BKD 10-K & 10-Q changes, risk factors and insider trading

Costs to seniors associated with independent living, assisted living, and memory care communities are not generally reimbursable under government reimbursement programs such as Medicare and Medicaid. For the year ended December 31, 2024,2025, we generated 93.8%93.9% of our consolidated resident fee revenue from private pay residents. Only seniors with income or assets meeting or exceeding the comparable median in the regions where our communities are located typically can afford to pay our monthly resident fees. Economic downturns, increased inflation, softness in the housing market, higher levels of unemployment among resident family members, lower levels of consumer confidence, stock market volatility, and changes in demographics could adversely affect the ability of seniors to afford our resident fees. If we are unable to retain and attract seniors with sufficient income, assets, or other resources required to pay the fees associated with independent living, assisted living, and memory care services and other service offerings, our occupancy, revenues, results of operations, and cash flow could decline. We have recently made the annual rate adjustment effective January 1, 20252026 for our in-place private pay residents. The average increase was again higher than our typical annual rate adjustment in order to help offset our increased costs as a result of laborgeneral pressures,cost high inflation,inflation and elevatedinvestments interestin rates.our communities and other corporate initiatives (including information systems and other strategic projects). Due to the competitive environment for new residents in our industry, our rate adjustments could slow our occupancy recovery progressgrowth or result in a decrease in occupancy in our communities. Any use of promotional or other discounting would offset a portion of such rate adjustments in our RevPAR and RevPOR results. In addition, the rate adjustment may not be sufficient to offset our increased costs. The increase we implemented in January 20252026 (and any rate increases that we implement in future years) could also result in a higher amount of attrition among our residents, which could negatively impact our occupancy, revenues, results of operationsoperations, and cash flows.

The senior living industry is highly competitive. We compete with numerous organizations, including not-for-profit entities, that offer similar communities and services, community-based service programs, retirement communities, convalescent centers, and other senior living providers. In general, regulatory and other barriers to competitive entry in the independent living, assisted living, and memory care sectors of the senior living industry are not substantial. In the decade prior to start of the COVID-19 pandemic in 2020, the industry historically attracted investments resulting in continuous increases in construction and development of new senior housing supply, and if this development were to return to pre-pandemic levels, it could result in increased competition. In addition, the COVID-19 pandemic resulted in additional occupancy pressure for our industry, and industry data shows that nearly all markets had fallen to record low occupancy by the first quarter of 2021. While the industry recovers occupancy, certain competitors may price aggressively in order to capture market share. Further, our competitors or other third parties may incorporate advanced technology, including artificial intelligence, into their business operations or services more quickly or more successfully than us, which could impair our ability to compete effectively. Such advances in technology and at-home services may also permit more seniors to age-in-place at home and could have an impact on the demand for senior living communities. We compete for residents on the basis of resident and family member satisfaction, reputation, location, service offerings, our communities’ physical characteristics, dining, and other amenities, among other things. Consequently, we may encounter competition that could limit our ability to attract and retain residents and associates, raise or maintain resident fees, and expand our business, which could have a material adverse effect on our occupancy, revenues, results of operations, and cash flow.

Failure to maintain the security and functionality of our information systems, to prevent a cybersecurity attack or other unauthorized access to our information systems, or to comply with applicable privacyprivacy, security, and consumer protection laws, including HIPAA, could expose us to a number of adverse consequences, many of which are not insurable, including: (i) interruptions to our business, (ii) the theft, destruction, loss, misappropriation, or release of sensitive information, including proprietary business information and personally identifiable information of our residents and associates, (iii) significant remediation costs; (iv) negative publicity which could damage our reputation and our relationships with our residents, associates, and referral sources, (v) litigation and potential liability under privacy, security, and consumer protection laws, including HIPAA, or other applicable laws, rules, or regulations, and (vi) government inquiries which may result in sanctions and other criminal or civil fines or penalties. Any of the foregoing could materially and adversely impact our revenues, results of operations, and cash flow.

As of December 31, 2024,2025, we had outstanding $3.7$3.9 billion principal amount of mortgage financing, $369.4 million of 3.50% convertible senior notes due 2029, $23.3 million of 2.00% convertible senior notes due 2026, $9.4and $60.6 million principal amount of the senior amortizing notes component of tangible equity units, and $75.3 million letters of credit. If we are unable to extend or refinance our indebtedness prior to scheduled maturity dates, our liquidity and financial condition could be adversely impacted. Even if we are able to extend or refinance our maturing debt or credit or letter of credit facilities, the terms of the new financing may not be as favorable to us as the terms of the existing financing.

The amount of mortgage financing available for our communities is generally dependent on their appraised values and performance. Decreases in the appraised values of our communities, including due to adverse changes in real estate market conditions, or their performance, has resulted, and could continue to result, in available mortgage refinancing amounts that are less than the communities' maturing indebtedness. In addition, our inability to satisfy underwriting criteria for individual communities may limit our access to our historical lending sources for such communities, including Fannie Mae and Freddie Mac. Due to lower operating performance for certain of our communities resultingin fromprior the COVID-19 pandemic, during 2021 and 2022years, we sought and obtained non-agency mortgage financings to partially refinance maturing Freddie Mac and Fannie Mae indebtedness. We cannot provide assurance that such non-agency mortgage financing will continue to be available as an alternative to Fannie Mae and Freddie Mac financing. We have completed the refinancing of all of our mortgage debt maturities due in 2025.2026. Our inability to obtain refinancing proceeds sufficient to cover 20262027 and later maturing indebtedness could adversely impact our liquidity, and may cause us to seek additional alternative sources of financing, which may be less attractive or unavailable. There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

Certain of our debt and lease documents contain restrictions and financial covenants, such as those requiring us to maintain prescribed minimum liquidity,liquidity and net worth, and stockholders' equityworth levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. Net worth is generally calculated as stockholders' equity, as calculated in accordance with generally accepted accounting principles in the United States ("GAAP"), and in certain circumstances, reduced by intangible assets or liabilities and/or increased by accumulated depreciation and amortization, and/or further adjusted for certain other specified adjustments. The debt service and lease coverage ratios are generally calculated as revenues less operating expenses, including an implied management fee and a reserve for capital expenditures, divided by the debt (principal and interest) or lease payment. These covenants include a requirement contained in certain of our long-term debt documents for us to maintain liquidity of at least $130.0 million at each quarter-end determination date. As of December 31, 2024,2025, our liquidity was $389.3$377.7 million.

Our variable-rate debt obligations expose us to interest rate risk. In the normal course of business, we enter into interest rate agreements with major financial institutions to manage our risk above certain interest rates on variable ratevariable-rate debt. These agreements only limit our exposure to increases in interest rates above certain levels and generally must be renewed every one to three years. Increases in prevailing interest rates will increase our payment obligations on our existing variable-rate obligations to the extent they are unhedged and may increase our future borrowing and hedging costs, which would negatively impact our results of operations and cash flow.

Our success depends on our ability to attract and retain qualified management and other associates who are responsible for the day-to-day operations of each of our communities. We compete with various healthcare service providers, other senior living providers, and hospitality and food services companies in attracting and retaining qualified associates. If we fail to attract and retain qualified associates, our ability to conduct our business operations effectively, our overall operating results, and cash flow could be harmed. In addition, if we fail to adequately onboard or appropriately train our associates, it could affect our ability to attract and retain such associates or adversely affect resident and family satisfaction. In recent years, we experienced pressures associated with the intensely competitive labor environment, including increased associate turnover and difficulty in filling open positions timely. Continued increased competition for, or a shortage of, nurses or other associates, general labor market conditions, low levels of unemployment, or general inflationary pressures, have required and may require that we enhance our pay and benefits package to compete effectively for such associates. In addition, we have experienced and may continue to experience wage pressures due to minimum wage and minimum salary threshold increases mandated by federal, state, and local laws. Third-party staffing agencies from which we source contract labor have increased the rates they charge which has resulted in, and may further result in, increases in the cost of contract labor. If we are unable to fill open positions timely, our reliance on premium labor may continue or increase. Increases in wages and any further increased use of premium labor would result in higher operating costs, and we may not be able to offset the added costs by increasing the rates we charge to our residents or our service charges, which would negatively impact our results of operations and cash flow.

Various factors, including general economic conditions and the spread of contagious illnesses,conditions, could adversely affect our financial performance and other aspects of our business.

General economic conditions, such as inflation, the consumer price index, commodity costs, fuel and other energy costs, competition in the labor market, costs of salaries, wages, benefits and insurance, interest rates, and tax rates, and tariffs affect our facility operating, facility lease, general and administrative and other expenses, and we have no control or limited ability to control such factors. Current global economic conditions and uncertainties, including geopolitical tensions, conflicts, potential recessions or economic downturns, uncertaintyother surroundinggeneral apolitical new presidential administration,developments, the potential for failures or realignments of financial institutions, and the related impact on available credit may affect us and our business partners, landlords, counterparties, and residents or prospective residents in an adverse manner including, but not limited to, reducing access to liquid funds or credit, increasing the cost of credit, limiting our ability to manage interest rate risk, increasing costs and expenses to us, increasing the risk that certain of our business partners, landlords, or counterparties would be unable to fulfill their obligations to us, and other impacts which we are unable to fully anticipate. In addition to the impact of the COVID-19 pandemic on our occupancy, seasonal contagious illnesses such as cold and flu, which typically more severely impact seniors than the general population may negatively affect our occupancy. Severe cold and flu season, or other contagious disease in the markets in which we operate could result in a regulatory ban on admissions, decreased occupancy, and otherwise adversely affect our business.

In the future, we may attempt to increase our capital resources by offering additional debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes, convertible securities, series of preferred shares, or shares of our common stock. Upon liquidation, holders of our debt securities and preferred stock, and lenders with respect to other borrowings, would receive a distribution of our available assets prior to the holders of our common stock. We may issue all of the shares of our common stock that are authorized but unissued (and not otherwise reserved for issuance under our stock incentive or purchase plans,plans outstanding warrants,or outstanding convertible senior notes, or outstanding tangible equity unitsnotes) without any action or approval by our stockholders. Additional equity offerings may dilute the economic and voting rights of our existing stockholders or reduce the market price of our common stock, or both. Shares of our preferred stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings. Thus, holders of our common stock bear the risk of our future offerings reducing the market price of our common stock and diluting their shareholdings in us.

For information regarding our business, including our strategy and recent developments regarding macroeconomic conditions, community acquisitionsacquisitions, dispositions, and communitymortgage lease amendments,financings, refer to "Item 1. Business." Refer to Note 3 in "Item 8. Financial Statements and Supplementary Data" for more information about acquisitions, dispositions, and other significant leasing transactions.

•RevPAR, or average monthly senior housing resident fee revenue per available unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding revenue for private duty services provided to seniors living outside of our communities and entrance fee amortization), divided by the weighted average number of available units in the corresponding portfolio for the period, divided by the number of months in the period. We measure RevPAR at the consolidated level, as well as at the segment level with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments. Our management uses RevPAR for decision making and components of executive compensation, and we believe the measure provides useful information to investors, because the measure is an indicator of senior housing resident fee revenue performance that reflects the impact of both senior housing occupancy and rate.

•RevPOR, or average monthly senior housing resident fee revenue per occupied unit, is defined as resident fee revenue for the corresponding portfolio for the period (excluding revenue for private duty services provided to seniors living outside of our communities and entrance fee amortization), divided by the weighted average number of occupied units in the corresponding portfolio for the period, divided by the number of months in the period. We measure RevPOR at the consolidated level, as well as at the segment level with respect to our Independent Living, Assisted Living and Memory Care, and CCRCs segments. Our management uses RevPOR for decision making, and we believe the measure provides useful information to investors, because it reflects the average amount of senior housing resident fee revenue we derive from an occupied unit per month without factoring occupancy rates. RevPOR is a significant driver of our senior housing revenue performance.

The increase in resident fees was primarily attributable to a 5.8%5.1% increase in same community RevPAR, comprised of a 4.1% increase in same community RevPOR and a 120210 basis point increase in same community weighted average occupancy.occupancy and a 2.3% increase in same community RevPOR. The increase was partially offset by the disposition of communitiescommunities, primarily though lease terminations, since the beginning of the prior yearyear, which resulted in $55.2$56.9 million less in resident fees during the year ended December 31, 2025 compared to the prior year.

The increase in facility operating expense was primarily attributable to a 4.4%4.7% increase in same community facility operating expense, primarily resulting from broad inflationary pressure, an additional day of expense due to the leap year, an increaseincreases in wage rates, utilities expense, estimated group health insurance expense, anand increase in property repair expense primarily as a result of severe weather events, an increase in information technology costs,repairs and anmaintenance increase in marketing expense compared to the prior year, partially offset by a decrease in the use of premium labor, primarily contract labor.expense. The increase was partially offset by the disposition of communitiescommunities, primarily though lease terminations, since the beginning of the prior year, which resulted in $48.0$49.2 million less in facility operating expense during the year ended December 31, 20242025 compared to the prior year.

The following table summarizes the operating results and data of our three senior housing segments (Independent Living, Assisted Living and Memory Care, and CCRCs) on a combined basis for the years ended December 31, 20242025 and 20232024 including operating results and data on a same community basis. The same community portfolio excludes 31 communities, including 29 communities (2,364 units) that we plan to sell during 2026. See management's discussion and analysis of the operating results on an individual segment basis on the following pages.

The following table summarizes the operating results and data for our Independent Living segment for the years ended December 31, 20242025 and 2023,2024, including operating results and data on a same community basis. All 68 of the communities in our Independent Living segment are included within our same community portfolio.

The increasedecrease in the segment's resident fees was primarily attributable to the disposition of communities, primarily though lease terminations, since the beginning of the prior year, which resulted in $26.7 million less in resident fees during the year ended December 31, 2025 compared to the prior year. The decrease was partially offset by an increase in the segment's same community RevPAR, comprised of a 4.7%3.2% increase in same community RevPOR and a 100170 basis point increase in same community weighted average occupancy. The increase in the segment's RevPOR was primarily the result of the current year annual rate increase. The increase in the segment's weighted average occupancy primarily reflects the impact of our execution on key initiatives to rebuild occupancy lost due to the COVID-19 pandemic.

The increasedecrease in the segment's facility operating expense was primarily attributable to broadthe inflationary pressure, an additional daydisposition of expensecommunities, dueprimarily tothough lease terminations, since the leapbeginning of the prior year, anwhich increaseresulted in estimated$18.9 insurancemillion expense, an increaseless in propertyfacility repairoperating expense primarilyduring asthe ayear resultended ofDecember severe31, weather events, increased wireless internet access provided for residents, and an increase in marketing expense2025 compared to the prior year. The decrease was partially offset by an increase in the segment's same community facility operating expense, primarily resulting from increases in wage rates, repairs and maintenance expense, utilities expense, and estimated group health insurance expense. The segment's same community facility operating expense for the year ended December 31, 2024 excludes $1.3$1.2 million of natural disaster expense.

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 4.4%2.3% increase in same community RevPOR and a 110220 basis point increase in same community weighted average occupancy. The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase. The increase in the segment's same community weighted average occupancy primarily reflects the impact of our execution on key initiatives to rebuild occupancy lost due to the COVID-19 pandemic. The increase in the segment's resident fees was partially offset by the disposition of communitiescommunities, primarily though lease terminations, since the beginning of the prior year, which resulted in $41.0$31.5 million less in resident fees during the year ended December 31, 20242025 compared to the prior year.

The increase in the segment's facility operating expense was primarily attributable to an increase in the segment's same community facility operating expenseexpense, primarilyincluding attributable to broad inflationary pressure, an additional day of expense due to the leap year, an increaseincreases in wage rates, estimated group health insurance expense, an increase in property repair expense primarily as a result of severe weather events, an increase in information technology costs,repairs and anmaintenance increaseexpense, inand marketingutilities expense compared to the prior year, partially offset by a decrease in the use of premium labor, primarily contract labor.expense. The increase in the segment's facility operating expense was partially offset by the disposition of communitiescommunities, primarily though lease terminations, since the beginning of the prior year, which resulted in $33.1$29.1 million less in facility operating expense during the year ended December 31, 20242025 compared to the prior year. The segment's same community facility operating expense for the year ended December 31, 2025 and 2024 excludes $5.3$1.2 million and $4.7 million, respectively, of natural disaster expense.

The increase in the segment's resident fees was primarily attributable to an increase in the segment's same community RevPAR, comprised of a 210290 basis point increase in same community weighted average occupancy and a 0.9% increase in same community RevPOR. The0.6% increase in the segment's same community weighted average occupancy primarily reflects the impact of our execution on key initiatives to rebuild occupancy lost due to the COVID-19 pandemic.RevPOR. The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase, and was partially offset by an occupancy mix shift to more independent living residents.and Additionally,assisted anliving increase in resident fees at a community whose operations in the prior year were significantly impacted by winter storm damageresidents and forlower whichskilled anursing repositioning project was completed in the prior year contributed to the increase in the segment’s resident fees. The increase in the segment's resident fees was partially offset by the disposition of communities since the beginning of the prior year, which resulted in $14.2 million less in resident fees during the year ended December 31, 2024 compared to the prior year.revenue.

Reimbursed Costs Incurred on Behalf of Managed Communities and Costs Incurred on Behalf of Managed Communities. The increasedecrease in reimbursed costs and costs incurred on behalf of managed communities was primarily attributable to an increase in community costs incurred as a result of broad inflationary pressure for communities managed in both periods, partially offset by terminations of management agreements subsequent to the beginning of the prior year.year, partially offset by an increase in community labor costs incurred for communities managed in both years.

General and Administrative Expense. The increase in general and administrative expense was primarily due to $9.3 million of organizational restructuring costs related to senior leadership changes and our efforts to reduce general and administrative expense, as we scaled our general and administrative costs in connection with community dispositions, and $8.0 million of transaction costs for stockholder relations advisory matters in the current year, partially offset by $7.0 million of legal expenses recognized in the prior year for certain pending putative class action litigation previously described in our SEC filings, representing the current estimate of our ultimate cost to resolve such litigation, net of estimated probable insurance recoveries.litigation. General and administrative expense includes transaction, legal, and organizational restructuring costs of $7.9$18.1 million and $3.9$7.9 million for the years ended December 31, 20242025 and 2023,2024, respectively. Transaction costs include those directly related to acquisition, disposition, financingfinancing, and leasing activity,activity and stockholder relations advisory matters, and are primarily comprised of legal, finance, consulting, professional fees, and other third-party costs. Legal costs include charges associated with putative class action litigation. Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance costs.

DepreciationInterest and Amortization.Expense. The increase in depreciation and amortizationinterest expense was primarily due to debt obtained to finance the completionacquisition of community36 renovations,communities apartmentpreviously upgrades,subject andto otheroperating majorleases buildingsubsequent infrastructure projects sinceto the beginning of the prior year.

Gain (Loss) on Debt Modification and Extinguishment, Net. The increase in loss on debt modification and extinguishment, net was primarily due to a $32.8 million loss on extinguishment of a financing obligation during the current year for the reacquisition of three communities previously subject to sale-leaseback transactions, partially offset by a $15.5 million loss on debt extinguishment in the currentprior year for the convertible notes issuance and exchange transactions. Refer to the "Convertible Senior Notes" section for additional information on the convertible notes issuance and exchange transactions.

Benefit (Provision) for Income Taxes. The difference between our effective tax rate for the years ended December 31, 20242025 and 20232024 was primarily due to ana increasedecrease in the tax expense resulting from the valuation allowance recorded against the benefit on operating losses. We recorded an aggregate deferred federal, state, and local tax benefit of $60.0 million for the year ended December 31, 2025, which was offset by an increase in the valuation allowance of $56.7 million. We recorded an aggregate deferred federal, state, and local tax benefit of $43.7 million for the year ended December 31, 2024, which was offset by an increase in the valuation allowance of $47.3 million. We recorded an aggregate deferred federal, state, and local tax benefit of $41.5 million for the year ended December 31, 2023, which was offset by an increase in the valuation allowance of $49.1 million.

The changeincrease in net cash provided by (used in) financingoperating activities was primarily attributable to a $560.1 millionan increase in debtresident proceedsfees comparedand toa the prior year, including $147.1$34.8 million ofdecrease proceedsin fromcash thefacility issuanceoperating oflease convertible notes,payments, partially offset by a $227.8 millionan increase in repaymentfacility ofoperating debt and financing lease obligationsexpense compared to the prior year.

The change in Adjusted Free Cash Flow was primarily attributable to a $29.8 million decrease in non-development capital expenditures, net and the increase in net cash provided by operatingfinancing activities was primarily attributable to a $152.4 million increase in debt proceeds compared to the prior year, partially offset by a $16.2$97.4 million decreaseincrease in propertyrepayment of debt and casualtyfinancing insurancelease proceedsobligations compared to the prior year.

As of December 31, 2024,2025, we had $1.6$1.2 billion of operating and financing lease obligations, and for the twelve months ending December 31, 2025,2026, we will be required to make approximately $240.0$191.6 million of cash lease payments in connection with our existing operating and financing leases (after giving effect to our planned acquisition transactions for 30 communities subsequent to December 31, 2024).leases.

As of December 31, 2024,2025, our current liabilities exceeded current assets by $66.8$14.0 million. Included in our current liabilities is $111.1$75.7 million of the current portion of operating and financing lease obligations, for which the associated right-of-use assets are excluded from current assets on our consolidated balance sheet.sheets. We currently estimate our historical principal sources of liquidity, primarily our cash flows from operations, together with cash balances on hand, and cash equivalents, andavailability marketableon securities,our secured credit facility, and proceeds from financings and refinancings of various assets will be sufficient to fund our liquidity needs for at least the next 12 months. We continue to focus on increasing our RevPAR, maintaining appropriate expense discipline, continuing to refinance or exercise available extension options for maturing debt, continuing to evaluate our capital structure and the state of debt and equity markets, and monetizing non-strategic or underperforming owned assets. There is no assurance that financing will continue to be available on terms consistent with our expectations or at all, or that our efforts will be successful in monetizing certain assets or exercising extension options.

As of December 31, 2025, the current portion of long-term debt was $77.5 million, which includes $23.3 million of our 2.00% convertible senior notes due October 15, 2026 and $19.6 million of mortgage notes payable secured by assets held for sale. We have completed the refinancing of all of our mortgage debt maturities due in 2025.2026. Our inability to obtain refinancing proceeds sufficient to cover 20262027 and later maturing indebtedness could adversely impact our liquidity, and may cause us to seek additional alternative sources of financing, which may be less attractive or unavailable. Shortfalls in cash flows from estimated operating results or other principal sources of liquidity may have an adverse impact on our ability to fund our planned capital expenditures or to fund investments to support our strategy. In order to continue some of these activities at historical or planned levels, we may incur additional indebtedness or lease financing to provide additional funding. There can be no assurance that any such additional financing will be available or on terms that are acceptable to us.

In the aggregate, we expect our full-year 20252026 non-development capital expenditures, net of anticipated lessor reimbursements and property and casualty insurance proceeds,reimbursements, to be approximately $175.0 million to 180.0$195.0 million. We anticipate that our 20252026 capital expenditures will be funded from cash on hand, cash equivalents, cash flows from operations, and reimbursements from lessors. As of December 31, 2024,2025, the average age of the buildings in our consolidated senior housing portfolio was approximately 2728 years. Our community-level non-development capital expenditures, net of lessor reimbursements, were $2,965 per unit in 2024, and our 2025 plans equate to approximately $3,000 per unit. To support our strategy and to protect the value of our community portfolio and ensure that our communities are in appropriate physical condition, over the intermediate term, we expect that our community-level non-development capital expenditures, net of lessor reimbursements, will be at annual levels in a similar range of recent and 20252026 projected per unit spend.

Over the longer term, we expect that we will also continue to invest in our development capital expenditures program through which we expand, reposition, and redevelop selected existing senior living communities where economically advantageous. We expect our full-year 2025 development capital expenditures to be funded from reimbursements from lessors.

As of December 31, 2024,2025, we had $4.1$4.3 billion of debt outstanding, at a weighted average interest rate of 5.15%.5.06%. As of such date, 88.4%,89.7%, or $3.6$3.9 billion, of our total debt obligations represented non-recourse property-level mortgage financings. As of December 31, 2024,2025, we had $3.0$3.3 billion of long-term fixed ratefixed-rate debt (including our $23.3 million principal amount of 2.00% convertible senior notes due 2026,2026 and our $369.4 million principal amount of 3.50% convertible senior notes due 2029, and our $9.4 million principal amount of the senior amortizing notes component of our tangible equity units2029), at a weighted average interest rate of 4.50%.4.70%.

As of December 31, 2024,2025, we had $1.1$1.0 billion of long-term variable ratevariable-rate debt, which is indexed to Secured Overnight Financing Rate ("SOFR") plus a weighted average margin of 244 basis points, at a weighted average interest rate of 6.89%.6.18%. Increases in prevailing interest rates as a result of inflation or other factors will increase our payment obligations on our variable-rate obligations to the extent they are unhedged and may increase our future borrowing and hedging costs. In the normal course of business, we enter into interest rate agreements with major financial institutions to manage our risk above certain interest rates on variable ratevariable-rate debt. Although we have interest rate cap or swap agreements in place for a majorityall of our $1.0 billion of outstanding long-term variable-rate debt,debt as of December 31, 2025, these agreements only limit our exposure to increases in interest rates above certain levels and generallyonly mustfor bethe renewedremaining every one to three years. Asterm of Decemberthe 31, 2024, our $1.1 billion of outstanding long-term variable rate debt is indexed to SOFR plus a weighted average margin of 241 basis points. As of such date, $1.0 billion, or 91%, of our long-term variable rate debt is subject to interest rate cap or swap agreements, and $0.1 billion of our long-term variable rate debt is not subject to anyexisting interest rate cap or swap agreements. For our SOFR interest rate cap and swap agreements as of December 31, 2024,2025, the weighted average fixed interest rate is 4.15%,4.25%, and the weighted average remaining term is 0.70.9 years. Many of our long-term variable ratevariable-rate debt instruments include provisions that obligate us to obtain additional interest rate cap agreements upon the maturity of the existing interest rate cap agreements.

The annual aggregate scheduled maturities (including recurring principal payments) of long-term debt outstanding as of December 31, 20242025 are as follows (in thousandsmillions).

(1)IncludesVariable rate maturities include the maturities of $326.1$357.8 million of mortgage debt for which we have the option to extend the maturitiesmaturity for onetwo additional terms of one year each subject to the satisfaction of certain conditions.

The Capped Call Transactions are separate transactions entered into by us with the Capped Call Counterparties and are not part of the terms of the 2026 Notes. The Capped Call Transactions had a cost of $15.9 million, which was paid on October 1, 2021 from the proceeds of the 2026 Notes. We account for Capped Call Transactions separately from the 2026 Notes and recognized the cost as a reduction of additional paid-in capital in the year ended December 31, 2021 as the Capped Call Transactions are indexed to our common stock. Subsequent to our convertible notes exchange transactions on October 3, 2024, the Capped Call Transactions remain outstanding with the terms unchanged and continue to cover the number of shares of our common stock that initially underlie the $230.0 million initial principal amount of 2026 Notes. Refer to Note 7 to the consolidated financial statements contained in "Item 8. Financial Statements and Supplementary Data" for additional information on the convertible senior notes transactions.

On September 30, 2024, we entered into privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with certain holders (the "Investors") of the 2026 Notes. On October 3, 2024, pursuant to the Exchange and Subscription Agreements, we issued $369.4 million aggregate principal amount of 3.50% convertible senior notes due 2029 (the "2029 Notes"). At closing, $219.4 million principal amount of the 2029 Notes were issued in exchange for $206.7 million principal amount of the 2026 Notes and $150.0 million principal amount of the 2029 Notes were issued for cash. As part of such transactions, $29.7 million principal amount of the 2029 Notes were issued in exchange for $28.0 million principal amount of the 2026 Notes in transactions with one holder and its affiliates whom beneficially owned more than 10% of the shares of the our common stock as of such date and at closing. The 2029 Notes were issued pursuant to, and are governed by, an Indenture (the “2029 Notes Indenture”), dated as of October 3, 2024 between EQ, as trustee and us. Following the closing, $23.3 million in aggregate principal amount of the 2026 Notes remain outstanding with the terms unchanged.

Our net cash proceeds from the exchange and issuance transactions, after subtracting fees, discounts and expenses, were $135.0 million. We intend to use the proceeds to fund acquisitions and for general corporate purposes.

After giving effect to our planned acquisition transactions for 30 leased communities subsequent to December 31, 2024, theThe leases relating to substantially all of our remaining leased communities are fixed ratefixed-rate leases with annual escalators that are fixed. We are responsible for all operating costs, including repairs,repairs and maintenance, property taxes, and insurance. As of December 31, 2024,2025, the weighted average remaining lease term of our operating and financing leases was 10.39.9 and 0.86.3 years, respectively. The lease terms generally provide for renewal or extension options, or in certain cases, purchase options. The existing lease maturities of our senior housing community leases as of December 31, 20242025 are as follows (without giving effect to future renewals or extension options).

The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions, and financial covenants, such as those requiring us to maintain prescribed minimum liquidity,liquidity and net worth, and stockholders' equityworth levels and lease coverage ratios. We are required to spend approximately $28.0$23.0 million in aggregate for the 24-month period ending December, 31, 20262027 for capital expenditures under certain of our community leases and approximately $125.0$116.0 million in aggregate thereafter under the initial lease terms of such leases. Our lease documents generally contain non-financial covenants, such as those requiring us to comply with Medicare or Medicaid provider requirements and maintain insurance coverage. Certain leases contain cure provisions, which generally allow us to post an additional lease security deposit if the required covenant is not met.

Certain of our long-term debt and lease documents contain restrictionsrestrictions, maintenance and capital expenditure obligations, and financial covenants, such as those requiring us to maintain prescribed minimum liquidity,liquidity and net worth, and stockholders' equityworth levels and debt service and lease coverage ratios, and requiring us not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. Net worth is generally calculated as stockholders' equity as calculated in accordance with GAAP, and in certain circumstances, reduced by intangible assets or liabilities and/or increased by accumulated depreciation and amortization, and/or further adjusted for certain other specified adjustments. The debt service and lease coverage ratios are generally calculated as revenues less operating expenses, including an implied management fee and a reserve for capital expenditures, divided by the debt (principal and interest) or lease payment. These covenants include a requirement contained in certain of our long-term debt documents for us to maintain liquidity of at least $130.0 million at each quarter-end determination date. As of December 31, 2024,2025, our liquidity was $389.3$377.7 million.

(1)Principal on long-term debt includes the maturities of $326.1$357.8 million of mortgage debt for which we have the option to extend the maturitiesmaturity for onetwo additional terms of one year each subject to the satisfaction of certain conditions.

We are the nation's premier operator of senior living communities, operating and managing 568541 communities in 41 states as of MarchJune 31,30, 2026, with the ability to serve approximately 51,00046,000 residents. We offer our residents access to a broad continuum of services across the most attractive sectors of the senior living industry. We operate and manage independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs"). As of MarchJune 31,30, 2026, we owned 363359 communities (32,87932,294 units), leased 176 communities (10,456 units), and managed 296 communities (4,293570 units).

Community DispositionsTransactions

We have continued executing on our ongoing capital recycling program through which we have exited non-strategic or underperforming owned assets or leases. Such activities completed during the threesix months ended MarchJune 31,30, 2026 included the sale of seven13 owned communities (3301,108 units) for proceeds of $22.1$147.4 million, net of transaction costs, and the disposal of two leased communities (152 units) through lease termination.terminations. For the six months ended June 30, 2026, we recognized a net gain on sale of assets of $49.4 million. Subsequent to MarchJune 31,30, 2026, we completed the sale of three owned communities (545228 units) for cash proceeds of $88$2.5 million, net of transaction costs.

Comparison of Three Months Ended MarchJune 31,30, 2026 and 2025

The following table summarizes our overall operating results for the three months ended MarchJune 31,30, 2026 and 2025.

The decrease in resident fees was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $93.1$106.4 million less in resident fees during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by a 5.5% increase in same community RevPAR, comprised of a 3.4%4.1% increase in same community RevPOR and a 170110 basis point increase in same community weighted average occupancy.

The decrease in facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $72.0$84.7 million less in facility operating expense during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by a 5.9%5.5% increase in same community facility operating expense primarily dueattributable to increases in wage rates, increases in estimated insurance expense, andmaintenance increases in utilitiesexpense, and maintenanceestimated expenseslosses associatedon withaccounts winter storm activity.receivable.

The decreaseincrease in net lossincome was primarily attributable to a $32.8$45.4 million lossgain on extinguishmentsale of acommunities financing obligation duringin the prior yearcurrent period for the reacquisition of three communities previously subject to sale-leaseback transactions and decreasesa decrease in depreciation and amortization expense and facility operating lease expense due to the disposition of communities since the beginning of the prior year period.

The following table summarizes the consolidated operating results and data of our three senior housing segments (Independent Living, Assisted Living and Memory Care, and CCRCs) for the three months ended MarchJune 31,30, 2026 and 2025, including operating results and data on a same community basis. The same community portfolio excludes 2320 communities, including 2216 communities that we sold subsequent to MarchJune 31,30, 2026 or that we plan to sell duringin 2026. See management's discussion and analysis of the operating results on an individual segment basis on the following pages.

The following table summarizes the operating results and data for our Independent Living segment for the three months ended MarchJune 31,30, 2026 and 2025, including operating results and data on a same community basis.

The decrease in the segment's resident fees was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $45.1$45.5 million less in resident fees during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by an increase in the segment's same community RevPAR, comprised of a 5.2%4.9% increase in same community RevPOR and a 16090 basis point increase in same community weighted average occupancy. The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase.

The decrease in the segment's facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $29.9$30.3 million less in facility operating expense during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by an increase in the segment's same community facility operating expense primarily resulting from increases in wage rates and increases inrates, estimated insurance expense.expense, maintenance expense, and estimated losses on accounts receivable.

The following table summarizes the operating results and data for our Assisted Living and Memory Care segment for the three months ended MarchJune 31,30, 2026 and 2025, including operating results and data on a same community basis.

The decrease in the segment's resident fees was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $39.7$44.2 million less in resident fees during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by an increase in the segment's same community RevPAR, comprised of a 3.2%3.9% increase in same community RevPOR and a 170120 basis point increase in same community weighted average occupancy. The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase.

The decrease in the segment's facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $34.1$39.3 million less in facility operating expense during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by an increase in the segment's same community facility operating expense primarily resulting from increases in wage rates, increases in estimated insurance expense, andmaintenance increases in utilitiesexpense, and maintenanceestimated expenseslosses associatedon withaccounts winter storm activity.receivable.

The following table summarizes the operating results and data for our CCRCs segment for the three months ended MarchJune 31,30, 2026 and 2025, including operating results and data on a same community basis.

The decrease in the segment's resident fees was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $8.3$16.7 million less in resident fees during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by an increase in the segment's same community RevPAR, comprised of a 3.1% increase in the segment's same community RevPOR and a 210 basis point increase in same community weighted average occupancy and a 1.3% increase in the segment's same community RevPOR.occupancy. The increase in the segment's same community RevPOR was primarily the result of the current year annual rate increase, partially offset by lower skilled nursing revenue and an occupancy mix shift to more independent living residents.

The decrease in the segment's facility operating expense was primarily attributable to the disposition of communities since the beginning of the prior year period, which resulted in $8.0$15.1 million less in facility operating expense during the three months ended MarchJune 31,30, 2026 compared to the prior year period. The decrease was partially offset by an increase in the segment's same community facility operating expense primarily resulting from increases in wage ratesrates, maintenance expense, and increasesestimated inlosses utilitieson andaccounts maintenance expenses associated with winter storm activity.receivable.

The following table summarizes other income and expense items in our operating results for the three months ended MarchJune 31,30, 2026 and 2025.

Reimbursed Costs Incurred on Behalf of Managed Communities and Costs Incurred on Behalf of Managed Communities. The increasedecrease in reimbursed costs and costs incurred on behalf of managed communities was primarily attributable to the termination of management agreements entered into since the beginning of the prior year period.

General and Administrative Expense. The decrease in general and administrative expense was primarily attributable to $5.1 million of transaction costs for stockholder relations advisory matters in the prior year period and our efforts to reduce general and administrative expense as we scaled our general and administrative costs in connection with community dispositions and $1.6 million of transaction costs for stockholder relations advisory matters in the prior year period.dispositions. General and administrative expense includes transaction, legal, and organizational restructuring costs of $0.8$4.5 million and $1.7$10.5 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Transaction costs include those directly related to acquisition, disposition, financing, and leasing activity and stockholder relations advisory matters, and are primarily comprised of legal, finance, consulting, professional fees, and other third-party costs. Legal costs include charges associated with putative class action litigation. Organizational restructuring costs include those related to our efforts to reduce general and administrative expense and our senior leadership changes, including severance costs.

Facility Operating Lease Expense. The decrease in facility operating lease expense was primarily dueattributable to the termination of community leases subsequent to the prior year period.

Depreciation and Amortization. The decrease in depreciation and amortization expense was primarily dueattributable to the disposition of communities since the beginning of the prior year period.

Asset Impairment. The increase in asset impairment was primarily dueattributable to changes in estimates of fair value for certain communities planned for disposition.

Loss (gain) on sale of communities, net. The increase in gain on sale of communities is drivenprimarily byattributable to the sale of sevensix communities for proceeds of $22.1$125.3 million, net of transaction costs in the three months ended MarchJune 31,30, 2026.

Interest expense. The decrease in interest expense was primarily dueattributable to the acquisition of 36 communities previously subject to financing leases subsequent to the beginning of the prior year period and an increase in the fair value of interest rate derivatives in the current period.period and a decrease in interest expense on long-term debt primarily as a result of decreases in variable interest rate indices.

GainThe (Loss)increase in net income was primarily attributable to a $49.4 million gain on Debtsale Modificationof andcommunities Extinguishment,in Net.the Thecurrent period, a decrease in loss on debt modificationdepreciation and extinguishment,amortization net was primarilyexpense due to the disposition of communities since the beginning of the prior year period, and a $32.8 million loss on extinguishment of a financing obligation during the prior year period for the reacquisition of three communities previously subject to sale-leaseback transactions.