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What changed in DIVERSIFIED HEALTHCARE TRUST's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of DIVERSIFIED HEALTHCARE TRUST's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+513 added−498 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-25)

Top changes in DIVERSIFIED HEALTHCARE TRUST's 2025 10-K

513 paragraphs added · 498 removed · 397 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

144 edited+38 added−24 removed319 unchanged
Biggest changeWe make disposition decisions based on a number of factors, including, but not limited to, the following: • our ability to lease or operate the affected property on terms acceptable to us or have the affected property managed with our realizing acceptable returns; • the manager's or tenant's desire to dispose of or cease operating the affected property; • the proposed sale price or targeted returns; • the existence of alternative sources, uses or needs for our capital and our leverage; • the remaining length of the lease relating to the property and its other terms; • our evaluation of future cash flows which may be achieved from the property; • the strategic fit of the property or investment with the rest of our portfolio; • the age and capital required to maintain the property; • the estimated value we may receive by selling the property; • our intended use of the proceeds we may realize from the sale of a property; • the expected benefits that can be achieved from contributing additional properties to our existing or any new joint ventures; and • the tax implications to us and our shareholders. 4 Table of Contents Other Investments We have no policies which specifically limit the percentage of our assets that may be invested in any individual property, in any one type of property, in properties leased to any one tenant or to an affiliated group of tenants or in properties operated by any one tenant or manager or by an affiliated group of tenants or managers or in securities of one or more persons.
Biggest changeWe make disposition decisions based on a number of factors, including, but not limited to, the following: • our ability to operate or lease the affected property on terms acceptable to us or have the affected property managed with our realizing acceptable returns; • the existence of alternative sources, uses or needs for our capital and our leverage; • the manager's or tenant's desire to dispose of or cease operating the affected property; 4 Table of Contents • the estimated value and returns we may receive by selling the property; • the remaining length of the lease relating to the property and its other terms; • our evaluation of future cash flows which may be achieved from the property; • the strategic fit of the property or investment with the rest of our portfolio; • the age and capital required to maintain the property; • our intended use of the proceeds we may realize from the sale of a property; • the expected benefits that can be achieved from contributing additional properties to our existing or any new joint ventures; and • the tax implications to us and our shareholders.
Item 1. Business. Our Company We are a real estate investment trust, or REIT, that was organized under Maryland law in 1998. We primarily own medical office and life science properties, senior living communities and other healthcare related properties throughout the United States.
Item 1. Business. Our Company We are a real estate investment trust, or REIT, that was organized under Maryland law in 1998. We primarily own senior living communities, medical office and life science properties and other healthcare related properties throughout the United States.
We plan to seek to profit from this demand in the future by, over time, investing in our properties, acquiring additional properties and entering into lease and management arrangements with qualified tenants, managers and operators which enhance our cash flow and generate returns that exceed our operating and capital costs to us, including structuring leases that provide for or permit periodic rent increases.
We plan to seek to profit from this demand in the future by, over time, investing in our properties, acquiring additional properties and entering into management and lease arrangements with qualified managers, operators and tenants which enhance our cash flow and generate returns that exceed our operating and capital costs to us, including structuring leases that provide for or permit periodic rent increases.
A portion of our medical office and life science property leases are “full service” leases where we receive fixed rent from the tenants and do not charge the tenants for any property operating expenses. Our leases for senior living communities and wellness centers are “triple net” leases.
A portion of our medical office and life science property leases are “full service” leases where we receive fixed rent from the tenants and do not charge the tenants for any property operating expenses. Our leases for wellness centers and senior living communities are “triple net” leases.
To seek to achieve these objectives, we seek to: maintain a strong capital base of shareholders' equity; invest in properties with strong market fundamentals and high credit quality tenants and managers; use leverage to fund additional investments which increase cash flow from operations because of positive spreads between our cost of capital and investment yields; make structured investments, including joint venture arrangements, which generate a minimum return and provide an opportunity to participate in operating growth at our properties; when market conditions permit, refinance maturing debt with new debt or equity; and pursue diversification so that our cash flow from operations comes from diverse properties and tenants.
To achieve these objectives, we seek to: maintain a strong capital base of shareholders' equity; invest in properties with strong market fundamentals and high credit quality managers and tenants; use leverage to fund additional investments which increase cash flow from operations because of positive spreads between our cost of capital and investment yields; make structured investments, including joint venture arrangements, which generate a minimum return and provide an opportunity to participate in operating growth at our properties; when market conditions permit, refinance maturing debt with new debt or equity; and pursue diversification so that our cash flow from operations comes from diverse properties and tenants.
An important part of our acquisition strategy is to identify and select qualified, experienced and financially stable tenants and managers.
An important part of our acquisition strategy is to identify and select qualified, experienced and financially stable managers and tenants.
State health authorities regulate and license clinics and other healthcare facilities. In most states in which we own properties, we and our tenants and managers are prohibited from providing certain services without first obtaining appropriate licenses.
State health authorities regulate and license clinics and other healthcare facilities. In most states in which we own properties, we and our managers and tenants are prohibited from providing certain services without first obtaining appropriate licenses.
Senior living communities and certain other healthcare facilities must also comply with applicable state and local building, zoning, fire and food service codes before licensing or Medicare and Medicaid certification are granted. These laws and regulatory requirements could affect our ability and that of our tenants and managers to expand into new markets or to expand communities in existing markets.
Senior living communities and certain other healthcare facilities must also comply with applicable state and local building, zoning, fire and food service codes before licensing or Medicare and Medicaid certification are granted. These laws and regulatory requirements could affect our ability and that of our managers and tenants to expand into new markets or to expand communities in existing markets.
In addition, government authorities have been subjecting healthcare facilities such as those that we own to increasing numbers of inspections, surveys, investigations, audits and other potential enforcement actions. We and our tenants and managers expend considerable resources to respond to such actions.
In addition, government authorities have been subjecting healthcare facilities such as those that we own to increasing numbers of inspections, surveys, investigations, audits and other potential enforcement actions. We and our managers and tenants expend considerable resources to respond to such actions.
Unannounced inspections or surveys may occur annually or biannually, or even more regularly, such as following a regulatory body's receipt of a complaint about a facility. From time to time in the ordinary course of business, we and our tenants and managers receive deficiency reports from state regulatory bodies resulting from those inspections and surveys.
Unannounced inspections or surveys may occur annually or biannually, or even more regularly, such as following a regulatory body's receipt of a complaint about a facility. From time to time in the ordinary course of business, we and our managers and tenants receive deficiency reports from state regulatory bodies resulting from those inspections and surveys.
We and our tenants and managers seek to resolve most inspection deficiencies through a plan of corrective action relating to the affected facility's operations.
We and our managers and tenants seek to resolve most inspection deficiencies through a plan of corrective action relating to the affected facility's operations.
If we or our tenants or managers fail to comply with any applicable legal requirements, or are unable to cure deficiencies, certain sanctions may be imposed and, if imposed, may adversely affect the ability of our tenants to pay their rent to us, the profitability of our managed senior living communities and the values of our properties.
If we or our managers or tenants fail to comply with any applicable legal requirements, or are unable to cure deficiencies, certain sanctions may be imposed and, if imposed, may adversely affect the ability of our tenants to pay their rent to us, the profitability of our managed senior living communities and the values of our properties.
Revocation of a license or certification at one facility could therefore impact our or a tenant's or manager's ability to obtain new licenses or certifications or to maintain or renew existing licenses at other facilities, which could adversely affect the ability of that tenant to pay rent to us, the profitability of that manager, the profitability and values of our properties and trigger defaults under our tenants' leases and managers' management agreements and our or our tenants' or managers' credit arrangements, or adversely affect our or our tenants' or managers' ability to obtain financing in the future.
Revocation of a license or certification at one facility could therefore impact our or a tenant's or manager's ability to obtain new licenses or certifications or to maintain or renew existing licenses at other facilities, which could adversely affect the ability of that tenant to pay rent to us, the profitability of that manager, the profitability and values of our properties and trigger defaults under our managers' management agreements and tenants' leases and our or our managers' or tenants' credit arrangements, or adversely affect our or our managers' or tenants' ability to obtain financing in the future.
It is unclear whether any adjustments in Medicare rates will compensate for the increased costs our tenants and managers may incur for services to residents whose services are paid for by Medicare. Current and future programmatic changes to Medicaid eligibility and rates may also impact us. Enforcement.
It is unclear whether any adjustments in Medicare and Medicaid rates will compensate for the increased costs our managers and tenants may incur for services to residents whose services are paid for by Medicare and Medicaid. Current and future programmatic changes to Medicaid eligibility and rates may also impact us. Enforcement.
We require our tenants and managers to comply with all laws that regulate the operation of our senior living communities. The costs to comply with these laws may adversely affect the profitability of our managed senior living communities and the ability of our tenants to pay their rent to us.
We require our managers and tenants to comply with all laws that regulate the operation of our senior living communities. The costs to comply with these laws may adversely affect the profitability of our managed senior living communities and the ability of our tenants to pay their rent to us.
If we, our managers, or any of our tenants were subject to an action alleging violations of such laws or to any adverse determination concerning any of our or our tenants' or managers' licenses or eligibility for Medicare or Medicaid reimbursement or any substantial penalties, repayments or sanctions, these actions could materially and adversely affect the ability of our tenants to pay rent to us, the profitability of our managed senior living communities and the values of our properties.
If we, our managers or any of our tenants were subject to an action alleging violations of such laws or to any adverse determination concerning any of our or our managers' or tenants' licenses or eligibility for Medicare or Medicaid reimbursement or any substantial penalties, repayments or sanctions, these actions could materially and adversely affect the ability of our tenants to pay rent to us, the profitability of our managed senior living communities and the values of our properties.
Depending upon what aspects of the laws and regulations are altered, the ability of our biotechnology laboratory tenants to pay rent to us could be adversely and materially affected. Competition Owning and operating medical office and life science properties, senior living communities and other healthcare related properties is a highly competitive business.
Depending upon what aspects of the laws and regulations are altered, the ability of our biotechnology laboratory tenants to pay rent to us could be adversely and materially affected. Competition Owning and operating senior living communities, medical office and life science properties and other healthcare related properties is a highly competitive business.
Our tenants and managers compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for residents and patients based on quality of care, reputation, physical appearance of properties, services offered, family preferences, physicians, staff, price and location.
Our managers and tenants compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for residents and patients based on quality of care, reputation, physical appearance of properties, services offered, family preferences, physicians, staff, price and location.
We and our tenants and managers also face competition from other healthcare facilities for qualified personnel, such as physicians and other healthcare providers that provide comparable facilities and services. For additional information on competition and the risks associated with our business, see “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
We and our managers and tenants also face competition from other healthcare facilities for qualified personnel, such as physicians and other healthcare providers that provide comparable facilities and services. For additional information on competition and the risks associated with our business, see “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
In addition, these laws also impose various requirements regarding the operation and maintenance of properties and recordkeeping and reporting requirements relating to environmental matters that require us or the tenants or managers of our properties to incur costs to comply with. We reviewed environmental surveys of the properties we own prior to their purchase.
In addition, these laws also impose various requirements regarding the operation and maintenance of properties and recordkeeping and reporting requirements relating to environmental matters that require us or the managers or tenants of our properties to incur costs to comply with. We reviewed environmental surveys of the properties we own prior to their purchase.
When adverse weather, natural disasters and adverse impacts from global climate change, such as hurricanes, floods or wildfires, occur near our properties, we, our tenants or our managers may relocate the residents at our senior living properties to alternative locations for their safety and we, our tenants or our managers may close or limit the operations of the impacted senior living community or office property until the event has ended and the property is then ready for operation.
When adverse weather, natural disasters and adverse impacts from global climate change, such as hurricanes, floods or wildfires, occur near our properties, we, our managers or our tenants may relocate the residents at our senior living properties to alternative locations for their safety and we, our managers or our tenants may close or limit the operations of the impacted senior living community or office property until the event has ended and the property is then ready for operation.
We or the tenants or managers of our properties may incur significant costs and losses as a result of these activities, both in terms of operating, preparing and repairing our properties in anticipation of, during and after adverse weather, natural disasters and adverse impacts from global climate change and in terms of potential lost business due to the interruption in operating our properties.
We or the managers or tenants of our properties may incur significant costs and losses as a result of these activities, both in terms of operating, preparing and repairing our properties in anticipation of, during and after adverse weather, natural disasters and adverse impacts from global climate change and in terms of potential lost business due to the interruption in operating our properties.
Our insurance and our tenants' and managers' insurance may not adequately compensate us or them for these costs and losses. Concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns. These and other laws may cause energy or other costs at our properties to increase.
Our insurance and our managers' and tenants' insurance may not adequately compensate us or them for these costs and losses. Concerns about climate change have resulted in various treaties, laws and regulations that are intended to limit carbon emissions and address other environmental concerns. These and other laws may cause energy or other costs at our properties to increase.
Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our buildings obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our tenants or managers and their ability to pay rent or returns to us.
Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our buildings obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our managers or tenants and their ability to pay rent or returns to us.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are: • a bank, insurance company or other financial institution; • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the United States Internal Revenue Code of 1986, as amended, or the IRC) of any class of our shares; • a U.S. expatriate; • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; 13 Table of Contents • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or • except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are: • a bank, insurance company or other financial institution; • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; 13 Table of Contents • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the United States Internal Revenue Code of 1986, as amended, or the IRC) of any class of our shares; • a U.S. expatriate; • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or • except as specifically described in the following summary, a trust, estate, tax-exempt entity, governmental organization or foreign person.
For more information regarding climate change and other environmental matters and their possible adverse impacts on us, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities” and “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters" in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” in Part II, Item 7 of this Annual Report on Form 10-K.
For more information regarding climate change and other environmental matters and their possible adverse impacts on us, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities” and “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters” in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” in Part II, Item 7 of this Annual Report on Form 10-K.
Federal and state efforts to target false claims, fraud and abuse and violations of anti-kickback, physician referral and privacy laws by providers under Medicare, Medicaid and other public and private programs have increased in recent years, as have civil monetary penalties, treble damages, repayment requirements and criminal sanctions for noncompliance, loss of licensure, termination of government payments, exclusion from any government health care program and damage assessments.
Federal and state efforts to target false claims, fraud and abuse and violations of anti-kickback, and physician referral laws by providers under Medicare, Medicaid and other public and private programs have increased in recent years, as have civil monetary penalties, treble damages, repayment requirements and criminal sanctions for noncompliance, loss of licensure, termination of government payments, exclusion from any government health care program and damage assessments.
For this additional exception to apply, a real property interest in a “qualified health care property” must be leased by the REIT to its TRS, and the facility must be operated on behalf of the TRS by a person who is an “eligible independent contractor,” all as described in Sections 856(d)(8)-(9) and 856(e)(6)(D) of the IRC.
For this additional exception to apply, a real property interest in a “qualified health care property” must be leased by the REIT to its TRS, and the property must be operated on behalf of the TRS by a person who is an “eligible independent contractor,” all as described in Sections 856(d)(8)-(9) and 856(e)(6)(D) of the IRC.
These tax consequences may not be comparable to the U.S. federal income tax consequences discussed above. 31 Table of Contents ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS General Fiduciary Obligations The Employee Retirement Income Security Act of 1974, as amended, or ERISA, the IRC and similar provisions to those described below under applicable foreign or state law, individually and collectively, impose certain duties on persons who are fiduciaries of any employee benefit plan subject to Title I of ERISA, or an ERISA Plan, or an individual retirement account or annuity, or an IRA, a Roth IRA, a tax-favored account (such as an Archer MSA, Coverdell education savings account or health savings account), a Keogh plan or other qualified retirement plan not subject to Title I of ERISA, each a Non-ERISA Plan.
These tax consequences may not be comparable to the U.S. federal income tax consequences discussed above. 32 Table of Contents ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS General Fiduciary Obligations The Employee Retirement Income Security Act of 1974, as amended, or ERISA, the IRC and similar provisions to those described below under applicable foreign or state law, individually and collectively, impose certain duties on persons who are fiduciaries of any employee benefit plan subject to Title I of ERISA, or an ERISA Plan, or an individual retirement account or annuity, or an IRA, a Roth IRA, a tax-favored account (such as an Archer MSA, Coverdell education savings account or health savings account), a Keogh plan or other qualified retirement plan not subject to Title I of ERISA, each a Non-ERISA Plan.
Your federal income tax consequences generally will differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” is a beneficial owner of our shares that is: • an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws; • an entity treated as a corporation for federal income tax purposes that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia; • an estate the income of which is subject to federal income taxation regardless of its source; or • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or, to the extent provided in Treasury regulations, a trust in existence on August 20, 1996 that has elected to be treated as a domestic trust; whose status as a U.S. shareholder is not overridden by an applicable tax treaty.
Your federal income tax consequences generally will differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” is a beneficial owner of our shares that is: • an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws; • an entity treated as a corporation for federal income tax purposes that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia; • an estate the income of which is subject to federal income taxation regardless of its source; or 14 Table of Contents • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or, to the extent provided in Treasury regulations, a trust in existence on August 20, 1996 that has elected to be treated as a domestic trust; whose status as a U.S. shareholder is not overridden by an applicable tax treaty.
Additionally, while a REIT is generally limited in its ability to earn qualifying rental income from a TRS, a REIT can earn qualifying rental income from the lease of a qualified health care property to a TRS if an eligible independent contractor operates the facility, as discussed more fully below.
Additionally, while a REIT is generally limited in its ability to earn qualifying rental income from a TRS, a REIT can earn qualifying rental income from the lease of a qualified health care property to a TRS if an eligible independent contractor operates the property, as discussed more fully below.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the federal corporate income tax we paid on our retained net capital gain. • If we have net income from the disposition of “foreclosure property,” as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying 15 Table of Contents income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate. • If we have net income from “prohibited transactions”—that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors—we will be subject to tax on this income at a 100% rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the federal corporate income tax we paid on our retained net capital gain. • If we have net income from the disposition of “foreclosure property,” as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate. • If we have net income from “prohibited transactions,” that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors, we will be subject to tax on this income at a 100% rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.
Department of Labor has issued a regulation defining “plan assets.” The regulation, as subsequently modified by ERISA, generally provides that when an ERISA Plan or a Non-ERISA Plan otherwise subject to Title I of ERISA and/or Section 4975 of the IRC acquires an interest in an entity that is neither a “publicly offered security” nor a security issued by an investment company registered under the Investment Company Act of 1940, as amended, the assets of the ERISA Plan or Non-ERISA Plan include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is 32 Table of Contents established either that the entity is an operating company or that equity participation in the entity by benefit plan investors is not significant.
Department of Labor has issued a regulation defining “plan assets.” The regulation, as subsequently modified by ERISA, generally provides that when an ERISA Plan or a Non-ERISA Plan otherwise subject to Title I of ERISA and/or Section 4975 of the IRC acquires an interest in an entity that is neither a “publicly offered security” nor a security issued by an investment company registered under the Investment Company Act of 1940, as amended, the assets of the ERISA Plan or Non-ERISA Plan include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is 33 Table of Contents established either that the entity is an operating company or that equity participation in the entity by benefit plan investors is not significant.
In implementing this acquisition strategy, we consider a range of factors relating to each proposed acquisition, including, but not limited to: • our cost of capital compared to projected returns we may realize by owning the property; • the use and size of the property; • the location of the property; • the price at which the property may be acquired as compared to the estimated replacement cost of the property; • the existing or proposed lease or management terms; • the existence of alternative sources, uses or needs for our capital and our leverage; • the availability and reputation of experienced and financially qualified tenants, managers or guarantors; 3 Table of Contents • the historical and projected cash flows from the operations of the property; • the construction quality, physical condition and design of the property, including various environmental sustainability factors; • the expected capital expenditures that may be needed at the property; • the competitive market environment of the property; • the growth, tax and regulatory environments of the market in which the property is located; • the price segment and payment sources in which the property is operated; • the strategic fit of the property with the rest of our portfolio; and • the level of permitted services and regulatory history of the property and its historical tenants and managers.
In implementing this acquisition strategy, we consider a range of factors relating to each proposed acquisition, including, but not limited to: • our cost of capital compared to projected returns we may realize by owning the property; • the use and size of the property; • the location of the property; • the price at which the property may be acquired as compared to the estimated replacement cost of the property; • the existing or proposed management or lease terms; • the existence of alternative sources, uses or needs for our capital and our leverage; • the availability and reputation of experienced and financially qualified managers, tenants or guarantors; • the historical and projected cash flows from the operations of the property; • the expected capital expenditures that may be needed at the property; • the competitive market environment of the property; • the construction quality, physical condition and design of the property, including various environmental sustainability factors; • the growth, tax and regulatory environments of the market in which the property is located; • the price segment and payment sources in which the property is operated; • the strategic fit of the property with the rest of our portfolio; and • the level of permitted services and regulatory history of the property and its historical managers and tenants.
Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR. Christopher J.
Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR and the sole director of AlerisLife. Christopher J.
Disposition Policies We plan to selectively sell certain properties from time to time to manage our leverage and improve our liquidity, to fund future acquisitions and to strategically update, rebalance and reposition our investment portfolio with a goal of (1) reducing our leverage, (2) improving the asset quality of our portfolio by reducing the overall average age of our properties and increasing the weighted average term of our leases and the likelihood of retaining our tenants and (3) increasing our distributions to shareholders.
Our Disposition Policies We plan to selectively sell certain properties from time to time to manage our leverage and improve our liquidity, to strategically update, rebalance and reposition our investment portfolio and to fund future acquisitions with a goal of (1) reducing our leverage, (2) improving the asset quality of our portfolio by reducing the overall average age of our properties and increasing the weighted average term of our leases and the likelihood of retaining both our residents and tenants and (3) increasing our distributions to shareholders.
To summarize, the preferential federal income tax rates for long-term capital gains and for qualified dividends generally apply to: (1) long-term capital gains, if any, recognized on the disposition of our shares; (2) our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate); (3) our dividends attributable to dividend income, if any, received by us from C corporations such as TRSs; (4) our dividends attributable to earnings and profits that we inherit from C corporations; and 26 Table of Contents (5) our dividends to the extent attributable to income upon which we have paid federal corporate income tax (such as taxes on foreclosure property income or on built-in gains), net of the corporate income taxes thereon.
To summarize, the preferential federal income tax rates for long-term capital gains and for qualified dividends generally apply to: (1) long-term capital gains, if any, recognized on the disposition of our shares; (2) our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate); (3) our dividends attributable to dividend income, if any, received by us from C corporations such as TRSs; (4) our dividends attributable to earnings and profits that we inherit from C corporations; and (5) our dividends to the extent attributable to income upon which we have paid federal corporate income tax (such as taxes on foreclosure property income or on built-in gains), net of the corporate income taxes thereon.
For so long as a class of our shares is listed on a U.S. national securities exchange, capital gain dividends that we declare and pay to a non-U.S. shareholder on those shares, as well as dividends to such a non-U.S. shareholder on those shares attributable to our sale or exchange of “United States real property interests” within the meaning of Section 897 of the IRC, or USRPIs, will not be subject to withholding as though those amounts were effectively connected with a U.S. trade or business, and non-U.S. shareholders will not be required to file U.S. federal income tax returns or pay branch profits tax in respect of these dividends.
For so long as a class of our shares is listed on a U.S. national securities exchange, capital gain dividends that we declare and pay to a non-U.S. shareholder on those shares, as well as dividends to such a non-U.S. shareholder on those shares attributable to our sale or exchange of “United States real property interests” within the meaning of Section 897 of the IRC, or USRPIs, will not be subject to withholding as though those amounts were effectively connected with a U.S. trade or business, and non-U.S. shareholders will not be required to file U.S. federal income tax returns or pay branch profits tax in respect of 29 Table of Contents these dividends.
We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. • If we acquire a corporation in a transaction where we succeed to its tax attributes, to preserve our qualification for taxation as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, no later than the end of our taxable year in which the acquisition occurs.
We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. 16 Table of Contents • If we acquire a corporation in a transaction where we succeed to its tax attributes, to preserve our qualification for taxation as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, no later than the end of our taxable year in which the acquisition occurs.
Some of the laws that impact or may impact us or our tenants or managers include: state and local licensure laws; laws protecting consumers against deceptive practices; laws relating to the operation of our properties and how our tenants and managers conduct their operations, such as health and safety, fire and privacy laws; federal and state laws affecting assisted living communities that participate in Medicaid and federal and state laws affecting SNFs, clinics and other healthcare facilities that participate in both Medicaid and Medicare that mandate allowable costs, pricing, reimbursement procedures and limitations, quality of services and care, food service and physical plants; resident rights laws (including abuse and neglect laws) and fraud laws; anti-kickback and physician referral laws; the Americans with Disabilities Act and similar state and local laws; and safety and health standards set by the federal Occupational Safety and Health Administration, or OSHA.
Some of the laws that impact or may impact us or our managers or tenants include: state and local licensure laws; laws protecting consumers against deceptive practices; laws relating to the operation of our properties and how our managers and tenants conduct their operations, such as health, safety and fire laws and standards; federal and state laws relating to the privacy and security of personal information and health information; federal and state laws affecting assisted living communities that participate in Medicaid and federal and state laws affecting SNFs, clinics and other healthcare facilities that participate in both Medicaid and Medicare that mandate allowable costs, pricing, reimbursement procedures and limitations, quality of services and care, food service and physical plants; resident rights laws (including abuse and neglect laws) and fraud laws; anti-kickback and physician referral laws; the Americans with Disabilities Act, or ADA, and similar state and local laws; and safety and health standards set by the federal Occupational Safety and Health Administration, or OSHA.
For the year ended December 31, 2024, substantially all of our net operating income, or NOI, from our senior living communities 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 our senior living communities where a majority of the revenue is dependent upon Medicare and Medicaid programs.
For the year ended December 31, 2025, substantially all of our net operating income, or NOI, from our senior living communities 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 our senior living communities where a majority of the revenue is dependent upon Medicare and Medicaid programs.
For more information, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities” and “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters” in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” in Part II, Item 7 of this Annual Report on Form 10-K.
For more information, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities” and “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant 11 Table of Contents amounts with respect to these matters” in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” in Part II, Item 7 of this Annual Report on Form 10-K.
First, at least 75% of our gross income for each taxable year must be derived from investments relating to real property, including “rents from real property” within the meaning of Section 856(d) of the IRC, interest and gain from mortgages on real property or on interests in real property, income and gain from foreclosure property, gain from the sale or other disposition of real property (including specified ancillary personal property treated as real property under the IRC), or dividends on and gain from the sale or disposition of shares in other REITs (but excluding in all cases any gains subject to the 100% tax on prohibited transactions).
First, at least 75% of our gross income for each taxable year must be derived from investments relating to real property, including “rents from real property” within the meaning of Section 856(d) of the IRC, interest and gain from mortgages on real property or on interests in real property, income and gain from foreclosure property, gain from the sale or other disposition of real property (including specified ancillary personal property treated as real property under the IRC), or dividends on and gain 19 Table of Contents from the sale or disposition of shares in other REITs (but excluding in all cases any gains subject to the 100% tax on prohibited transactions).
Our counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 1999 through 2024 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
Our counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 1999 through 2025 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
Current state laws and regulations allow enforcement officials to make determinations as to whether the care provided by or on behalf of our tenants or by our managers at our facilities exceeds the level of care for which a particular facility is licensed, which could result in closure of the community and the immediate discharge and transfer of residents, which could adversely affect the ability of that tenant to pay rent to us, the profitability of our managed senior living communities and the values of our properties.
Current state laws and regulations allow enforcement officials to make determinations as to whether the care provided by our managers or by or on behalf of our tenants at our facilities exceeds the level of care for which a particular facility is licensed, which could result in closure of the community and the immediate discharge and transfer of residents, which could adversely affect the ability of that tenant to pay rent to us, the profitability of our managed senior living communities and the 7 Table of Contents values of our properties.
U.S. shareholders who are individuals, estates or trusts are generally required to pay a 3.8% Medicare tax on their net investment income (including dividends on our shares (without regard to any deduction allowed by Section 199A of the IRC) and gains from the sale or other disposition of our shares), or in the case of estates and trusts on their net investment income 27 Table of Contents that is not distributed, in each case to the extent that their total adjusted income exceeds applicable thresholds.
U.S. shareholders who are individuals, estates or trusts are generally required to pay a 3.8% Medicare tax on their net investment income (including dividends on our shares (without regard to any deduction allowed by Section 199A of the IRC) and gains from the sale or other disposition of our shares), or in the case of estates and trusts on their net investment income that is not distributed, in each case to the extent that their total adjusted income exceeds applicable thresholds.
Foreclosure property is generally any real property, including interests in real property, and any personal property incident to such real property: • that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured; 20 Table of Contents • for which any related loan acquired by the REIT was acquired at a time when the default was not imminent or anticipated; and • for which the REIT makes a proper election to treat the property as foreclosure property.
Foreclosure property is generally any real property, including interests in real property, and any personal property incident to such real property: • that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured; • for which any related loan acquired by the REIT was acquired at a time when the default was not imminent or anticipated; and • for which the REIT makes a proper election to treat the property as foreclosure property.
Whether separately stated charges received by a REIT for services that are not geographically customary and provided by a TRS are included in “rents from real property” has not been addressed clearly by the IRS in published authorities; however, our counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, “rents from real property” also includes charges we receive for services provided by our TRSs when the charges are separately stated, even if the services are not geographically customary.
Whether separately stated charges received by a REIT for services that are not geographically customary and provided 20 Table of Contents by a TRS are included in “rents from real property” has not been addressed clearly by the IRS in published authorities; however, our counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, “rents from real property” also includes charges we receive for services provided by our TRSs when the charges are separately stated, even if the services are not geographically customary.
As of December 31, 2024, we owned a 10% equity interest in an unconsolidated joint venture that owns a life science property located in Boston, Massachusetts, or the Seaport JV, and a 20% equity interest in an unconsolidated joint venture for 10 medical office and life science properties, or the LSMD JV.
As of December 31, 2025, we owned a 10% equity interest in an unconsolidated joint venture that owns a life science property located in Boston, Massachusetts, or the Seaport JV, and a 20% equity interest in an unconsolidated joint venture for 10 medical office and life science properties, or the LSMD JV.
Even without having executed an applicable IRS Form W-8 or substantially similar form, however, in some cases information reporting and backup withholding will not 30 Table of Contents apply to proceeds that a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares if the non-U.S. shareholder receives those proceeds through a broker’s foreign office.
Even without having executed an applicable IRS Form W-8 or substantially similar form, however, in some cases information reporting and backup withholding will not apply to proceeds that a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares if the non-U.S. shareholder receives those proceeds through a broker’s foreign office.
Among other requirements, a TRS of ours must: (1) not directly or indirectly operate or manage a health care facility or a lodging facility; and 18 Table of Contents (2) not directly or indirectly provide to any person, under a franchise, license or otherwise, rights to any brand name under which any health care facility or lodging facility is operated, except that in limited circumstances a subfranchise, sublicense or similar right can be granted to an independent contractor to operate or manage a health care facility or a lodging facility.
Among other requirements, a TRS of ours must: (1) not directly or indirectly operate or manage a health care facility or lodging facility; and (2) not directly or indirectly provide to any person, under a franchise, license or otherwise, rights to any brand name under which any health care facility or lodging facility is operated, except that in limited circumstances a subfranchise, sublicense or similar right can be granted to an independent contractor to operate or manage a health care facility or lodging facility.
Once a product is approved, the FDA maintains oversight of the product and its developer and can withdraw its approval, recall products or suspend their production, 9 Table of Contents impose or seek to impose civil or criminal penalties on the developer or take other actions for the developer's failure to comply with regulatory requirements, including anti-fraud, false claims, anti-kickback or physician referral laws.
Once a product is approved, the FDA maintains oversight of the product and its developer and can withdraw its approval, recall products or suspend their production, impose or seek to impose civil or criminal penalties on the developer or take other actions for the developer's failure to comply with regulatory requirements, including anti-fraud, false claims, anti-kickback or physician referral laws.
For example, on November 15, 2023, CMS issued a final rule, effective January 16, 2024, that requires SNFs and Medicaid-participating nursing facilities to disclose certain additional data on their owners, operators and management in an effort to increase transparency of nursing facility ownership and to promote competition among nursing facilities by allowing patients to choose facilities based on publicly available data of their owners and operators.
For example, CMS issued a final rule, effective January 16, 2024, that requires SNFs and Medicaid-participating nursing facilities to disclose certain additional data on their owners, operators and management in an effort to increase transparency of nursing facility ownership and to promote competition among nursing facilities by allowing patients to choose facilities based on publicly available data of their owners and operators.
As long as we qualify for taxation as a REIT, a distribution to our U.S. shareholders that we do not designate as a capital gain dividend generally will be treated as an ordinary income dividend to the extent of our available current or accumulated earnings and profits (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements for taxable years before 2026).
As long as we qualify for taxation as a REIT, a distribution to our U.S. shareholders that we do not designate as a capital gain dividend generally will be treated as an ordinary income dividend to the extent of our available current or accumulated earnings and profits (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements).
Sections 857(b)(6)(C) and (E) of the IRC provide safe harbors pursuant to which limited sales of real property held for at least two years and meeting specified additional requirements will not be treated as prohibited transactions. However, compliance with the safe harbors is not always achievable in practice.
Sections 857(b)(6)(C) and (E) of the IRC provide safe harbors pursuant to which limited sales of real property held for at least two years and meeting specified additional requirements will not be treated as prohibited transactions. However, compliance 21 Table of Contents with the safe harbors is not always achievable in practice.
Non-U.S. shareholders and shareholders who hold our shares through a non-U.S. intermediary are encouraged to consult their own tax advisors regarding foreign account tax compliance. Other Tax Considerations Our tax treatment and that of our shareholders may be modified by legislative, judicial or administrative actions at any time, which actions may have retroactive effect.
Non-U.S. shareholders and shareholders who hold our shares through a non-U.S. intermediary are encouraged to consult their own tax advisors regarding foreign account tax compliance. 31 Table of Contents Other Tax Considerations Our tax treatment and that of our shareholders may be modified by legislative, judicial or administrative actions at any time, which actions may have retroactive effect.
Shareholders.” Section 302 of the IRC treats a redemption of our shares for cash only as a distribution under Section 301 of the IRC, and hence taxable as a dividend to the extent of our available current or accumulated earnings and profits, unless the redemption satisfies one of the tests set forth in Section 302(b) of the IRC enabling the redemption to be treated as a sale or exchange of the shares.
Shareholders.” Section 302 of the IRC treats a redemption of our shares for cash only as a distribution under Section 301 of the IRC, and hence taxable as a dividend to the extent of our available current or accumulated earnings and profits, unless the redemption 26 Table of Contents satisfies one of the tests set forth in Section 302(b) of the IRC enabling the redemption to be treated as a sale or exchange of the shares.
Further, healthcare providers are experiencing heightened scrutiny under antitrust laws in the United States as integration and consolidation of health care delivery increase and affect competition. In addition, there has been a movement toward increased scrutiny of private equity and REIT interest in the healthcare industry, including the long-term care sector.
Further, healthcare providers are experiencing heightened scrutiny under antitrust laws in 9 Table of Contents the United States as integration and consolidation of health care delivery increase and affect competition. In addition, there has been a movement toward increased scrutiny of private equity and REIT interest in the healthcare industry, including the long-term care sector.
Taxation as a REIT We have elected to be taxed as a REIT under Sections 856 through 860 of the IRC, commencing with our 1999 taxable year. Our REIT election, assuming continuing compliance with the then applicable qualification tests, has continued and will 14 Table of Contents continue in effect for subsequent taxable years.
Taxation as a REIT We have elected to be taxed as a REIT under Sections 856 through 860 of the IRC, commencing with our 1999 taxable year. Our REIT election, assuming continuing compliance with the then applicable qualification tests, has continued and will continue in effect for subsequent taxable years.
Based upon those surveys, other studies we may have since reviewed and our understanding of the operations of these properties by our tenants and managers, 11 Table of Contents we do not believe that there are environmental conditions at any of our properties that have had or will have a material adverse effect on us.
Based upon those surveys, other studies we may have since reviewed and our understanding of the operations of these properties by our managers and tenants, we do not believe that there are environmental conditions at any of our properties that have had or will have a material adverse effect on us.
A U.S. shareholder’s net investment income will include ordinary income dividend distributions received from us and, only if an appropriate election is made by the shareholder, capital gain dividend distributions and qualified dividends received from us; however, distributions treated as a nontaxable return of the shareholder’s basis will not enter into the computation of net investment income.
A U.S. shareholder’s net investment income will include ordinary income dividend distributions received from us and, only if an appropriate election is made by the shareholder, capital gain dividend 28 Table of Contents distributions and qualified dividends received from us; however, distributions treated as a nontaxable return of the shareholder’s basis will not enter into the computation of net investment income.
We may elect to retain, rather than distribute, some or all of our net capital gain and certain of our cancellation of indebtedness income, and pay income tax on such retained amounts.
We may elect to retain, rather than distribute, some or all of our net capital gain and certain of our cancellation of indebtedness income, if any, and pay income tax on such retained amounts.
Our Board of Trustees may change our investment and operating policies at any time without a vote of, or notice to, our shareholders. Acquisition Policies Our acquisition strategy is to seek to acquire additional properties primarily for income and secondarily for appreciation potential. We may purchase individual properties or multiple properties in one portfolio.
Our Board of Trustees may change our investment and operating policies at any time without a vote of, or notice to, our shareholders. 3 Table of Contents Our Acquisition Policies Our acquisition strategy is to seek to acquire additional properties primarily for income and secondarily for appreciation potential. We may purchase individual properties or multiple properties in one portfolio.
We generally do not intend to lease property to any party if rents from that property 19 Table of Contents would not qualify as “rents from real property,” but application of the 10% ownership rule is dependent upon complex attribution rules and circumstances that may be beyond our control.
We generally do not intend to lease property to any party if rents from that property would not qualify as “rents from real property,” but application of the 10% ownership rule is dependent upon complex attribution rules and circumstances that may be beyond our control.
A 28 Table of Contents distribution of this type will generally be subject to U.S. federal income tax and withholding at the rate of 30%, or at a lower rate if the non-U.S. shareholder has in the manner prescribed by the IRS demonstrated to the applicable withholding agent its entitlement to benefits under a tax treaty.
A distribution of this type will generally be subject to U.S. federal income tax and withholding at the rate of 30%, or at a lower rate if the non-U.S. shareholder has in the manner prescribed by the IRS demonstrated to the applicable withholding agent its entitlement to benefits under a tax treaty.
Changes in the regulatory 6 Table of Contents framework could have a material adverse effect on the ability of our tenants to pay us rent, the profitability of our managed senior living communities and the values of our properties. State and local health and social service agencies and other regulatory authorities regulate and license many senior living communities.
Changes in the regulatory framework could have a material adverse effect on the ability of our tenants to pay us rent, the profitability of our managed senior living communities and the values of our properties. State and local health and social service agencies and other regulatory authorities regulate and license many senior living communities.
Even if this relief provision does apply, a 100% tax is imposed upon the greater of the amount by which we failed the 75% gross income 21 Table of Contents test or the amount by which we failed the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year.
Even if this relief provision does apply, a 100% tax is imposed upon the greater of the amount by which we failed the 75% gross income test or the amount by which we failed the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year.
We also have a policy outlining 12 Table of Contents procedures for handling concerns or complaints about accounting, internal accounting controls or auditing matters and a governance hotline accessible on our website that shareholders can use to report concerns or complaints about accounting, internal accounting controls or auditing matters or violations or possible violations of our Code of Conduct.
We also have a policy outlining procedures for handling concerns or complaints about accounting, internal accounting controls or auditing matters and a governance hotline accessible on our website that shareholders can use to report concerns or complaints about accounting, internal accounting controls or auditing matters or violations or possible violations of our Code of Conduct.
Census data, between now and 2030, more than 20% of the total U.S. population will be age 65 or older, with that demographic projected to grow thereafter by the equivalent of 10,000 people per day. According to U.S.
Census data, by 2030, more than 20% of the total U.S. population will be age 65 or older, with that demographic projected to grow thereafter by the equivalent of 10,000 people per day. According to the U.S.
This relief provision may 17 Table of Contents apply to a failure of the applicable conditions even if the failure first occurred in a year prior to the taxable year in which the failure was discovered. Our Wholly Owned Subsidiaries and Our Investments Through Partnerships.
This relief provision may apply to a failure of the applicable conditions even if the failure first occurred in a year prior to the taxable year in which the failure was discovered. Our Wholly Owned Subsidiaries and Our Investments Through Partnerships.
This contractor and its affiliates are actively engaged in the trade or business of operating qualified health care properties for their own accounts, including pursuant to management contracts among themselves; however, this contractor and its affiliates have few if any management contracts for qualified health care properties with third parties other than us and our TRSs.
This contractor and its affiliates were actively engaged in the trade or business of operating qualified health care properties for their own accounts, including pursuant to management contracts among themselves; however, this contractor and its affiliates had few if any management contracts for qualified health care properties with third parties other than us and our TRSs.
If a shareholder is subject to backup or other U.S. federal income tax withholding, then the applicable withholding agent will be required to withhold the appropriate amount with respect to a deemed or constructive distribution or a distribution in kind even though there is insufficient cash from which to satisfy the withholding obligation.
If a shareholder is subject to backup or other U.S. federal 30 Table of Contents income tax withholding, then the applicable withholding agent will be required to withhold the appropriate amount with respect to a deemed or constructive distribution or a distribution in kind even though there is insufficient cash from which to satisfy the withholding obligation.
Corporate Sustainability Our manager, RMR, periodically publishes its Sustainability Report, which summarizes the environmental, social and governance, or ESG, initiatives employed by RMR and its client companies, including us. RMR’s Sustainability Report may be accessed on the RMR Inc. website at www.rmrgroup.com/corporate-sustainability/default.aspx.
Corporate Sustainability Our manager, RMR, periodically publishes its Sustainability Report, which summarizes the environmental, social and governance, or ESG, initiatives employed by RMR and its client companies, including us. RMR’s Sustainability Report may be 10 Table of Contents accessed on the RMR Inc. website at www.rmrgroup.com/corporate-sustainability/default.aspx.
As of December 31, 2024, we owned an equity interest in each of two unconsolidated joint ventures that own medical office and life science properties located in five states with an aggregate of approximately 2.2 million rentable square feet that were 99% leased with an average (by annualized rental income) remaining lease term of 15.1 years.
As of December 31, 2025, we owned an equity interest in each of two unconsolidated joint ventures 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 14.2 years.
We also may use future sales proceeds to manage our leverage, to invest in our properties and to acquire new properties that we believe will help us reduce the overall average age of our properties, increase our weighted average lease term, reduce our ongoing capital requirements and/or increase our distributions to shareholders.
We also may use future sales proceeds to invest in our properties and to acquire new properties that we believe will help us reduce the overall average age of our properties, increase our weighted average lease term, if applicable, reduce our ongoing capital requirements and/or increase our distributions to shareholders.
Segment Information As of December 31, 2024, we had two reportable segments: Medical Office and Life Science Portfolio and SHOP.
Segment Information As of December 31, 2025, we had two reportable segments: SHOP and Medical Office and Life Science Portfolio.
As a result, our ordinary dividends generally are taxed at the higher federal income tax rates applicable to ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements for taxable years before 2026).
As a result, our ordinary dividends generally are taxed at the higher federal income tax rates applicable to ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements).
We cannot be sure that financing would be available for these purposes on favorable terms, or at all. 24 Table of Contents We may be able to rectify a failure to pay sufficient dividends for any year by paying “deficiency dividends” to shareholders in a later year.
We cannot be sure that financing would be available for these purposes on favorable terms, or at all. We may be able to rectify a failure to pay sufficient dividends for any year by paying “deficiency dividends” to shareholders in a later year.
Our tenants and managers operate facilities in many states and they and we participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid 7 Table of Contents benefit programs for services in SNFs and other similar facilities and state Medicaid programs for services in assisted living communities. Government Payers.
Our managers and tenants operate facilities in many states and they and we participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid benefit programs for services in SNFs and other similar facilities and state Medicaid programs for services in assisted living communities. Government Payers.
Our tenants must comply with the Americans with Disabilities Act, or ADA, and similar state and local laws to the extent that such facilities are “public accommodations” as defined in those statutes. The obligation to comply with the ADA and similar laws is an ongoing obligation, and our tenants expend significant resources to comply with such laws.
Our tenants must comply with the ADA and similar state and local laws to the extent that such facilities are “public accommodations” as defined in those statutes. The obligation to comply with the ADA and similar laws is an ongoing obligation, and our tenants expend significant resources to comply with such laws.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCovenants and conditions contained in our debt agreements may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders, potential downgrades to our credit ratings and other limitations on our ability to access capital at reasonable costs or at all, including the limited availability of debt capital to office and healthcare REITs generally; • we may be unable to renew our leases when they expire without decreasing rents or incurring significant costs or at all; • our potential future development or redevelopment projects or sales or acquisitions may not be successful or may not be executed on the terms or within the timing we expect as a result of ongoing market and economic conditions, including capital market disruptions, uncertainties surrounding interest rates and inflation, competition, or otherwise; • we are subject to risks related to our qualification for taxation as a REIT, including REIT distribution requirements; • our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements or our joint ventures could require us to provide additional capital; • ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and adverse impacts from global climate change; • insurance may not adequately cover our losses, and insurance costs may increase; • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations; • we are subject to risks related to the security of RMR’s or our senior living community managers’ or other operators’ information technology and RMR's use of artificial intelligence; • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR, AlerisLife (including Five Star) and others affiliated with them, may create conflicts of interest; • sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks; • provisions in our declaration of trust, bylaws and other agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals, limit our rights and the rights of our shareholders to take action against our Trustees and officers or limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes; • we may change our operational, financing and investment policies without shareholder approval; and • our distributions to shareholders may remain at $0.01 per common share per quarter for an indefinite period or be eliminated and the form of payment could change.
Biggest changeCovenants and conditions contained in our debt agreements may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders, which may result in potential downgrades to our credit ratings and other limitations on our ability to access capital at reasonable costs or at all, including the limited availability of debt capital to healthcare REITs generally; • we may be unable to renew our leases when they expire or lease our properties to new tenants without decreasing rents or incurring significant costs or at all; • our potential future development or redevelopment projects or sales or acquisitions may not be successful or may not be executed on the terms or within the timing we expect as a result of ongoing market and economic conditions, including capital market disruptions, uncertainties surrounding interest rates and inflation, competition, or otherwise; • we are subject to risks related to our qualification for taxation as a REIT, including REIT distribution requirements; • our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements or our joint ventures could require us to provide additional capital; • ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and adverse impacts from global climate change; • insurance may not adequately cover our losses, and insurance costs may increase; • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations; • we are subject to risks related to the security of RMR’s or our senior living community managers’ or other operators’ information technology and RMR’s use of artificial intelligence; • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR and others affiliated with them, may create conflicts of interest; • sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks; • we may change our operational, financing and investment policies without shareholder approval; • our distributions to shareholders may remain at $0.01 per common share per quarter for an indefinite period or be eliminated and the form of payment could change; and • provisions in our declaration of trust, bylaws and other agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals, limit our rights and the rights of our shareholders to take action against our Trustees and officers or limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes.
We and our managers and other operators and tenants face significant competition. We face competition for tenants at our properties, particularly at our medical office and life science properties. Some competing properties may be newer, better located or more attractive to tenants.
We and our managers and other operators and tenants face significant competition. We face significant competition for tenants at our properties, particularly at our medical office and life science properties. Some competing properties may be newer, better located or more attractive to tenants.
We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations. We intend to continue to engage in development, redevelopment and repositioning activities with respect to our properties, and, as a result, we are subject to certain risks.
We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations. We intend to continue to engage in development, redevelopment and repositioning activities with respect to our properties, and, as a result, we are subject to certain associated risks.
RMR and our senior living community managers take various actions, and incur significant costs, to maintain and protect the operation and security of information technology systems, including the data maintained in those systems.
RMR and our senior living community managers take various actions, and incur significant costs, to maintain and protect the operation and security of information technology and systems, including the data maintained in those systems.
There is uncertainty in the legal and regulatory landscape for AI, which is not fully developed, and any laws, regulations or industry standards adopted in response to the emergence of AI may be burdensome, could entail significant costs, and may restrict or impede RMR’s ability to successfully develop, adopt and deploy AI technologies efficiently and effectively.
There is uncertainty in the legal and regulatory landscape for AI Technologies, which is not fully developed, and any laws, regulations or industry standards adopted in response to the emergence of AI Technologies may be burdensome, could entail significant costs and may restrict or impede RMR’s ability to successfully develop, adopt and deploy AI Technologies efficiently and effectively.
For example: • an acquired property may be located in a new market where we may face risks associated with investing in an unfamiliar market; • the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value; • property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns; and • notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination, or our analyses and assumptions for the properties may prove to be incorrect.
For example: • the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value; • property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns; • an acquired property may be located in a new market where we may face risks associated with investing in an unfamiliar market; and • notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination, or our analyses and assumptions for the properties may prove to be incorrect.
In the case of any tenant, manager or other operator bankruptcy, we may incur substantial costs in protecting our investment and re-leasing or finding a replacement tenant, manager or other operator. A severe cold or flu season, epidemics or any other widespread illnesses could adversely affect the operations of our senior living communities.
In the case of any manager, other operator or tenant bankruptcy, we may incur substantial costs in protecting our investment and re-leasing or finding a replacement manager, other operator or tenant. A severe cold or flu season, epidemics or any other widespread illnesses could adversely affect the operations of our senior living communities.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; 48 Table of Contents • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “Managing Trustees” and other Trustees be “Independent Trustees,” as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change in control) and issue additional common shares; • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; 49 Table of Contents • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “Managing Trustees” and other Trustees be “Independent Trustees,” as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change in control) and issue additional common shares; • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s, our senior living community managers’ or other third parties’ abilities to maintain the security, proper function and availability of their information technology and systems since remote working by their employees could strain their technology resources and introduce operational risk, including heightened cybersecurity risk.
This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s, our senior living community managers’ or other third parties’ abilities to maintain the security, proper function and availability of their respective information technology and systems since remote working by their employees could strain their respective technology resources and introduce operational risk, including heightened cybersecurity risk.
Our bylaws currently provide that other than any action arising under the Securities Act, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for: (1) any Internal Corporate Claim, as such term is defined under the Maryland General Corporation Law; (2) any derivative action or proceeding brought on our behalf; (3) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, managers or other agents to us or our shareholders; (4) any action asserting a claim against us or any of our Trustees, officers, managers or other agents arising pursuant to Maryland law, our declaration of trust or bylaws, including any disputes, claims or controversies brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, managers or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws; and (5) any action asserting a claim against us or any of our Trustees, officers, managers or other agents that is governed by the internal affairs doctrine of the State of Maryland.
Our bylaws currently provide that other than any action arising under the Securities Act, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for: (1) any Internal Corporate Claim, as such term is defined under the Maryland General Corporation Law; (2) any derivative action or proceeding brought on our behalf; (3) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, manager or other agents to us or our shareholders; (4) any action asserting a claim against us or any of our Trustees, officers, manager or other agents arising pursuant to Maryland law, our declaration of trust or bylaws, including any disputes, claims or controversies brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, manager or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws; and (5) any action asserting a claim against us or any of our Trustees, officers, manager or other agents that is governed by the internal affairs doctrine of the State of Maryland.
If we and RMR fail to comply with ESG related regulations and to satisfy the expectations of investors and our tenants and other stakeholders or our or RMR’s announced goals and other initiatives are not executed as planned, our and RMR’s reputation could be adversely affected, and our revenues, results of operations and ability to grow our business may be negatively impacted.
If we and RMR fail to comply with ESG and anti-ESG related regulations and to satisfy the expectations of investors and our tenants and other stakeholders or our or RMR’s announced goals and other initiatives are not executed as planned, our and RMR’s reputation could be adversely affected, and our revenues, results of operations and ability to grow our business may be negatively impacted.
Economic conditions may be affected by numerous factors, including, but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, uncertainty about government fiscal and tax policy, geopolitical events, the regulatory environment, the availability of credit and interest rates.
Economic conditions may be affected by numerous factors, including, but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, uncertainty about government fiscal, tax and trade policy, geopolitical events, the regulatory environment, the availability of credit and interest rates.
If the content, analyses or recommendations that AI applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected.
If the content, analyses or recommendations that AI Technologies applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI Technologies algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected.
Unlike apartment leases that typically have a one-year term, state regulations governing assisted living communities typically require that senior living community residents have the right to terminate their assisted living resident agreements for any reason on reasonable (for example, 30 days’) notice.
Unlike apartment leases that typically have a one-year term, state regulations governing SHOP communities typically require that senior living community residents have the right to terminate their assisted living resident agreements for any reason on reasonable (for example, 30 days’) notice.
This ownership limitation in our bylaws is intended to help us preserve our ability to use our net operating losses and other tax benefits to reduce our future taxable income. We also believe these restrictions in our declaration of trust and bylaws promote good orderly governance.
This ownership limitation in our bylaws is intended to help us preserve our ability to use our net operating losses and other tax benefits to reduce our future taxable income. We also believe these restrictions in our declaration of trust and bylaws promote orderly governance.
Our participation in joint ventures is subject to risks, including the following: • we share approval rights over major decisions affecting the ownership or operation of the joint ventures and any property owned by the joint ventures; • we may need to contribute additional capital in order to preserve, maintain or grow the joint ventures and their investments; • joint venture investors may have economic or other business interests or goals that are inconsistent with our business interests or goals, which could affect our ability to lease, relet or operate properties owned by the joint ventures; • joint venture investors may be subject to different laws or regulations than us, or may be structured differently than us for tax purposes, which could create conflicts of interest and/or affect our ability to maintain our qualification for taxation as a REIT; • our ability to sell our interest in, or sell additional properties to, the joint ventures or the joint ventures’ ability to sell additional interests of, or properties owned by, the joint ventures when we so desire are subject to the approval rights of the other joint venture investors under the terms of the agreements governing the joint ventures; and • disagreements with joint venture investors could result in litigation or arbitration that could be expensive and distracting to management and could delay important decisions.
Our participation in joint ventures is subject to risks, including the following: • we share approval rights over major decisions affecting the ownership or operation of the joint ventures and any property owned by the joint ventures; • we may need to contribute additional capital in order to preserve, maintain or grow the joint ventures and their investments; • joint venture investors may have economic or other business interests or goals that are inconsistent with our business interests or goals, which could affect our ability to lease, relet or operate properties owned by the joint ventures; 45 Table of Contents • joint venture investors may be subject to different laws or regulations than us, or may be structured differently than us for tax purposes, which could create conflicts of interest and/or affect our ability to maintain our qualification for taxation as a REIT; • our ability to sell our interest in, or sell additional properties to, the joint ventures or the joint ventures’ ability to sell additional interests of, or properties owned by, the joint ventures when we so desire are subject to the approval rights of the other joint venture investors under the terms of the agreements governing the joint ventures; and • disagreements with joint venture investors could result in litigation or arbitration that could be expensive and distracting to management and could delay important decisions.
Also, our competitors or other third parties may incorporate AI into their products and services more quickly or more successfully than RMR, which could impair our ability to compete effectively and adversely affect our results of operations.
Also, our competitors or other third parties may incorporate AI Technologies into their products and services more quickly or more successfully than RMR, which could impair our ability to compete effectively and adversely affect our results of operations.
Although most of RMR’s and our senior living community managers’ staff work from their offices for a majority of the work week, flexible working arrangements have resulted in increased remote working.
Although most of RMR’s and our senior living community managers’ staff work from their respective offices for a majority of the work week, flexible working arrangements have resulted in increased remote working.
For our TRS arrangements to comply as intended with the REIT qualification and taxation rules under the IRC, a number of requirements must be satisfied, including: • our TRSs may not directly or indirectly operate or manage a healthcare facility, as defined by the IRC; • the leases to our TRSs must be respected as true leases for federal income tax purposes and not as service contracts, partnerships, joint ventures, financings or other types of arrangements; • the leased properties must constitute qualified healthcare properties (including necessary or incidental property) under the IRC; • our leased properties must be managed and operated on behalf of the TRSs by independent contractors who are less than 35% affiliated with us and who are actively engaged (or have affiliates so engaged) in the trade or business of managing and operating qualified healthcare properties for any person unrelated to us; and • the rental and other terms of the leases must be arm’s length.
For our TRS arrangements to comply as intended with the REIT qualification and taxation rules under the IRC, a number of requirements must be satisfied, including: • our TRSs may not directly or indirectly operate or manage a healthcare facility, as defined by the IRC; • the leases to our TRSs must be respected as true leases for federal income tax purposes and not as service contracts, partnerships, joint ventures, financings or other types of arrangements; • the leased properties must constitute qualified healthcare properties (including necessary or incidental property) under the IRC; • our leased properties must be managed and operated on behalf of the TRSs by independent contractors who are less than 35% affiliated with us and who are (or, in limited cases, have been) actively engaged (or have affiliates that are or have been so engaged) in the trade or business of managing and operating qualified healthcare properties for any person unrelated to us; and • the rental and other terms of the leases must be arm’s length.
High interest rates have significantly increased our borrowing costs. Although we have an option to extend the maturity date of certain of our debt upon payment of a fee and meeting other conditions, the applicable conditions may not be met, and we may be required to repay or refinance our existing debt with new debt at less favorable terms.
High interest rates have significantly increased our borrowing costs. Although we have an option to extend the maturity date of certain of our debt upon payment of a fee and meeting other conditions, the applicable conditions may not be met, and we may be required to repay or refinance our existing debt with new debt on less favorable terms.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our Trustees, officers, managers or other agents.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our Trustees, officers, manager or other agents.
The cybersecurity risks to us or our third party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR’s, our senior living community managers’ or other third parties’ information technology networks and systems or operations.
The cybersecurity risks to us or our third party vendors 42 Table of Contents are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR’s, our senior living community managers’ or other third parties’ information technology networks and systems or operations.
Secured debt, including mortgage debt, increases our risk of asset and property losses because defaults on debt secured by our assets may result in foreclosure actions initiated by lenders and ultimately our loss of the property or other assets securing any loans for which we are in default.
Secured debt, including mortgage debt, increases our risk of asset and property losses because defaults on debt secured by our assets may result in foreclosure actions initiated by lenders and ultimately our loss of the property or other assets securing any debts for which we are in default.
Seniors have been increasingly delaying their moves to senior living communities until they require greater care or forgoing moving to senior living communities altogether, and approximately 24% of the senior living communities we own are independent living communities which require residents to be capable of relatively high degrees of independence.
Seniors have been increasingly delaying their moves to senior living communities until they require greater care or forgoing moving to senior living communities altogether, and approximately 21% of the senior living communities we own are independent living communities which require residents to be capable of relatively high degrees of independence.
The exclusive forum provisions of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, managers or other agents, which may discourage lawsuits against us and our Trustees, officers, managers or other agents.
The exclusive forum provisions of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager or other agents, which may discourage lawsuits against us and our Trustees, officers, manager or other agents.
For example, our properties could be severely damaged or destroyed from either singular extreme weather events (such as floods, storms and wildfires) or through long term impacts of climatic conditions (such as precipitation frequency, weather instability and rise of sea levels).
For example, our properties could be severely damaged or destroyed from either singular extreme weather events (such as floods, storms and wildfires) or through long term impacts of climatic conditions (such as precipitation frequency, weather instability and rising sea levels).
If RMR’s use of AI becomes controversial, it may experience brand or reputational harm, competitive harm, or legal liability.
If RMR’s use of AI Technologies becomes controversial, it may experience brand or reputational harm, competitive harm or legal liability.
During 2020, we reduced our quarterly cash distribution rate on our common shares to $0.01 per common share to enhance our liquidity until our leverage profile otherwise improves, subject to applicable REIT tax requirements; however: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by current market and economic conditions, such as uncertainties surrounding interest rates and inflation and economic downturns or a possible recession, on our business, results of operations and liquidity; and • the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to, our funds from operations, or FFO, our normalized funds from operations, or Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, 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.
During 2020, we reduced our quarterly cash distribution rate on our common shares to $0.01 per common share to improve our liquidity, subject to applicable REIT tax requirements; however: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by current market and economic conditions, such as uncertainties surrounding interest rates and inflation and economic downturns or a possible recession, on our business, results of operations and liquidity; and • the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to, our funds from operations, or FFO, our normalized funds from operations, or Normalized FFO, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, 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.
If we determine that an uninsured loss or a loss in excess of insured limits occurs and if we are not able to recover amounts from our tenants for certain losses, we may have to incur uninsured costs to mitigate such losses or lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property.
If we determine that an uninsured loss or a loss in excess of insured limits occurs and if we are not able to recover amounts from our managers or other operators or tenants for certain losses, we may have to incur uninsured costs to mitigate such losses or lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property.
As a result, the Notes and the Guarantees are, and, except to the extent that future Notes are guaranteed by our non-guarantor subsidiaries, will be, structurally subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2025 Notes, the 2026 Notes and the 2031 Notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
As a result, the Notes and the Guarantees are, and, except to the extent that future Notes are guaranteed by our non-guarantor subsidiaries, will be, structurally subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2030 Notes and the 2031 Notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
Such release may occur at any time upon a sale, disposition or transfer, in compliance with the provisions of the indentures and related supplements governing 2025 Notes, the 2026 Notes and the 2031 Notes, of the capital stock of such subsidiary guarantor or of substantially all of the assets of such subsidiary guarantor, or if such subsidiary guarantor becomes an Excluded Subsidiary or a Foreign Subsidiary, as such terms are defined in the applicable indenture or supplemental indenture.
Such release may occur at any time upon a sale, disposition or transfer, in compliance with the provisions of the indentures and related supplements governing the 2030 Notes and the 2031 Notes, of the capital stock of such subsidiary guarantor or of substantially all of the assets of such subsidiary guarantor, or if such subsidiary guarantor becomes an Excluded Subsidiary or a Foreign Subsidiary, as such terms are defined in the applicable indenture or supplemental indenture.
Further, courts interpreting change of control provisions under New York law (which is the governing law of the indentures governing the 2025 Notes, the 2026 Notes and the 2031 Notes) have not provided clear and consistent meanings of such change of control provisions which leads to subjective judicial interpretation of what may constitute a “Change of Control.” Some or all of the Guarantees may be released automatically.
Further, courts interpreting change of control provisions under New York law (which is the governing law of the indentures governing the 2030 Notes and the 2031 Notes) have not provided clear and consistent meanings of such change of control provisions which leads to subjective judicial interpretation of what may constitute a “Change of Control.” Some or all of the Guarantees may be released automatically.
In particular, these factors could arise from weaknesses in or a lack of established markets for the properties we may identify for sale, the availability of financing to potential purchasers on reasonable terms, changes in the financial condition of prospective purchasers for and the tenants of the properties, the terms of leases with tenants at certain of the properties, the characteristics, quality and prospects of the properties, the number of prospective purchasers, the number of competing properties in the market, unfavorable local, national or international economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challenges, economic downturns or a possible recession and labor market conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.
In particular, these factors could arise from weaknesses in or a lack of established markets for the properties we may identify for sale, the availability of financing to potential purchasers on reasonable terms, changes in the financial condition of prospective purchasers for and the tenants of the properties, the terms of leases with tenants at certain of the properties, the characteristics, quality and prospects of the properties, the number of prospective purchasers, the number of competing properties in the market, unfavorable local, national or international economic conditions, such as uncertainties surrounding interest rates and inflation, changing tariffs and trade policies and related uncertainty, supply chain challenges, economic downturns or a possible recession and labor market conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.
These fee arrangements could incentivize RMR to pursue acquisitions, capital transactions, tenancies and construction projects or to avoid disposing of our assets in order to increase or maintain its management fees and might reduce RMR’s incentive to devote its time and effort to seeking investments that provide attractive returns for us.
These fee arrangements could incentivize RMR to pursue acquisitions, capital transactions, tenancies and construction projects or to avoid disposing of our assets in order to increase or maintain its management fees and 47 Table of Contents might reduce RMR’s incentive to devote its time and effort to seeking investments that provide attractive returns for us.
In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a “Change of Control” under the indentures and related supplements governing the 2025 Notes, the 2026 Notes and the 2031 Notes although these types of transactions could affect our capital structure or credit ratings and the holders of such Notes.
In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a “Change of Control” under the indentures and related supplements governing the 2030 Notes and the 2031 Notes although these types of transactions could affect our capital structure or credit ratings and the holders of such Notes.
Heightened levels of staffing turnover at our senior living communities, particularly with respect to key and skilled positions, such as management, regional and executive directors and other skilled and qualified personnel, may disrupt operations, limit or slow the execution of business strategies, and decrease revenues and increase costs at our managed senior living communities.
Heightened levels of staffing turnover at our senior living communities, particularly with respect to key and skilled positions, such as management, regional and executive directors and other skilled and qualified personnel, may disrupt 38 Table of Contents operations, limit or slow the execution of business strategies, and decrease revenues and increase costs at our managed senior living communities.
In addition, RMR’s, our senior living community managers’ or other third parties’ data security, data privacy, investor reporting and 41 Table of Contents business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, their information systems and technology.
In addition, RMR’s, our senior living community managers’ or other third parties’ data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, their information systems and technology.
The use of AI applications to support business processes carries inherent risks related to data privacy and security, such as unintended or inadvertent transmission of proprietary or sensitive information, including personal data. AI presents emerging ethical issues, and RMR may be unsuccessful in identifying and resolving these issues before they arise.
The use of AI Technologies applications to support business processes carries inherent risks related to data privacy and security, such as unintended or inadvertent transmission of proprietary or sensitive information, including personal data. AI Technologies present emerging ethical issues, and RMR may be unsuccessful in identifying and resolving these issues before they arise.
Increased labor costs, decreased labor availability and staffing turnover have negatively impacted our managers and our SHOP segment operating results, and these conditions may continue for an extended period. Wages and employee benefits associated with the operations of our managed senior living communities represent a significant part of our managed senior living communities’ operating expenses.
Increased labor costs, decreased labor availability and staffing turnover have negatively impacted our managers and our SHOP segment operating results, and these conditions may continue for an extended period. Wages and employee benefits associated with the operations of our managed senior living communities represent the largest part of our managed senior living communities’ operating expenses.
Losses of a catastrophic nature, such as those caused by hurricanes, flooding, volcanic eruptions and earthquakes or losses as a result of outbreaks of pandemics or acts of terrorism, may be covered by insurance policies with limitations such as large deductibles or co-payments that we or a responsible tenant may not be able to pay.
Losses of a catastrophic nature, such as those caused by hurricanes, flooding, volcanic eruptions and earthquakes or losses as a result of outbreaks of pandemics or acts of terrorism, may be covered by insurance policies with limitations such as large deductibles or co-payments that we or a responsible manager or other operator or tenant may not be able to pay.
Under various laws, owners as well as operators of real estate may be required to investigate and clean up or remove hazardous substances present at or migrating from properties they own or operate and may be held liable for property damage or personal injuries that result from hazardous substances.
Under various laws, owners as well as operators of real estate may be required to investigate and clean up or remove hazardous substances present at or migrating from properties they own or operate and may be held liable for property damage or personal injuries that result from hazardous 41 Table of Contents substances.
Our ability to refinance this debt and the cost of any such refinancing will be subject to market conditions, our financial condition and operating performance and our credit ratings; and • property values are often determined, in part, based upon a capitalization of rental income formula.
Our ability to refinance this debt and the cost of any such refinancing will be subject to market conditions, our financial condition and operating performance and our credit ratings; and • property values are often determined, in part, based upon a capitalization of NOI formula.
The outstanding Notes and Guarantees, other than the 2026 Notes and related Guarantees on a senior secured basis, or the Unsecured Notes and Guarantees, are not secured and any Notes we may issue in the future may not be secured.
The outstanding Notes and Guarantees, other than the 2030 Notes and related Guarantees on a senior secured basis, or the Unsecured Notes and Guarantees, are not secured and any Notes we may issue in the future may not be secured.
If we could not refinance such debt or otherwise obtain a waiver from the holders of such debt, we would be prohibited from repurchasing the 2025 Notes, the 2026 Notes and the 2031 Notes, which would constitute an event of default under the indentures and related supplements governing such Notes, which in turn would constitute a default under such debt arrangements.
If we could not refinance such debt or otherwise obtain a waiver from the holders of such debt, we would be prohibited from repurchasing the 2030 Notes and the 2031 Notes, which would constitute an event of default under the indentures and related supplements governing such Notes, which in turn would constitute a default under such debt arrangements.
Our Board of Trustees periodically reviews our operating and investment guidelines and our operating activities and investments but it does not review or approve each decision made by RMR on our behalf. In addition, in conducting periodic reviews, our Board of Trustees relies primarily on information provided to it by RMR.
Our Board of Trustees periodically reviews our operating and investment guidelines and our operating activities and 46 Table of Contents investments, but it does not review or approve each decision made by RMR on our behalf. In addition, in conducting periodic reviews, our Board of Trustees relies primarily on information provided to it by RMR.
There may be no public market for certain of the Notes, and one may not develop, be maintained or be liquid. We have not applied for listing of certain of the Notes on any securities exchange or for quotation on any automatic dealer quotation system, and we may not do so for Notes issued in the future.
There may be no public market for certain of the Notes, and one may not develop, be maintained or be liquid. 54 Table of Contents We have not applied for listing of certain of the Notes on any securities exchange or for quotation on any automatic dealer quotation system, and we may not do so for Notes issued in the future.
Some of these senior living competitors are larger and have greater financial resources than our managers or other operators do, and some of these competitors are not for-profit entities which have endowment income and may not face the same financial pressures that 39 Table of Contents they do.
Some of these senior living competitors are larger and have greater financial resources than our managers or other operators do, and some of these competitors are not for-profit entities which have endowment income and may not face the same financial pressures that they do.
We or our tenants are generally responsible for the costs of insurance coverage for our properties and the operations conducted on them, including for casualty, liability, malpractice, fire, extended coverage and rental or business interruption loss insurance. In the future, we may acquire properties for which we are responsible for the costs of insurance.
We or our managers or other operators or tenants are generally responsible for the costs of insurance coverage for our properties and the operations conducted on them, including for casualty, liability, malpractice, fire, extended coverage and rental or business interruption loss insurance. In the future, we may acquire properties for which we are responsible for the costs of insurance.
Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or RMR’s policies relating to corporate sustainability are inadequate.
Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or RMR’s policies relating to corporate sustainability are not aligned with their own policies.
Further, we and our managers and other operators have been, are currently, and expect in the future to be involved in claims, lawsuits and regulatory and government audits, investigations and proceedings arising in the ordinary course of senior 36 Table of Contents living operations.
Further, we and our managers and other operators have been, are currently and expect in the future to be involved in claims, lawsuits and regulatory and government audits, investigations and proceedings arising in the ordinary course of senior living operations.
Our bylaws currently also provide that the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for any dispute, or portion thereof, regarding 49 Table of Contents the meaning, interpretation or validity of any provision of our declaration of trust or bylaws.
Our bylaws currently also provide that the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for any dispute, or portion thereof, regarding the meaning, interpretation or validity of any provision of our declaration of trust or bylaws.
To the extent that we satisfy this distribution requirement, federal corporate income tax will not apply to the earnings that we distribute, but if we 50 Table of Contents distribute less than 100% of our REIT taxable income, then we will be subject to federal corporate income tax on our undistributed taxable income.
To the extent that we satisfy this distribution requirement, federal corporate income tax will not apply to the earnings that we distribute, but if we distribute less than 100% of our REIT taxable income, then we will be subject to federal corporate income tax on our undistributed taxable income.
These risks include fluctuations in occupancy experienced during the normal course of business, Medicare and Medicaid reimbursement, if applicable, and private pay rates; economic conditions, such as uncertainties surrounding interest rates and inflation, economic downturns or a possible recession and labor market conditions; competition; litigation and regulatory and government proceedings; federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards; the availability and increases in cost of general and professional liability insurance coverage; increases in property taxes; state regulation and rights of residents related to entrance fees; federal and state housing laws and regulations; the availability and increases in the cost of labor (as a result of unionization or otherwise); and increases in commodity prices, such as the prices of food and construction materials, as a result of, among other things, supply chain challenges or other market conditions.
These risks include fluctuations in occupancy experienced during the normal course of business, private pay rates and Medicare and Medicaid reimbursement, if applicable; economic conditions, such as uncertainties surrounding interest rates and inflation, economic downturns or a possible recession and labor market conditions; competition; litigation and regulatory and government proceedings; federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards; the availability and increases in cost of general and professional liability insurance coverage; increases in property taxes; state regulation and rights of residents related to entrance fees; federal 37 Table of Contents and state housing laws and regulations; the availability and increases in the cost of labor (as a result of unionization or otherwise); and increases in commodity prices, such as the prices of food and construction materials, as a result of, among other things, changing tariffs and trade policies and related uncertainty, supply chain challenges or other market conditions.
Additionally, AI technology is continuously evolving, and RMR may adopt and deploy AI technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI.
Additionally, AI Technologies are continuously evolving, and RMR may adopt and deploy AI Technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI Technologies.
Unless we otherwise consent in writing, the sole and exclusive forum for claims that arise under the Securities Act is the federal district courts of the United States, to the fullest extent permitted by the law.
Unless we otherwise consent in writing, the sole and exclusive forum for claims that arise under the Securities Act is the federal 50 Table of Contents district courts of the United States, to the fullest extent permitted by law.
If 44 Table of Contents any of our tenants, managers or other operators files for bankruptcy, we may experience delays in enforcing our rights, and may be limited in our ability to replace the tenant, manager or other operator.
If any of our managers, other operators or tenants files for bankruptcy, we may experience delays in enforcing our rights, and may be limited in our ability to replace the manager, other operator or tenant.
Upon any distribution to our creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or our property, the holders of our secured debt, including debt under the 2026 Notes and our $127.5 million in aggregate principal amount of mortgage notes (to the extent such debt remains outstanding and is still then secured), will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the instruments governing such debt and to be paid in full, from the assets securing that secured debt before any payment may be made with respect to the Notes that are not secured by those assets.
Upon any distribution to our creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or our property, the 53 Table of Contents holders of our secured debt, including debt under the 2030 Notes and our $468.5 million in aggregate principal amount of mortgage notes (to the extent such debt remains outstanding and is still then secured), will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the instruments governing such debt and to be paid in full, from the assets securing that secured debt before any payment may be made with respect to the Notes that are not secured by those assets.
As a result of these conditions, the cost of liability insurance continues to increase. In addition, we generally hold the applicable healthcare license and enroll in applicable government healthcare programs on behalf of the properties in our senior living operations segment. This subjects us to potential liability under various healthcare laws and regulations.
As a result of these conditions, the cost of liability insurance continues to increase. In addition, we generally hold the applicable healthcare license and enroll in applicable government healthcare programs on behalf of the properties in our SHOP segment. This subjects us to potential liability under various healthcare laws and regulations.
Upon the occurrence of a change of control, we will be required to offer to repurchase the outstanding 2025 Notes and 2031 Notes at 101% of the principal amount thereof, and the outstanding 2026 Notes at 100% of the principal amount thereof, in each case plus accrued and unpaid interest on such Notes, if any, to, but not including, the date of repurchase.
Upon the occurrence of a change of control, we will be required to offer to repurchase the outstanding 2030 Notes and 2031 Notes at 101% of the principal amount thereof, in each case plus accrued and unpaid interest on such Notes, if any, to, but not including, the date of repurchase.
We may update these risk factors in our future periodic reports. 34 Table of Contents Risks Related to Our Business Unfavorable market and industry conditions may have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders.
We may update these risk factors in our future periodic reports. 35 Table of Contents Risks Related to Our Business Unfavorable market and industry conditions have had and may continue to have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders.
When interest rates are high, such as they are currently, real estate transaction volumes slow due to increased borrowing costs and property investors often demand higher capitalization rates, which causes property values to decline. High interest rates could therefore lower the value of our properties and cause the value of our securities to decline.
When interest rates are high, real estate transaction volumes slow due to increased borrowing costs and property investors often demand higher capitalization rates, which causes property values to decline. High interest rates could therefore lower the value of our properties and cause the value of our securities to decline.
However, for tax years beginning before 2026, REIT dividends paid to noncorporate shareholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the IRC for specified forms of income from passthrough entities.
However, REIT dividends paid to noncorporate shareholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the IRC for specified forms of income from passthrough entities.
We may not have the ability to raise the funds necessary to finance the repurchase of the 2025 Notes, the 2026 Notes and the 2031 Notes upon a change of control event as will be required.
We may not have the ability to raise the funds necessary to finance the repurchase of the 2030 Notes and the 2031 Notes upon a change of control event as will be required.
At current interest rate levels, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares and seek alternative investments with higher distribution rates.
If market interest rate levels increase, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares and seek alternative investments with higher distribution rates.
This provision may not be effective to protect the Guarantees or any future guarantees from being voided under 53 Table of Contents fraudulent transfer laws, or may eliminate the guarantor’s obligations or reduce the guarantor’s obligations to an amount that effectively makes the guarantee worthless.
This provision may not be effective to protect the Guarantees or any future guarantees from being voided under fraudulent transfer laws, or may eliminate the guarantor’s obligations or reduce the guarantor’s obligations to an amount that effectively makes the guarantee worthless.
Our business and operations may be adversely affected by market and economic volatility experienced by the U.S. and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located.
Our business and operations have been and may continue to be adversely affected by market and economic volatility experienced by the U.S. and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located.
For example, current market conditions have caused, and may continue to cause, increased capitalization rates which, together with increased interest rates, have resulted in reduced commercial real estate transaction volume, and such conditions may continue or worsen.
For example, current market conditions have caused, and may continue to cause, increased capitalization rates which, together with increased 44 Table of Contents interest rates, have resulted in reduced commercial real estate transaction volume, and such conditions may continue or worsen.
The occurrence of a tenant bankruptcy could reduce the rent we receive from that tenant, and economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challenges, economic downturns or a possible recession and labor market conditions, may increase the risk of our tenants and the managers and other operators of our senior living communities filing for bankruptcy.
The occurrence of a tenant bankruptcy could reduce the rent we receive from that tenant, and economic conditions, such as uncertainties surrounding interest rates and inflation, changing tariffs and trade policies and related uncertainty, supply chain challenges, economic downturns or a possible recession and labor market conditions, may increase the risk of the managers and other operators of our senior living communities and our tenants filing for bankruptcy.
Risks Related to Our Relationships with RMR and AlerisLife (including Five Star) We are dependent upon RMR to manage our business and implement our growth strategy. We have no employees. Personnel and services that we require are provided to us by RMR pursuant to our management agreements with RMR.
Risks Related to Our Relationships with RMR We are dependent upon RMR to manage our business and implement our growth strategy. We have no employees. Personnel and services that we require are provided to us by RMR pursuant to our management agreements with RMR.
In addition, if the 2025 Notes and the 2031 Notes have a rating equal to or higher than Baa2 (or the equivalent) by Moody’s Investors Service, or Moody's, or BBB (or the equivalent) by Standard & Poor’s Rating Services, or Standard & Poor's, and at such time no default or event of default under the indenture and related supplements governing the 2025 Notes and the 2031 Notes has occurred and is continuing, the Guarantees and all other obligations of the subsidiary guarantors under the indenture will automatically terminate and be 54 Table of Contents released.
In addition, if the 2030 Notes and the 2031 Notes have a rating equal to or higher than Baa2 and Baa3 (or the equivalent), respectively, by Moody’s Investors Service, or Moody's, or BBB and BBB- (or the equivalent), respectively, by Standard & Poor’s Rating Services, or Standard & Poor's, and at such time no default or event of default under the indenture and related supplements governing the 2030 Notes and the 2031 Notes has occurred and is continuing, the Guarantees and all other obligations of the subsidiary guarantors under the indenture will automatically terminate and be released.
The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2025 Notes, the 2026 Notes and the 2031 Notes.
The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2030 Notes and the 2031 Notes.
Our subsidiaries that guarantee the Notes are the sole obligor on the guarantees of such notes, or the Guarantees. The subsidiaries that guarantee the 2025 Notes, the 2026 Notes and/or the 2031 Notes do not currently guarantee any of our other Notes.
Our subsidiaries that guarantee the Notes are the sole obligor on the guarantees of such notes, or the Guarantees. The subsidiaries that guarantee the 2030 Notes and/or the 2031 Notes do not currently guarantee any of our other Notes.
Market conditions or our loss history may limit the scope of insurance or coverage available to us or our tenants on economic terms.
Market conditions or our loss history may limit the scope of insurance or coverage available to us or our managers or other operators or tenants on economic terms.
If we default under any of our debt obligations, we may be in default under other debt agreements of ours that have cross default provisions, including our senior notes indentures and their supplements, as applicable.
If we default under any of our debt obligations, we may be in default under other debt agreements of ours that have cross default provisions, including our credit agreement and our senior notes indentures and their supplements.
RMR is incorporating artificial intelligence, or AI, into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and adversely affect our results of operations.
RMR incorporates artificial intelligence into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and could adversely affect our results of operations.
Sales of our common shares may cause a decline in the market price of our common shares; • amounts outstanding under future debt we may incur may require interest to be paid at floating interest rates.
Sales of our common shares may cause a decline in the market price of our common shares; • amounts outstanding under certain of our debt require interest to be paid at floating interest rates.
Vacancies in a property could result in significant capital expenditures and illiquidity and reduce the value of the property. The loss or downsizing of a tenant may reduce the value of a property and require us to spend significant amounts of capital to renovate the property before it is suitable for a new tenant.
Vacancies in a property could result in significant capital expenditures and negative property level cash flow and reduce the value of the property. The loss or downsizing of a tenant may reduce the value of a property and require us to spend significant amounts of capital to renovate the property before it is suitable for a new tenant.
In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG policies or third party expectations or demands. 42 Table of Contents Insurance may not adequately cover our losses, and insurance costs may increase.
In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG and anti-ESG policies or third party expectations or demands. Insurance may not adequately cover our losses, and insurance costs may increase.
Any failure by RMR, our senior living community managers or other third party vendors to maintain the security, proper function and availability of their respective information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
Any failure by RMR, our senior living community managers or other third party vendors to maintain the security, proper function and availability of their respective information technology and systems or to adequately protect personal data, or any failure by RMR, our senior living community managers or other third party vendors to provide the appropriate regulatory and other notifications in a timely manner could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
If any challenges to related party transactions were to be successful, we might not realize the benefits expected 47 Table of Contents from the transactions being challenged.
If any challenges to related party transactions were to be successful, we might not realize the benefits expected from the transactions being challenged.

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Item 2. Properties

Properties — owned and leased real estate

7 edited+1 added−0 removed0 unchanged
Biggest changeAll dollar amounts are in thousands: Medical Office and Life Science Portfolio SHOP All Other Consolidated State Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value AL — $ — $ — 8 $ 105,206 $ 70,777 — $ — $ — 8 $ 105,206 $ 70,777 AR — — — 3 47,068 27,039 — — — 3 47,068 27,039 AZ 2 40,903 28,288 6 178,736 105,762 — — — 8 219,639 134,050 CA 7 242,506 173,471 9 215,124 130,945 1 7,279 3,731 17 464,909 308,147 CO 2 20,780 11,895 8 118,932 71,759 1 14,264 9,357 11 153,976 93,011 DC 2 108,453 78,380 — — — — — — 2 108,453 78,380 DE — — — 2 62,519 35,655 — — — 2 62,519 35,655 FL 7 48,211 33,535 19 691,602 429,174 1 20,692 19,728 27 760,505 482,437 GA 6 93,135 61,691 25 329,395 212,258 2 65,306 50,791 33 487,836 324,740 HI 1 81,190 55,640 — — — — — — 1 81,190 55,640 ID — — — — — — 2 22,658 14,920 2 22,658 14,920 IL 3 52,370 33,314 11 190,420 108,478 1 20,641 12,626 15 263,431 154,418 IN 1 22,211 12,027 11 186,277 119,479 1 66,189 45,452 13 274,677 176,958 KS 1 18,100 8,927 3 70,289 40,654 — — — 4 88,389 49,581 KY — — — 9 123,611 66,616 — — — 9 123,611 66,616 MA 6 163,881 115,270 1 37,589 21,655 — — — 7 201,470 136,925 MD 1 8,142 5,562 11 274,476 175,891 1 20,964 14,192 13 303,582 195,645 MN 8 100,781 64,037 1 17,214 11,307 — — — 9 117,995 75,344 MO 2 84,145 51,055 5 73,602 44,802 — — — 7 157,747 95,857 NC 2 62,674 41,898 16 244,945 172,384 — — — 18 307,619 214,282 NE — — — 1 8,508 5,007 1 26,702 17,688 2 35,210 22,695 NJ — — — 3 130,773 87,218 — — — 3 130,773 87,218 NM 2 39,717 27,119 1 36,023 20,291 3 33,303 19,892 6 109,043 67,302 NV — — — 2 86,826 56,619 — — — 2 86,826 56,619 NY 3 81,381 51,648 1 115,814 81,238 — — — 4 197,195 132,886 OH 1 18,601 11,251 1 51,269 28,727 1 4,428 1,531 3 74,298 41,509 OR — — — 1 52,356 43,379 — — — 1 52,356 43,379 PA 4 57,131 35,911 7 96,438 56,806 — — — 11 153,569 92,717 SC 1 4,942 3,170 17 143,812 97,228 — — — 18 148,754 100,398 TN 1 9,971 6,164 13 186,228 132,539 — — — 14 196,199 138,703 TX 10 202,768 131,314 13 401,567 248,267 1 20,502 13,171 24 624,837 392,752 VA 8 130,405 80,166 11 153,156 93,639 — — — 19 283,561 173,805 WA — — — — — — 2 18,356 10,183 2 18,356 10,183 WI 10 169,236 108,920 7 122,082 80,967 — — — 17 291,318 189,887 Total 91 1,861,634 1,230,653 226 4,551,857 2,876,560 18 341,284 233,262 335 6,754,775 4,340,475 Held for Sale 7 274,752 175,948 6 76,287 47,535 19 68,113 37,900 32 419,152 261,383 Grand Total 98 $ 2,136,386 $ 1,406,601 232 $ 4,628,144 $ 2,924,095 37 $ 409,397 $ 271,162 367 $ 7,173,927 $ 4,601,858 (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. 56 Table of Contents
Biggest changeAll dollar amounts are in thousands: SHOP Medical Office and Life Science Portfolio All Other Consolidated State Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value Number of Properties Gross Book Value of Real Estate Assets (1) Net Book Value AL 8 $ 106,603 $ 68,303 — $ — $ — — $ — $ — 8 $ 106,603 $ 68,303 AR 3 47,812 26,034 — — — — — — 3 47,812 26,034 AZ 6 182,607 108,651 — — — — — — 6 182,607 108,651 CA 9 216,708 125,116 6 233,938 161,676 1 7,279 3,467 16 457,925 290,259 CO 8 118,663 67,122 2 20,780 11,417 1 14,385 9,106 11 153,828 87,645 DC — — — 1 30,287 22,605 — — — 1 30,287 22,605 DE 2 61,663 33,963 — — — — — — 2 61,663 33,963 FL 19 690,475 413,840 7 48,082 32,129 1 20,691 18,986 27 759,248 464,955 GA 10 230,016 147,197 6 96,476 62,353 2 65,306 48,961 18 391,798 258,511 HI — — — 1 80,845 53,641 — — — 1 80,845 53,641 ID — — — — — — 2 23,721 15,188 2 23,721 15,188 IL 11 191,932 104,877 2 38,341 21,654 1 20,641 12,136 14 250,914 138,667 IN 9 171,630 107,404 1 22,584 12,066 1 66,443 44,030 11 260,657 163,500 KS 2 41,592 28,177 1 18,609 8,935 1 27,204 9,952 4 87,405 47,064 KY 9 123,592 63,576 — — — — — — 9 123,592 63,576 MA 1 38,191 21,178 3 127,233 89,669 — — — 4 165,424 110,847 MD 11 275,771 171,593 — — — 1 20,964 13,780 12 296,735 185,373 MN 1 17,149 10,127 5 72,900 44,870 — — — 6 90,049 54,997 MO 5 74,512 43,759 1 26,533 17,791 — — — 6 101,045 61,550 NC 16 248,974 169,685 1 38,228 24,315 — — — 17 287,202 194,000 NE 1 8,624 4,848 — — — 1 26,702 17,138 2 35,326 21,986 NJ 3 130,217 82,481 — — — — — — 3 130,217 82,481 NM 1 36,913 20,335 2 39,988 25,999 3 33,303 19,163 6 110,204 65,497 NV 2 87,266 54,697 — — — — — — 2 87,266 54,697 NY 1 116,603 78,891 1 54,127 30,609 — — — 2 170,730 109,500 OH 1 51,435 27,755 1 18,601 10,929 1 4,428 1,419 3 74,464 40,103 OR 1 53,482 42,973 — — — — — — 1 53,482 42,973 PA 7 96,883 54,262 3 42,112 25,388 — — — 10 138,995 79,650 SC 9 104,202 66,913 — — — — — — 9 104,202 66,913 TN 12 160,156 113,278 1 9,806 5,951 — — — 13 169,962 119,229 TX 13 404,818 242,484 8 189,647 117,928 1 20,502 12,723 22 614,967 373,135 VA 11 152,878 89,735 5 105,254 62,706 — — — 16 258,132 152,441 WA — — — — — — 2 18,275 9,641 2 18,275 9,641 WI 7 122,864 79,018 9 175,020 112,307 — — — 16 297,884 191,325 Total 199 4,364,231 2,668,272 67 1,489,391 954,938 19 369,844 235,690 285 6,223,466 3,858,900 Held for Sale 13 52,496 22,048 — — — — — — 13 52,496 22,048 Grand Total 212 $ 4,416,727 $ 2,690,320 67 $ 1,489,391 $ 954,938 19 $ 369,844 $ 235,690 298 $ 6,275,962 $ 3,880,948 (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. 57 Table of Contents
For more information regarding our finance leases, mortgages, senior secured notes and two unconsolidated joint ventures, see Notes 3 and 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 55 Table of Contents The following table summarizes certain information about our owned properties as of December 31, 2024.
For more information regarding our finance leases, mortgages, senior secured notes and two unconsolidated joint ventures, see Notes 3 and 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 56 Table of Contents The following table summarizes certain information about our owned properties as of December 31, 2025.
Item 2. Properties. At December 31, 2024, our portfolio was comprised of 367 owned properties. The gross book value of real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, or gross book value of real estate assets, of these properties totaled $7.2 billion at December 31, 2024.
Item 2. Properties. At December 31, 2025, our portfolio was comprised of 298 owned properties. The gross book value of real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, or gross book value of real estate assets, of these properties totaled $6.3 billion at December 31, 2025.
The eleven properties owned by our unconsolidated joint ventures in which we own 10% and 20% interests were encumbered by three mortgages totaling $1.1 billion as of December 31, 2024.
The 11 properties owned by our unconsolidated joint ventures in which we own 10% and 20% interests were encumbered by three mortgages totaling $1.5 billion as of December 31, 2025.
As of December 31, 2024, two properties with a gross book value of real estate assets of $43.8 million were subject to finance lease obligations with an aggregate principal balance of $2.3 million.
As of December 31, 2025, two properties with a gross book value of real estate assets of $20.1 million were subject to finance lease obligations with an aggregate principal balance of $0.6 million.
As of December 31, 2024, nine properties with a gross book value of real estate assets of $301.0 million were encumbered by two mortgages with an aggregate principal balance of $127.5 million.
As of December 31, 2025, 36 properties with a gross book value of real estate assets of $657.3 million were encumbered by six mortgages with an aggregate principal balance of $468.5 million.
As of December 31, 2024, 95 properties with a gross book value of real estate assets of $1.6 billion were encumbered by our senior secured notes due 2026 with a principal balance of $940.5 million.
As of December 31, 2025, 36 properties with a gross book value of real estate assets of $402.8 million were encumbered by our senior secured notes due 2030 with a principal balance of $375.0 million.
Added
As of December 31, 2025, 14 properties with a gross book value of real estate assets of $326.6 million were encumbered by our undrawn secured revolving credit facility.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides information about our purchases of our equity securities during the quarter ended December 31, 2024: Calendar Month Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs December 1 - December 31, 2024 670 $ 2.28 — — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain former employees of RMR in connection with the vesting of prior awards of our common shares.
Biggest changeThe following table provides information about our purchases of our equity securities during the quarter ended December 31, 2025: Calendar Month Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs November 1 - November 30, 2025 693 $ 4.42 — $ — December 1 - December 31, 2025 16,152 $ 4.90 — — Total / Weighted Average 16,845 $ 4.88 — $ — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain former employees of RMR and AlerisLife in connection with the vesting of prior awards of our common shares.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common shares are traded on Nasdaq (symbol: DHC). As of February 21, 2025, there were 1,212 shareholders of record of our common shares, although there is a larger number of beneficial owners. Issuer purchases of equity securities.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common shares are traded on Nasdaq (symbol: DHC). As of February 20, 2026, there were 1,174 shareholders of record of our common shares, although there is a larger number of beneficial owners. Issuer purchases of equity securities.
We withheld and purchased these shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date. Our current cash distribution rate to common shareholders is $0.01 per share per quarter, or $0.04 per share per year.
We withheld and purchased these shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the applicable purchase dates. Our current cash distribution rate to common shareholders is $0.01 per share per quarter, or $0.04 per share per year.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Year Ended December 31, 2024 2023 $ Change % Change NOI by segment: Medical Office and Life Science Portfolio $ 115,683 $ 122,566 $ (6,883) (5.6) % SHOP 106,060 76,817 29,243 38.1 % All Other 37,142 36,774 368 1.0 % Total NOI 258,885 236,157 22,728 9.6 % Depreciation and amortization 284,957 284,083 874 0.3 % General and administrative 26,518 26,131 387 1.5 % Acquisition and certain other transaction related costs 2,510 10,853 (8,343) (76.9) % Impairment of assets 70,734 18,380 52,354 nm (Loss) gain on sale of properties (18,938) 1,205 (20,143) nm Gains on equity securities, net — 8,126 (8,126) (100.0) % Interest and other income 8,950 15,536 (6,586) (42.4) % Interest expense (235,239) (191,775) (43,464) 22.7 % Loss on modification or early extinguishment of debt (324) (2,468) 2,144 (86.9) % Loss before income taxes and equity in net earnings (losses) of investees (371,385) (272,666) (98,719) 36.2 % Income tax expense (467) (445) (22) 4.9 % Equity in net earnings (losses) of investees 1,597 (20,461) 22,058 nm Net loss $ (370,255) $ (293,572) $ (76,683) 26.1 % nm – not meaningful 64 Table of Contents Medical Office and Life Science Portfolio: Comparable Properties (1) All Properties As of December 31, As of December 31, 2024 2023 2024 2023 Total properties 87 87 98 102 Total square feet 6,976 6,971 7,953 8,610 Occupancy 90.2 % 92.5 % 82.2 % 86.9 % Year Ended December 31, Comparable (1) Non-Comparable Properties Results Properties Results Consolidated Properties Results 2024 2023 $ Change % Change 2024 2023 2024 2023 $ Change % Change Rental income $ 194,274 $ 192,972 $ 1,302 0.7 % $ 19,046 $ 27,558 $ 213,320 $ 220,530 $ (7,210) (3.3) % Property operating expenses (82,870) (81,119) 1,751 2.2 % (14,767) (16,845) (97,637) (97,964) (327) (0.3) % NOI $ 111,404 $ 111,853 $ (449) (0.4) % $ 4,279 $ 10,713 $ 115,683 $ 122,566 $ (6,883) (5.6) % (1) Consists of medical office and life science properties that we have owned and which have been in service continuously since January 1, 2023; excludes properties classified as held for sale or out of service undergoing redevelopment, if any, and properties owned by unconsolidated joint ventures in each of which we own an equity interest.
Biggest changeFor the Year Ended December 31, 2025 2024 $ Change % Change NOI by segment: SHOP $ 139,256 $ 106,060 $ 33,196 31.3 % Medical Office and Life Science Portfolio 108,130 115,683 (7,553) (6.5) % All Other 31,127 37,142 (6,015) (16.2) % Total NOI 278,513 258,885 19,628 7.6 % Depreciation and amortization 261,923 284,957 (23,034) (8.1) % General and administrative 45,502 26,518 18,984 71.6 % Acquisition and certain other transaction related costs 10,356 2,510 7,846 nm Impairment of assets 165,702 70,734 94,968 134.3 % Gain (loss) on sale of properties 117,730 (18,938) 136,668 nm Gain on insurance recoveries 7,522 — 7,522 100.0 % Interest and other income 5,839 8,950 (3,111) (34.8) % Interest expense (204,498) (235,239) 30,741 (13.1) % Loss on modification or early extinguishment of debt (42,526) (324) (42,202) nm Loss before income taxes and equity in net earnings of investees (320,903) (371,385) 50,482 (13.6) % Income tax expense (1,743) (467) (1,276) nm Equity in net earnings of investees 36,760 1,597 35,163 nm Net loss $ (285,886) $ (370,255) $ 84,369 (22.8) % nm – not meaningful 66 Table of Contents SHOP: Comparable Properties (1) All Properties As of and For the Year Ended December 31, As of and For the Year Ended December 31, 2025 2024 2025 2024 Total properties 184 184 212 232 Number of units 21,201 21,201 23,217 24,978 Occupancy 81.9 % 80.9 % 81.0 % 79.3 % Average monthly rate (2) $ 5,404 $ 5,137 $ 5,455 $ 5,193 Year Ended December 31, Comparable (1) Non-Comparable Properties Results Properties Results Consolidated Properties Results 2025 2024 $ Change % Change 2025 2024 2025 2024 $ Change % Change Residents fees and services $ 1,141,276 $ 1,073,753 $ 67,523 6.3 % $ 171,379 $ 170,636 $ 1,312,655 $ 1,244,389 $ 68,266 5.5 % Property operating expenses (994,135) (949,223) $ 44,912 4.7 % (179,264) (189,106) (1,173,399) (1,138,329) $ 35,070 3.1 % NOI $ 147,141 $ 124,530 $ 22,611 18.2 % $ (7,885) $ (18,470) $ 139,256 $ 106,060 $ 33,196 31.3 % (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.
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.
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.
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.
Nonetheless, we own, and our managers, operators and tenants 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.
Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our buildings obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our tenants or managers and their ability to pay rent or returns to us.
Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our buildings obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our managers or tenants and their ability to pay rent or returns to us.
For further information about these and other such relationships and related person transactions, see Notes 3, 6, 7 and 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference and our other filings with the SEC including our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2024.
For further information about these and other such relationships and related person transactions, see Notes 3, 6, 7 and 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference and our other filings with the SEC including our definitive Proxy Statement for our 2026 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2025.
Impairment of assets. For information about our asset impairment charges, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. (Loss) gain on sale of properties.
For information about our asset impairment charges, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Gain (loss) on sale of properties.
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.” For a comparison of consolidated results for the year ended December 31, 2023 compared to the year ended December 31, 2022, see Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Our definition of NOI and our reconciliation of net income (loss) to NOI and a description of why we believe NOI is an appropriate supplemental measure are included below under the heading “Non-GAAP Financial Measures.” For a comparison of consolidated results for the year ended December 31, 2024 compared to the year ended December 31, 2023, see Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.
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.
The pandemic further accelerated this trend because of stronger consumer preference for off-campus care in more convenient locations. Costs within the industry continue to be in focus with health system operating margins being under pressure in recent years, which is, while moderating, a theme that may continue in 2025.
The pandemic further accelerated this trend because of stronger consumer preference for off-campus care in more convenient locations. Costs within the industry continue to be in focus with health system operating margins being under pressure in recent years, which is, while moderating, a theme that may continue in 2026.
Funding in the past three years has been increasingly concentrated on companies located in the top three markets of Boston, San Francisco and San Diego with more stringent requirements. New construction of life science properties hit record levels in 2023 across major markets, and the construction pipeline, while decreasing, remains elevated into 2025.
Funding in the past three years has been increasingly concentrated on companies located in the top three markets of Boston, San Francisco and San Diego with more stringent requirements. New construction of life science properties hit record levels in 2024 across major markets, and the construction pipeline, while decreasing, remains elevated into 2025.
We allocate a portion of the purchase price to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in 76 Table of Contents place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases.
We allocate a portion of the purchase price to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases.
In the life science sector, particularly with properties that provide laboratory or medical manufacturing space, over the years there has been significant capital invested across the bio-medical research space, driving a large increase in demand for laboratory and research space. Venture capital funding significantly declined in 2022, 2023 and 2024.
In the life science sector, particularly with properties that provide laboratory or medical manufacturing space, over the years there has been significant capital invested across the bio-medical research space, driving a large increase in demand for laboratory and research space. Venture capital funding significantly declined in 2023, 2024 and 2025.
Impact of Government Reimbursement For the year ended December 31, 2024, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments.
Impact of Government Reimbursement For the year ended December 31, 2025, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 (dollars and square feet in thousands, except average monthly rate): Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the year ended December 31, 2024 to the year ended December 31, 2023.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 (dollars and square feet in thousands, except average monthly rate): Unless otherwise indicated, references in this section to changes or comparisons of results, income or expenses refer to comparisons of the results for the year ended December 31, 2025 to the year ended December 31, 2024.
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.
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.
Net operating income. The change in NOI reflects the net changes in residents fees and services and property operating expenses described above.
The change in NOI reflects the net changes in residents fees and services and property operating expenses described above.
For the year ended December 31, 2024, acquisition and certain other transaction related costs primarily represent termination and other fees as a result of our transition of 13 communities to an existing third party manager.
For the year ended December 31, 2024, acquisition and certain other transaction related costs primarily represent termination and other fees as a result of our transition of 13 communities to an existing third party manager. Impairment of assets.
Non-GAAP Financial Measures (dollars in thousands, except per share amounts) We present certain "non-GAAP financial measures" within the meaning of applicable SEC rules, including FFO, Normalized FFO and NOI for the years ended December 31, 2024 and 2023.
Non-GAAP Financial Measures (dollars in thousands, except per share amounts) We present certain "non-GAAP financial measures" within the meaning of applicable SEC rules, including FFO, Normalized FFO and NOI for the years ended December 31, 2025 and 2024.
Our calculations of FFO and Normalized FFO for the years ended December 31, 2024 and 2023 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our consolidated financial statements, to FFO and Normalized FFO appear in the following table.
Our calculations of FFO and Normalized FFO for the years ended December 31, 2025 and 2024 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our consolidated financial statements, to FFO and Normalized FFO appear in the following table.
(2) Includes capital expenditures to replace obsolete building components that extend the useful life of existing assets or other improvements to increase the marketability of the property. (3) Includes capital expenditures that reposition a property or result in new sources of revenue.
(2) Includes capital expenditures to replace obsolete building components that extend the useful life of existing assets or other improvements to increase the marketability of the property. (3) Includes capital expenditures that reposition a property or result in change of use or new sources of revenue.
We cannot currently predict the type and magnitude of the potential Medicare and Medicaid policy changes, rate changes or other changes that may be implemented, but we believe that some of these changes will cause these government funded healthcare programs to fail to provide rates that match our and our tenants' increasing expenses and that such changes may be material and adverse to our future financial results.
We cannot currently predict the type and magnitude of the potential Medicare and Medicaid policy changes, rate changes or other changes that may be implemented, but we believe that some of these changes will cause these government funded 79 Table of Contents healthcare programs to fail to provide rates that match our and our tenants' increasing expenses and that such changes may be material and adverse to our future financial results.
Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2023. Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above.
Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2024. Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above.
We determine the fair value of each property using methods similar to those used by independent appraisers, which may involve estimated cash flows that are based on a number of factors, including capitalization rates and discount rates, among others.
We determine the fair value of each property using methods similar to those used by independent appraisers, which may involve estimated cash flows that are based on a number of factors, 78 Table of Contents including capitalization rates and discount rates, among others.
In calculating Normalized FFO, we adjust for the items shown below including similar adjustments for our unconsolidated joint ventures, if any. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders.
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.
A subsidiary guarantor's guarantee of our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, as applicable, and all other obligations of such subsidiary guarantor under the indenture governing the notes will automatically terminate and such subsidiary guarantor will automatically be released from all of its obligations under such subsidiary guarantee and the indenture under certain circumstances, including on or after the date (a) the notes have an investment grade rating from two rating agencies and one of such investment grade ratings is a mid-BBB investment grade rating and (b) no default or event of default has occurred and is continuing under the indenture.
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.
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.
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 74 Table of Contents sales as a result.
Other real estate companies and REITs may calculate NOI differently than we do. 69 Table of Contents The calculation of NOI by reportable segment is included above in this Item 7. The following table includes the reconciliation of net loss to NOI for the years ended December 31, 2024 and 2023.
Other real estate companies and REITs may calculate NOI differently than we do. 71 Table of Contents The calculation of NOI by reportable segment is included above in this Item 7. The following table includes the reconciliation of net loss to NOI for the years ended December 31, 2025 and 2024.
This has been met by softening demand from tenants and resulted in rising vacancy rates across the major life science markets. We believe that the primary market for senior living services is individuals age 80 and older. According to U.S.
This has been met by softening demand from tenants and resulted in rising vacancy rates across the major life science markets. 64 Table of Contents We believe that the primary market for senior living services is individuals age 80 and older. According to U.S.
During the year ended December 31, 2024, we paid quarterly cash distributions to our shareholders totaling approximately $9.6 million using cash on hand. For further information regarding the distributions we paid during 2024, see Note 5 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
During the year ended December 31, 2025, we paid quarterly cash distributions to our shareholders totaling approximately $9,661 using cash on hand. For further information regarding the distributions we paid during 2025, see Note 5 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
(2) Consists of properties that we have owned and which have been reported in the same segment and leased to the same operator continuously since January 1, 2023; excludes properties classified as held for sale, if any.
(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 and planned dispositions, if any.
Depreciation and amortization expense increased primarily due to the purchase of capital improvements at certain of our properties, partially offset by certain depreciable assets becoming fully depreciated and dispositions since January 1, 2023. General and administrative expense .
Depreciation and amortization expense decreased primarily due to dispositions since January 1, 2024 and certain depreciable assets becoming fully depreciated, partially offset by the purchase of capital improvements at certain of our properties. General and administrative expense .
For further information regarding 72 Table of Contents our dispositions, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. On February 14, 2025, AlerisLife paid an aggregate cash dividend of $50.0 million to its stockholders. Our pro rata share of this cash dividend was $17.0 million.
For further information regarding our dispositions, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. On February 14, 2025, AlerisLife paid an aggregate cash dividend of $50,000 to its stockholders. Our pro rata share of this cash dividend was $17,000.
We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, uncertainties surrounding interest rates and inflation, volatility in the public debt and equity markets, global geopolitical hostilities and tensions, economic uncertainties, labor market conditions and changes in real estate utilization.
We 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.
Our non-guarantor subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on our 9.75% senior notes due 2025 or our 4.375% senior notes due 2031 or the respective guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments.
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.
Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows.
Similarly, our 75 Table of Contents ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows.
Our remaining $1.1 billion of senior unsecured notes do not have the benefit of any guarantees.
Our remaining $1,100,000 of senior unsecured notes do not have the benefit of any guarantees.
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, 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.
OVERVIEW We are a REIT organized under Maryland law that primarily owns medical office and life science properties, senior living communities and other healthcare related properties throughout the United States. As of December 31, 2024, we owned 367 properties located in 36 states and Washington, D.C., including 32 properties classified as held for sale and three closed senior living communities.
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 December 31, 2025, we owned 298 properties located in 33 states and Washington, D.C., including 13 properties classified as held for sale.
As of December 31, 2024, all $380.0 million of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint, several and unsecured basis, by all of our subsidiaries except certain excluded subsidiaries.
As of December 31, 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 rights of holders of our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031, as applicable, to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of those subsidiaries' creditors and any preferred equity holders.
The rights of holders of our 4.375% senior notes due 2031 77 Table of Contents 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.
According to NIC, annual inventory growth was 1.2% across all markets during the fourth quarter of 2024. Additionally, annual absorption was 3.7% for the fourth quarter of 2024, according to NIC. We expect improving market fundamentals and constrained supply to continue to result in increased occupancy at our senior living communities over the next 12 to 24 months.
According to NIC, annual inventory growth was 0.5% across primary and secondary markets during the fourth quarter of 2025. Additionally, annual absorption was 2.8% for the fourth quarter of 2025, according to NIC. We expect improving market fundamentals and constrained supply to continue to result in increased occupancy at our senior living communities over the next 12 to 24 months.
As of December 31, 2024, we had $144.6 million of cash and cash equivalents. We typically use cash balances, net proceeds from offerings of securities, debt issuances or dispositions of assets and cash flows from our operations to fund our operations, debt repayments, distributions, acquisitions, investments, capital expenditures and other general business purposes.
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.
For further information regarding our investment in AlerisLife, see Notes 2 and 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Interest and other income.
For further information regarding this gain on insurance recoveries, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Interest and other income.
Our $940.5 million in outstanding senior secured notes due 2026 are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by certain of our subsidiaries that own 95 properties, or the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries.
These notes are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by certain of our subsidiaries that own 36 properties, or 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.
The terms of the management agreements with the other third party managers are generally as follows: the other third party managers will receive a management fee equal to 5% to 6% of the gross revenues realized at the applicable senior living communities plus reimbursement for direct costs and expenses related to such communities.
The terms of the management agreements with our third party managers are generally as follows: the managers will receive a management fee equal to 5% to 6% of the gross revenues realized at the applicable senior living communities.
For further information regarding these laws and regulations, and possible legislative and regulatory changes, see "Business—Government Regulation and Reimbursement" in Part I, Item 1 of this Annual Report on Form 10-K. 63 Table of Contents RESULTS OF OPERATIONS (dollars and square feet in thousands, unless otherwise noted) The following table summarizes the results of operations of each of our segments for the years ended December 31, 2024 and 2023: For the Year Ended December 31, 2024 2023 Revenues: Medical Office and Life Science Portfolio $ 213,320 $ 220,530 SHOP 1,244,389 1,151,908 All Other 37,718 37,870 Total revenues $ 1,495,427 $ 1,410,308 Net loss: Medical Office and Life Science Portfolio $ (66,668) $ (12,183) SHOP (89,807) (99,620) All Other (213,780) (181,769) Net loss $ (370,255) $ (293,572) The following sections analyze and discuss the results of operations of each of our segments for the periods presented.
For further information regarding these laws and regulations, and possible legislative and regulatory changes, see "Business—Government Regulation and Reimbursement" in Part I, Item 1 of this Annual Report on Form 10-K. 65 Table of Contents RESULTS OF OPERATIONS (dollars and square feet in thousands, unless otherwise noted) The following table summarizes the results of operations of each of our segments for the years ended December 31, 2025 and 2024: For the Year Ended December 31, 2025 2024 Revenues: SHOP $ 1,312,655 $ 1,244,389 Medical Office and Life Science Portfolio 193,809 213,320 All Other 31,389 37,718 Total revenues $ 1,537,853 $ 1,495,427 Net loss: SHOP $ (110,000) $ (89,807) Medical Office and Life Science Portfolio (48,633) (66,668) All Other (127,253) (213,780) Net loss $ (285,886) $ (370,255) The following sections analyze and discuss the results of operations of each of our segments for the periods presented.
These notes and the guarantees provided by the Collateral Guarantors are secured by a first priority lien and security interest in each of the collateral properties and 100% of the equity interests in each of the Collateral Guarantors.
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.
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.
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.
On January 16, 2025, we declared a quarterly distribution to common shareholders of record on January 27, 2025 of $0.01 per share, or approximately $2.4 million in aggregate. We paid this distribution on February 20, 2025, using cash on hand.
On January 15, 2026, we declared a quarterly distribution to common shareholders of record on January 26, 2026 of $0.01 per share, or approximately $2,421 in aggregate. We paid this distribution on February 19, 2026, using cash on hand.
Pursuant to the Master Management Agreement, Five Star receives a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for its direct costs and expenses related to such communities.
Pursuant to the Master Management Agreement, Five Star received a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for its direct costs and expenses related to such communities. Our third party managers manage all 212 of our senior living communities as of December 31, 2025.
Our future cash flows from operating activities will depend primarily upon: • our ability to receive rents from our tenants; • our ability to maintain or increase the occupancy of, and the rates at, our properties; • 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. 70 Table of Contents The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our Consolidated Statements of Cash Flows included in Part IV, Item 15 of this Annual Report on Form 10-K (dollars in thousands): Year Ended December 31, 2024 2023 Cash and cash equivalents and restricted cash at beginning of period $ 246,961 $ 688,302 Net cash provided by (used in): Operating activities 112,223 10,483 Investing activities (187,019) (202,111) Financing activities (22,311) (249,713) Cash and cash equivalents and restricted cash at end of period $ 149,854 $ 246,961 We have a significant number of unencumbered properties in our SHOP segment.
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. 72 Table of Contents The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our Consolidated Statements of Cash Flows included in Part IV, Item 15 of this Annual Report on Form 10-K: Year Ended December 31, 2025 2024 Cash and cash equivalents and restricted cash at beginning of period $ 149,854 $ 246,961 Net cash provided by (used in): Operating activities (19,618) 112,223 Investing activities 483,572 (187,019) Financing activities (492,009) (22,311) Cash and cash equivalents and restricted cash at end of period $ 121,799 $ 149,854 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 senior living communities monthly, quarterly or annually.
For further information regarding the terms of the Master Management Agreement and of the management agreements with the other third party managers and our other business arrangements with Five Star, see Note 6 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, and for more information about our dealings and relationships with Five Star generally, and the risks which may arise as a result of these related person transactions, see “Risk Factors—Risks Related to Our Relationships with RMR and AlerisLife (including Five Star)” in Part I, Item 1A of this Annual Report on Form 10-K, “Related Person Transactions” below and Note 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
For further information regarding the terms of the management agreements with our managers and of the terminated Master Management Agreement and our other prior business arrangements with Five Star, see Note 6 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, and for more information about our dealings and relationships with Five Star generally, see “Related Person Transactions” below and Note 8 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
For further information regarding our outstanding debt, see Note 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
For information regarding (loss) gain on sale of properties, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Gain on insurance recoveries.
The debt secured by the properties included in the LSMD JV in which we own a 20% equity interest is guaranteed by this joint venture and is non-recourse to us. Supplemental Guarantor Information On May 28, 2020, we issued $1.0 billion of our 9.75% senior notes due 2025.
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.
The loan agreements governing the aggregate $620.0 million secured debt financing related to the Seaport JV contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.
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.
All Other (1) : Comparable Properties (2) All Properties As of and For the Year Ended December 31, As of and For the Year Ended December 31, 2024 2023 2024 2023 Total properties: Triple net leased senior living communities 8 8 27 27 Wellness centers 10 10 10 10 Rent coverage: Other triple net leased senior living communities (3) 1.95 x 1.65 x 1.85 x 1.49 x Wellness centers (3) 2.56 x 2.64 x 2.56 x 2.64 x Year Ended December 31, Comparable (2) Non-Comparable Properties Results Properties Results Consolidated Properties Results 2024 2023 $ Change % Change 2024 2023 2024 2023 $ Change % Change Rental income $ 27,304 $ 27,195 $ 109 0.4 % $ 10,414 $ 10,675 $ 37,718 $ 37,870 $ (152) (0.4) % Property operating expenses (529) (1,093) (564) (51.6) % (47) (3) (576) (1,096) (520) (47.4) % NOI $ 26,775 $ 26,102 $ 673 2.6 % $ 10,367 $ 10,672 $ 37,142 $ 36,774 $ 368 1.0 % (1) All Other operations consist of all of our other operations, including certain senior living communities and wellness centers that are leased to third party operators, which segment we do not consider to be sufficiently material to constitute a separate reportable segment, and any other income or expenses that are not attributable to a specific reportable segment.
All Other (1) : Comparable Properties (2) All Properties As of and For the Year Ended December 31, As of and For the Year Ended December 31, 2025 2024 2025 2024 Total properties: Triple net leased senior living communities 8 8 9 27 Wellness centers 10 10 10 10 Rent coverage: Other triple net leased senior living communities (3) 1.73 x 1.95 x 1.73 x 1.85 x Wellness centers (3) 2.96 x 2.11 x 2.96 x 2.56 x Year Ended December 31, Comparable (2) Non-Comparable Properties Results Properties Results Consolidated Properties Results 2025 2024 $ Change % Change 2025 2024 2025 2024 $ Change % Change Rental income $ 29,652 $ 27,304 $ 2,348 8.6 % $ 1,737 $ 10,414 $ 31,389 $ 37,718 $ (6,329) (16.8) % Property operating expenses (259) (529) (270) (51.0) % (3) (47) (262) (576) (314) (54.5) % NOI $ 29,393 $ 26,775 $ 2,618 9.8 % $ 1,734 $ 10,367 $ 31,127 $ 37,142 $ (6,015) (16.2) % (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.
We operate in, and report financial information for, the following two segments: Medical Office and Life Science Portfolio and SHOP. Our Medical Office and Life Science Portfolio segment primarily consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties primarily leased to biotech laboratories and other similar tenants.
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.
The activity for our non-comparable properties primarily reflects the 13 communities transitioned to an existing third party manager during 2024 and six properties classified as held for sale as of December 31, 2024. Property operating expenses.
The activity for our non-comparable properties reflects the 13 communities classified as held for sale as of December 31, 2025, 10 communities transitioned to an existing third party manager during 2024, four communities that are not stabilized for both periods presented and one closed community. Property operating expenses.
Net operating income. The change in NOI reflects the net changes in rental income and property operating expenses described above. Consolidated: References to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended December 31, 2024, compared to the year ended December 31, 2023. Depreciation and amortization expense.
Consolidated: References to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended December 31, 2025, compared to the year ended December 31, 2024. Depreciation and amortization expense.
The net proceeds from this mortgage loan were approximately $117.1 million after deducting estimated closing costs, and in June 2024 we used $60.0 million of the net proceeds to partially redeem our then outstanding $500.0 million 9.75% senior notes due 2025.
This mortgage loan matures in June 2034 and requires that interest be paid at an annual rate of 6.864%. The net proceeds from this mortgage loan were approximately $117,100 after deducting estimated closing costs, and in June 2024 we used $60,000 of the net proceeds to partially redeem our then outstanding $500,000 9.75% senior notes due 2025.
For the Year Ended December 31, 2024 2023 Reconciliation of Net Loss to NOI: Net loss $ (370,255) $ (293,572) Equity in net (earnings) losses of investees (1,597) 20,461 Income tax expense 467 445 Loss before income taxes and equity in net earnings (losses) of investees (371,385) (272,666) Loss on modification or early extinguishment of debt 324 2,468 Interest expense 235,239 191,775 Interest and other income (8,950) (15,536) Gains on equity securities, net — (8,126) Loss (gain) on sale of properties 18,938 (1,205) Impairment of assets 70,734 18,380 Acquisition and certain other transaction related costs 2,510 10,853 General and administrative 26,518 26,131 Depreciation and amortization 284,957 284,083 Total NOI $ 258,885 $ 236,157 Medical Office and Life Science Portfolio NOI $ 115,683 $ 122,566 SHOP NOI 106,060 76,817 All Other NOI 37,142 36,774 Total NOI $ 258,885 $ 236,157 LIQUIDITY AND CAPITAL RESOURCES Our principal sources of cash to meet operating and capital expenses, pay our debt service obligations and make distributions to our shareholders are the operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities and proceeds from the disposition of certain properties.
For the Year Ended December 31, 2025 2024 Reconciliation of Net Loss to NOI: Net loss $ (285,886) $ (370,255) Equity in net earnings of investees (36,760) (1,597) Income tax expense 1,743 467 Loss before income taxes and equity in net earnings of investees (320,903) (371,385) Loss on modification or early extinguishment of debt 42,526 324 Interest expense 204,498 235,239 Interest and other income (5,839) (8,950) (Gain) loss on sale of properties (117,730) 18,938 Impairment of assets 165,702 70,734 Acquisition and certain other transaction related costs 10,356 2,510 General and administrative 45,502 26,518 Depreciation and amortization 261,923 284,957 Total NOI $ 278,513 $ 258,885 SHOP NOI $ 139,256 $ 106,060 Medical Office and Life Science Portfolio NOI 108,130 115,683 All Other NOI 31,127 37,142 Total NOI $ 278,513 $ 258,885 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.
(2) Represents gross book value of real estate assets divided by number of rentable square feet or living units, as applicable, at December 31, 2024. (3) We calculate our NOI on a consolidated basis and by reportable segment.
(2) Represents gross book value of real estate assets divided by number of living units or rentable square feet, as applicable, at December 31, 2025. (3) We calculate our 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”.
During the years ended December 31, 2024, 2023 and 2022, we recognized $0.0 million, $1.6 million and $4.3 million, respectively, in interest and other income in our consolidated statements of comprehensive income (loss) related to funds received under the CARES Act and ARPA. 77 Table of Contents Seasonality Senior housing operations have historically reflected modest seasonality.
During the years ended December 31, 2025, 2024 and 2023, we recognized $0, $0 and $1,581, respectively, in interest and other income in our consolidated statements of comprehensive income (loss) related to funds received under the Coronavirus Aid, Relief, and Economic Security Act and the American Rescue Plan Act. Seasonality Senior housing operations have historically reflected modest seasonality.
GENERAL INDUSTRY TRENDS The healthcare industry remains one of the most resilient commercial real estate sectors, in part due to the scale of the U.S. healthcare market, which collectively represents approximately 18% of the U.S. GDP, according to CMS.
Annualized rental income includes estimated percentage rents and straight line rent adjustments and excludes lease value amortization. GENERAL INDUSTRY TRENDS The healthcare industry remains one of the most resilient commercial real estate sectors, in part due to the scale of the U.S. healthcare market, which collectively represents approximately 18% of the U.S. GDP, according to CMS.
The increase in property operating expenses at our comparable properties is primarily due to increased insurance costs recorded in 2024 and increases in cleaning costs and utility expenses, partially offset by a decrease in real estate taxes due to refunds realized and a reduction in assessed values as a result of successful appeals during 2024.
The increase in property operating expenses at our comparable properties was primarily due to increases in utility expenses, HVAC expenses and snow removal costs, partially offset by a decrease in insurance costs, real estate taxes due to lower assessed values as a result of successful tax appeals at certain of our properties, as well as other direct costs.
Our definition of NOI and our reconciliation of net income (loss) to NOI are included below under the heading “Non-GAAP Financial Measures”. 58 Table of Contents (4) Medical office and life science property occupancy data is as of December 31, 2024 and 2023 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.
(4) Medical office and life science property occupancy data is as of December 31, 2025 and 2024 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.
In January 2024, Standard & Poor's upgraded our 9.75% senior notes due 2025 rating from CCC+ to B, our 4.375% senior notes due 2031 rating from CCC+ to B and our senior unsecured debt rating from CCC- to CCC, and Standard & Poor's also assigned a B rating to our senior secured notes due 2026.
In September 2025, Standard & Poor's 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-.
(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.
Properties are included in same property once stabilized for the full period in both comparison periods presented. 68 Table of Contents (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.
The management agreements with the other third party managers also generally provide us with the right to terminate the management agreements for communities that do not earn 70% to 80% of the target EBITDA for such communities, after an agreed upon stabilized period. 61 Table of Contents The following table presents a summary of the other third party managers as of December 31, 2024: Manager Location Number of Communities Number of Units Charter Senior Living FL/MD/TN/VA/IL/WI 30 1,759 IntegraCare Senior Living PA 2 146 Life Care Services DE 3 517 Navion Senior Solutions SC 5 238 Northstar Senior Living AZ/CA 7 418 Oaks-Caravita Senior Care GA/SC 26 1,415 Oaks Senior Living GA 3 264 Omega Senior Living NE 1 69 Phoenix Senior Living AL/AR/KY/MO/NC/SC 23 1,457 RMR TX 1 169 Stellar Senior Living CO/TX/WY 10 1,094 Total (1) 111 7,546 (1) Excludes three closed senior living communities.
The management agreements also generally provide us with the right to terminate the management agreements for communities that do not earn 70% to 85% of the target EBITDA for such communities, after an agreed upon stabilized period. 60 Table of Contents The following table presents a summary of our managers as of December 31, 2025: Manager Location Number of Communities Number of Units Discovery Senior Living Various (7 States) 44 5,095 Sinceri Senior Living Various (11 States) 38 7,261 Charter Senior Living FL/IL/MD/TN/VA/WI 30 1,759 Phoenix Senior Living AL/AR/KY/MO/NC/SC 26 1,822 Tutera Senior Living IL/IN/KS/TN 18 1,967 Oaks-Caravita Senior Care (1) GA/SC 16 890 Stellar Senior Living AZ/CO/NM/TX 14 2,015 Northstar Senior Living AZ/CA 7 418 Navion Senior Solutions SC 5 238 WellQuest Living CA/NV 5 798 Oaks Senior Living GA 3 264 IntegraCare Senior Living PA 2 146 Ciel Senior Living NY 1 306 Omega Senior Living NE 1 69 RMR TX 1 169 Total (2) 211 23,217 (1) Includes 13 communities with 669 units classified as held for sale as of December 31, 2025.
The initial terms of the management agreements with the other third party managers are generally five years, subject to automatic extensions of successive terms of two years each unless earlier terminated or timely notice of nonrenewal is delivered.
The managers can also earn a construction supervision fee ranging between 3% and 5% of construction costs. The initial terms of the management agreements are generally five to ten years, subject to automatic extensions of successive terms of two years each unless earlier terminated or timely notice of nonrenewal is delivered.
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.
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.
This table also provides a comparison of distributions to shareholders, FFO and Normalized FFO and net income (loss) per share for these periods. 68 Table of Contents For the Year Ended December 31, 2024 2023 Net loss $ (370,255) $ (293,572) Depreciation and amortization 284,957 284,083 Loss (gain) on sale of properties 18,938 (1,205) Impairment of assets 70,734 18,380 Gains on equity securities, net — (8,126) Equity in net (earnings) losses of investees (1,597) 20,461 Share of FFO from unconsolidated joint ventures 9,006 7,738 Adjustments to reflect our share of FFO attributable to an equity method investment 13,807 (1,586) FFO 25,590 26,173 Acquisition and certain other transaction related costs 2,510 10,853 Loss on modification or early extinguishment of debt 324 2,468 Adjustments to reflect our share of Normalized FFO attributable to an equity method investment (8,755) 1,576 Normalized FFO $ 19,669 $ 41,070 Weighted average common shares outstanding (basic and diluted) 239,535 238,836 Per common share data (basic and diluted): Net loss $ (1.55) $ (1.23) FFO $ 0.11 $ 0.11 Normalized FFO $ 0.08 $ 0.17 Distributions declared $ 0.04 $ 0.04 Property Net Operating Income (NOI) We calculate NOI as shown below.
This table also provides a comparison of distributions to shareholders, FFO and Normalized FFO and net income (loss) per share for these periods. 70 Table of Contents For the Year Ended December 31, 2025 2024 Net loss $ (285,886) $ (370,255) Depreciation and amortization 261,923 284,957 (Gain) loss on sale of properties (117,730) 18,938 Impairment of assets 165,702 70,734 Equity in net earnings of investees (36,760) (1,597) Share of FFO from unconsolidated joint ventures 9,649 9,006 Adjustments to reflect our share of FFO attributable to an equity method investment 5,699 13,807 FFO 2,597 25,590 Incentive management fees (1) 17,905 — Acquisition and certain other transaction related costs 10,356 2,510 Gain on insurance recoveries (7,522) — Loss on modification or early extinguishment of debt 42,526 324 Adjustments to reflect our share of Normalized FFO attributable to an equity method investment (1,441) (8,755) Normalized FFO $ 64,421 $ 19,669 Weighted average common shares outstanding (basic and diluted) 240,286 239,535 Per common share data (basic and diluted): Net loss $ (1.19) $ (1.55) FFO $ 0.01 $ 0.11 Normalized FFO $ 0.27 $ 0.08 Distributions declared $ 0.04 $ 0.04 (1) Incentive management fees are estimated and accrued during the applicable measurement period.
As of December 31, 2024, we believe we were in compliance with all of the covenants under our senior notes indentures and their supplements and our other debt obligations.
As of December 31, 2025, we believe we were in compliance with all of the covenants under our debt agreements.
We also report “all other” operations, which consists of triple net leased wellness centers and senior living communities that are leased to third party operators from which we receive rents. Medical Office and Life Science Portfolio As of December 31, 2024, we owned 98 medical office and life science properties located in 24 states and Washington, D.C.
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.
In January 2024, Moody's upgraded our 9.75% senior notes due 2025 and our 4.375% senior notes due 2031 ratings from Ca to Caa3 and our senior unsecured debt rating from C to Ca, and Moody's also assigned a Caa2 rating to our senior secured notes due 2026.
In August 2025, 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.
For the years ended December 31, 2024, 2023 and 2022, we recorded $2.2 million, $0.0 million and $2.1 million, respectively, of costs that we incurred related to retention, transition, termination and other costs to acquisition and certain other transaction related costs in our consolidated statements of comprehensive income (loss).
For the year ended December 31, 2025, we recorded $10.4 million of these costs to acquisition and certain other transaction related costs in our consolidated statements of comprehensive income (loss).
Debt Covenants Our principal debt obligations at December 31, 2024 were: (1) $2.0 billion outstanding principal amount of senior unsecured notes; (2) $940.5 million outstanding principal amount of senior secured notes; and (3) $127.5 million aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by nine properties.
Debt Covenants Our principal debt obligations at December 31, 2025 were: (1) $1,600,000 outstanding principal amount of senior unsecured notes; (2) $375,000 outstanding principal amount of senior secured notes; (3) $328,500 aggregate principal amount of fixed rate mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by 22 properties; and (4) $140,000 principal amount of a floating rate mortgage loan (excluding discounts, premiums and net debt issuance costs) secured by 14 properties.
During 2023, we tendered all of our AlerisLife common shares at $1.31 per share. 71 Table of Contents The following is a summary of capital expenditures, development, redevelopment and other activities for the periods presented (dollars in thousands): Year Ended December 31, 2024 2023 Medical Office and Life Science Portfolio capital expenditures: Lease related costs (1) $ 21,289 $ 38,070 Building improvements (2) 6,002 12,984 Recurring capital expenditures - Medical Office and Life Science Portfolio 27,291 51,054 SHOP fixed assets and capital improvements 93,043 100,981 Wellness centers lease related costs (1) 20,618 9,721 Total recurring capital expenditures $ 140,952 $ 161,756 Development, redevelopment and other activities - Medical Office and Life Science Portfolio (3) $ 3,012 $ 9,244 Development, redevelopment and other activities - SHOP (3) 46,558 82,207 Total development, redevelopment and other activities $ 49,570 $ 91,451 Capital expenditures by segment: Medical Office and Life Science Portfolio $ 30,303 $ 60,298 SHOP 139,601 183,188 All Other - wellness centers 20,618 9,721 Total capital expenditures $ 190,522 $ 253,207 (1) Includes capital expenditures to improve tenants' space or amounts paid directly to tenants to improve their space and other leasing related costs, such as brokerage commissions and tenant inducements.
These changes were partially offset by $8,500 of contributions made to the Seaport JV in 2025. 73 Table of Contents The following is a summary of capital expenditures, development, redevelopment and other activities for the periods presented: Year Ended December 31, 2025 2024 SHOP fixed assets and capital improvements $ 96,940 $ 93,043 Medical Office and Life Science Portfolio capital expenditures: Lease related costs (1) 26,706 21,289 Building improvements (2) 7,802 6,002 Recurring capital expenditures - Medical Office and Life Science Portfolio 34,508 27,291 Wellness centers lease related costs (1) — 20,618 Total recurring capital expenditures $ 131,448 $ 140,952 Development, redevelopment and other activities - SHOP (3) $ 14,194 $ 46,558 Development, redevelopment and other activities - Medical Office and Life Science Portfolio (3) 308 3,012 Total development, redevelopment and other activities $ 14,502 $ 49,570 Capital expenditures by segment: SHOP $ 111,134 $ 139,601 Medical Office and Life Science Portfolio 34,816 30,303 All Other - wellness centers — 20,618 Total capital expenditures $ 145,950 $ 190,522 (1) Includes capital expenditures to improve tenants' space or amounts paid directly to tenants to improve their space and other leasing related costs, such as brokerage commissions and tenant inducements.
In November 2024, we redeemed $60.0 million of our outstanding 9.75% senior unsecured notes due 2025 using cash on hand.
In November 2024, we redeemed $60,000 of our outstanding 9.75% senior unsecured notes due 2025 using cash on hand. In March 2025, we executed a $140,000 floating rate mortgage loan secured by 14 SHOP communities.
See "—Our Financing Liquidity and Resources" above for information regarding recent changes to our issuer credit rating and senior debt ratings. 74 Table of Contents Our senior unsecured notes indentures and their supplements contain cross default provisions to any other debts of more than $20.0 million ($50.0 million or more in the case of our senior notes indentures and supplements entered in February 2016, February 2018, June 2020, February 2021 and December 2023).
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 and February 2021).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe may in the future enter into hedge arrangements or derivative contracts from time to time to mitigate our exposure to changes in interest rates. 78 Table of Contents Fixed Rate Debt At December 31, 2024, our outstanding fixed rate debt included the following (dollars in thousands): Annual Annual Principal Interest Interest Interest Debt Balance (1) Rate (1) Expense Maturity Payments Due Senior unsecured notes 380,000 9.750 % 37,050 2025 Semi-Annually Senior secured notes (2) 940,534 0.000 % — 2026 At Maturity Senior unsecured notes 500,000 4.750 % 23,750 2028 Semi-Annually Senior unsecured notes 500,000 4.375 % 21,875 2031 Semi-Annually Senior unsecured notes 350,000 5.625 % 19,688 2042 Quarterly Senior unsecured notes 250,000 6.250 % 15,625 2046 Quarterly Mortgage note 120,000 6.864 % 8,237 2034 Monthly Mortgage note 7,464 6.444 % 481 2043 Monthly $ 3,047,998 $ 126,706 (1) The principal balances and interest rates are the amounts stated in the applicable contracts.
Biggest changeFixed Rate Debt (dollars in thousands) At December 31, 2025, our outstanding fixed rate debt consisted of the following: Annual Annual Principal Interest Interest Interest Debt Balance (1) Rate (1) Expense Maturity Payments Due Senior secured notes $ 375,000 7.250 % $ 27,188 October 2030 Semi-Annually Senior unsecured notes 500,000 4.750 % 23,750 February 2028 Semi-Annually Senior unsecured notes 500,000 4.375 % 21,875 March 2031 Semi-Annually Senior unsecured notes 350,000 5.625 % 19,688 August 2042 Quarterly Senior unsecured notes 250,000 6.250 % 15,625 February 2046 Quarterly Mortgage note 63,499 6.572 % 4,231 June 2030 Monthly Mortgage note 120,000 6.864 % 8,351 June 2034 Monthly Mortgage note 108,873 6.220 % 6,866 May 2035 Monthly Mortgage note 30,284 6.360 % 1,953 June 2035 Monthly Mortgage note 5,847 6.444 % 382 July 2043 Monthly $ 2,303,503 $ 129,909 (1) The principal balances and annual interest rates are the amounts stated in the applicable contracts.
In the past, we have repurchased and retired some of our outstanding debt and we may do so again in the future. These prepayment rights and our ability to repurchase and retire outstanding debt may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity.
In the past, we have repurchased and retired some of our outstanding debt and we may do so again in the future. These prepayment rights and our ability to repurchase and retire outstanding debt may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity. Item 8.
In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed certain of these debts. This table does not include obligations under finance leases.
In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed certain of these debts. This table does not include obligations under finance leases. 82 Table of Contents No principal repayments are due under our senior notes until maturity.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives, including fixed rate debt, and employing derivative instruments, including interest rate caps, to limit our exposure to increasing interest rates.
Because these debts require interest to be paid at a fixed rate, changes in market interest rates during the term of these debts will not affect our interest obligations.
Our mortgage loans maturing in June 2030 and July 2043 require monthly principal and interest payments. Because these debts require interest to be paid at a fixed rate, changes in market interest rates during the term of these debts will not affect our interest obligations.
Floating Rate Debt At December 31, 2024 and February 21, 2025, we did not have any floating rate debt obligations. Item 8. Financial Statements and Supplementary Data. The information required by this item is included in Part IV, Item 15 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Financial Statements and Supplementary Data. The information required by this item is included in Part IV, Item 15 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.
If these debts were refinanced at interest rates which are one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately $21.1 million, which amount excludes our $940.5 million of our senior secured notes due 2026 as no interest is due until maturity.
If these debts were refinanced at interest rates which are one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately $19,285. Changes in market interest rates would also affect the fair value of our fixed rate debt obligations.
Changes in market interest rates also would affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt. In response to significant increases in inflation, the U.S.
Increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt. Interest rates continue to remain elevated despite reductions in 2025 by the U.S. Federal Reserve. There are uncertainties surrounding interest rates and they may remain at current levels, decrease or increase.
Federal Reserve raised interest rates multiple times during 2022 and 2023. The U.S. Federal Reserve cut interest rates three times in late 2024, and it may further reduce interest rates, increase interest rates or maintain current interest rates. Our debt agreements contain provisions that allow us to make repayments earlier than the stated maturity date.
Our debt agreements contain provisions that allow us to make repayments earlier than the stated maturity date.
Removed
Other than as described below, we do not currently foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.
Added
Other than as described below, we do not currently expect any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future. 80 Table of Contents Floating Rate Debt (dollars in thousands) As of December 31, 2025, our outstanding floating rate debt consisted of the following: Debt Principal Balance Annual Interest Rate (1) Annual Interest Expense Maturity Date Interest Payments Due Floating rate mortgage loan $ 140,000 6.19% $ 8,786 March 2028 Monthly Floating rate secured revolving credit facility — — — June 2029 Monthly $ 140,000 $ 8,786 (1) The annual interest rate is the rate stated in the applicable contract, as adjusted by our interest rate cap, if applicable.
Removed
(2) These notes require no cash interest to accrue prior to maturity and will accrete at a rate of 11.25% per annum compounded semiannually on January 15 and July 15 of each year, such that the accreted value will equal the principal amount at maturity.
Added
Our $140,000 floating rate mortgage loan is subject to two one-year extension options and requires that interest be paid at SOFR plus a premium of 2.50%. We are vulnerable to changes in the U.S. dollar based on short term interest rates, specifically SOFR.
Removed
We have a one-time option to extend the maturity date of these notes by one year, to January 15, 2027, subject to satisfaction of certain conditions and payment of an extension fee. No principal repayments are due under our senior notes until maturity.
Added
In connection with this mortgage loan, to hedge our exposure to risks related to changes in SOFR and pursuant to the terms of the applicable loan agreement, we have purchased an interest rate cap with a SOFR strike rate equal to 4.50%. At December 31, 2025, we had no amounts outstanding under our revolving credit facility.
Removed
Our $120.0 million mortgage note due 2034 is a fixed rate, interest only loan and our mortgage note due 2043 requires principal and interest payments through maturity pursuant to an amortization schedule.
Added
No principal repayments are required under our revolving credit facility prior to maturity and repayments may be made and redrawn subject to conditions at any time without penalty. Borrowings under our revolving credit facility are in U.S. dollars and require interest to be paid at a rate of SOFR plus a premium.
Added
Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically SOFR. In addition, upon renewal or refinancing of these obligations, we are vulnerable to increases in interest rate premiums, including increases in the cost of replacement interest rate caps, due to market conditions and our perceived credit risk.
Added
The following table presents the approximate impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at December 31, 2025, including the impact of our interest rate cap: Impact of an Increase in Interest Rates Total Interest Annual Earnings Interest Rate (1) Outstanding Debt Expense Per Year Per Share Impact (2) As of December 31, 2025 6.19% $ 140,000 $ 8,786 $ (0.04) One percentage point increase (3) 7.00% $ 140,000 $ 9,936 $ (0.04) 81 Table of Contents (1) Based on SOFR plus a premium, which was 250 basis points per annum for our $140,000 floating rate mortgage loan, as of December 31, 2025.
Added
(2) Based on the diluted weighted average common shares outstanding for the year ended December 31, 2025. (3) A one percentage point increase in interest rates would be capped at 7.00% for our $140,000 floating rate mortgage loan as a result of our 4.50% interest rate cap purchased for this debt.
Added
However, a one percentage point increase in the interest rate of our floating rate debt to 7.19% at December 31, 2025 would result in total floating rate interest expense per year of $10,203 and a decrease in annual earnings per share of $0.04.
Added
The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at December 31, 2025 if we were fully drawn on our revolving credit facility: Impact of an Increase in Interest Rates Total Interest Annual Earnings Interest Rate (1) Outstanding Debt (2) Expense Per Year Per Share Impact (3) As of December 31, 2025 6.42% $ 290,000 $ 18,623 $ (0.08) One percentage point increase (4) 6.82% $ 290,000 $ 19,776 $ (0.08) (1) Based on SOFR plus a premium, which was 250 basis points per annum for both our revolving credit facility and our $140,000 floating rate mortgage loan, as of December 31, 2025.
Added
Interest rate is weighted based on amounts outstanding. (2) Represents the maximum amount available under our revolving credit facility and our $140,000 floating rate mortgage loan. (3) Based on the diluted weighted average common shares outstanding for the year ended December 31, 2025.
Added
(4) A one percentage point increase in interest rates would be capped at 7.00% for our $140,000 floating rate mortgage loan as a result of our 4.50% interest rate cap purchased for this debt.
Added
However, a one percentage point increase in the interest rate of our floating rate debt to 7.44% at December 31, 2025 would result in total floating rate interest expense per year of $21,563 and a decrease in annual earnings per share of $0.09.
Added
The foregoing table shows the impact of an immediate one percentage point change in floating interest rates, including the impact of our interest rate cap.
Added
Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts of any floating rate debt we may incur and the impact, if any, of interest rate caps we may purchase. Generally, if interest rates were to change gradually over time, the impact would be spread over time.
Added
Our mortgage loan maturing in June 2034 requires monthly interest payments and no principal payment is due until maturity, while our mortgage loans maturing in March 2028, May 2035 and June 2035 require monthly interest payments and no principal payment is due for a specified amount of time.

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