 13,580 291,093 Financing activities (3,869) (131,049) Cash and cash equivalents and restricted cash at end of period $ 139,852 $ 306,655 Our Operating Liquidity and Resources We receive residents fees and services revenues, net of expenses, from our managed senior living communities monthly, we generally receive minimum rents from tenants at our senior living communities, medical office and life science properties and triple net leased wellness centers monthly and we receive percentage rents from tenants at certain of our triple net leased senior living communities monthly, quarterly or annually. The change in cash provided by (used in) operating activities for the three months ended March 31, 2026 compared to the prior period was primarily due to a reduction in interest paid during the 2026 period primarily due to accreted interest of $34,700 paid during the 2025 period as a result of the partial redemption of our then outstanding senior secured notes due 2026. This increase was partially offset by the payment of a $17,905 incentive management fee pursuant to our business management agreement for the year ended December 31, 2025. We paid this incentive management fee to RMR in January 2026. Our Investing Liquidity and Resources The decrease in cash provided by investing activities for the three months ended March 31, 2026 compared to the prior period was primarily due to a decrease in proceeds from the sale of real estate, partially offset by an increase in cash dividends paid to us by AlerisLife and our $5,800 of contributions made to the Seaport JV in the 2025 period. In connection with the wind-down of its business, on January 9, 2026, AlerisLife paid an aggregate cash dividend of $80,000 to its stockholders, and our pro rata share of this cash dividend was $27,200. Capital Expenditures As of March 31, 2026, we had estimated unspent leasing related obligations at our medical office and life science properties of approximately $11,123, of which we expect to spend approximately $8,811 during the next 12 months. We expect to fund these obligations using operating cash flows and cash on hand. 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. 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 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. For further information regarding our capital expenditures, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Dispositions During the three months ended March 31, 2026, we sold 13 properties for an aggregate sales price of $23,000, excluding closing costs. 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. 30 Table of Contents Acquisitions In April 2026, we acquired two land parcels located in Lexington, Kentucky previously subject to finance leases pursuant to our exercise of a purchase option for an aggregate purchase price of $14,500, excluding closing costs. Our Financing Liquidity and Resources The decrease in cash used in financing activities for the three months ended March 31, 2026 compared to the prior period was primarily due to the partial redemption of our then outstanding senior secured notes due 2026, partially offset by our incurrence of a $140,000 mortgage loan, in the 2025 period. As of March 31, 2026, we had $121,774 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. Our revolving credit facility is available for general business purposes, including acquisitions. We can borrow, repay and reborrow funds available under our revolving credit facility, and no principal repayments are due, until maturity. Availability of borrowings under our credit agreement is subject to satisfying certain financial covenants and other credit facility conditions. 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 daily 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 March 31, 2026. 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 March 31, 2026, the annual interest rate payable on borrowings under our revolving credit facility was 6.28%. As of March 31, 2026 and April 30, 2026, we had no borrowings under our revolving credit facility and $150,000 available for borrowings. Distributions During the three months ended March 31, 2026, we paid a quarterly cash distribution to our shareholders totaling approximately $2,421 using cash on hand. On April 9, 2026, we declared a quarterly distribution to common shareholders of record on April 21, 2026 of $0.01 per share, or approximately $2,421. We expect to pay this distribution on or about May 14, 2026 using cash on hand. Indebtedness Our principal debt obligations at March 31, 2026 were: (1) $1,600,000 outstanding principal amount of senior unsecured notes; (2) $375,000 outstanding principal amount of senior secured notes secured by 36 properties; (3) $327,774 aggregate principal amount of fixed rate mortgage notes secured by 22 properties; and (4) $140,000 principal amount floating rate mortgage loan secured by 14 properties. For further information regarding our indebtedness, see Note 6 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. In April 2026, Moody's Investors Service, or Moody's, upgraded our issuer credit rating from Caa1 to B3, our senior secured notes due 2030 rating from B3 to B2, our 4.375% senior notes due 2031 rating from Caa1 to B3, and our senior unsecured notes from Caa2 to Caa1. Moody's also updated our ratings outlook to positive. For further information regarding our outstanding debt, see Note 6 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. 31 Table of Contents Our senior notes are governed by our senior notes indentures and their supplements. Our credit agreement, our mortgage loan agreements and our senior notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default. 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 March 31, 2026, 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. If our operating results and financial condition are significantly negatively impacted by economic conditions or otherwise, we may fail to satisfy our debt covenants and conditions. Our senior notes indentures and their supplements do not contain provisions for acceleration which could be triggered by our debt ratings. See "—Our Financing Liquidity and Resources" above for information regarding recent changes to our issuer credit rating and senior debt ratings. Our revolving credit facility contains cross default provisions to any other debts of more than $25,000. 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, February 2021 and September 2025). 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 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. Supplemental Guarantor Information On February 3, 2021, we issued $500,000 of our 4.375% senior notes due 2031. As of March 31, 2026, 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. Our remaining $1,100,000 of senior unsecured notes do not have the benefit of any guarantees. A subsidiary guarantor's guarantee of our 4.375% senior notes due 2031 and all other obligations of such subsidiary guarantor under the indenture governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and the indenture under certain circumstances, including on or after the date (a) the notes have an investment grade rating from two rating agencies and one of such investment grade ratings is a mid-BBB investment grade rating and (b) no default or event of default has occurred and is continuing under the indenture. Our non-guarantor subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on our 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. 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: 32 Table of Contents As of March 31, 2026 December 31, 2025 Real estate properties, net $ 2,427,843 $ 2,452,118 Other assets, net 305,033 333,731 Total assets $ 2,732,876 $ 2,785,849 Indebtedness, net $ 1,946,942 $ 1,945,732 Other liabilities 153,986 192,526 Total liabilities $ 2,100,928 $ 2,138,258 Three Months Ended March 31, 2026 Revenues $ 219,921 Expenses $ 242,625 Loss from continuing operations $ (50,732) Net loss $ (51,285) Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc., AlerisLife (including Five Star) and others related to them. For further information about these and other such relationships and related person transactions, see Notes 4, 10 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our Annual Report, our definitive Proxy Statement for our 2026 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services. Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. 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. A discussion of our critical accounting estimates is included in our Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2025. Impact of Government Reimbursement For the three months ended March 31, 2026, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments. Nonetheless, we own, and our tenants, managers and operators operate, facilities in many states that participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid programs and other federal and state healthcare payment programs. Also, some of our medical office and life science property tenants participate in federal Medicare and state Medicaid programs and other government healthcare payment programs. For more information regarding the government healthcare funding and regulation of our business, please see the section captioned “Business—Government Regulation and Reimbursement” in our Annual Report and the section captioned “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Government Reimbursement” in our Annual Report. 33 Table of Contents