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

InterestAn rates have risen substantially since 2022 and although interest rates moderated during 2024, they may rise in the future. Further, increasesincrease in interest rates could increase our interest costs for borrowings on our Revolving Credit Facility and any new debt we may incur. This increased cost could make the financing of any new investments more costly. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing. In addition, an increase in interest rates could negatively impact the access to and cost of financing available to third parties interested in purchasing assets we may make available for sale, thereby decreasing the amount they are willing to pay for those assets, and consequently limit our ability to reposition our portfolio promptly in response to changes in economic or other conditions.

Pandemics or epidemics,epidemics suchhave ashad COVID-19,and may in the future have a material adverse effect on our business, results of operations, cash flows and financial condition.

TheWe have in the past been negatively impacted by the COVID-19 pandemic has negatively impacted us and oura operations, and anotherfuture pandemic or epidemic maycould materially negatively impact us and our operations in the future.operations. For example, as a result of decreased occupancy and increased operating costs for our tenants and borrowers due to the COVID-19 pandemic, our tenants’ and borrowers’ ability to meet their obligations as they came due, including their obligation to make full and timely rental payments and debt service payments, respectively, to us was adversely impacted and may in the future be adversely impacted by pandemics or epidemics. Additionally, duewe tohave in the COVID-19 pandemic in some cases, we had to restructure our tenants’ long-term rent obligationspast and may in the future be required to restructure suchlong-term rent obligations in the future due to other pandemics or epidemics, which may not be on terms that are as favorable to us as those currently in place. Reduced or modified rental and debt service amounts could result in the determination that the full amounts of our investments are not recoverable, which could result in an impairment charge. Further, the operating results of our Senior Housing - Managed portfolio and our unconsolidated joint ventures have been impacted and may be negatively impacted by future pandemics or epidemics as well.epidemics. Prolonged deterioration in the operating results for these investments could result in the determination that the full amounts of our investments are not recoverable, which could result in an impairment charge.

The duration and extent of the effects of a future pandemic or epidemic, such as we experienced with the COVID-19 pandemic, on our operational and financial performance are uncertain and difficult to predict andand, in the event of a future pandemic or epidemic we may experience adverse impacts to our business, financial condition, results of operations and prospects.

Further, ourOur third-party operators are ultimately in control of the day-to-day business of the properties that they operate. We depend on these third parties to operate theseour properties in a manner that complies with applicable law and regulation, minimizes legal risk and maximizes the value of our investment. The failure by these third parties to operate theseour properties efficiently and effectively and adequately manage the related risks could adversely affect our business, financial condition and results of operations.

We operate in a highly competitive industry and face competition from other REITs, investment companies, private equity and hedge fund investors, sovereign funds, healthcare operators, lenders and other investors, some of whom are significantly larger than us and have greater resources and lower costs of capital than we do. This competition makes it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. Similarly, our properties face competition for patients and residents from other properties in the same market, which may affect our ability to attract and retain tenants or may reduce the rents we are able to charge. Additionally, changes in consumer preferences, such as favoring home health services over residing in a senior housing community, could increase competition for patients and residents. If we cannot identify and purchase a sufficient quantity of healthcare properties at favorable prices, finance acquisitions on commercially favorable terms, or attract and retain profitable tenants, our business, financial position or results of operations could be materially adversely affected.

Our tenants and borrowers depend on reimbursement from governmental and other third-party payor programs, and reimbursement rates from such payors may be reduced.reduced or delayed.

Many of our tenants and borrowers depend on third-party payors, including Medicare, Medicaid or private third-party payors, for the majority of their revenue. The reduction in reimbursement rates from third-party payors, including insurance companies and the Medicare and Medicaid programs, or other measures reducing reimbursements for services provided by our tenants and borrowers, may result in a reduction in our tenants’ and borrowers’ revenues and operating margins. In addition, reimbursement from private third-party payors may be reduced as a result of retroactive adjustment during claims settlement processes or as a result of post-payment audits. Furthermore, new laws and regulations could impose additional limitations on government and private payments to healthcare providers. For example, our tenants and borrowers may be affected by health reform initiatives that modify certain payment systems to encourage more cost-effective care and a reduction of inefficiencies and waste (e.g., the implementation of a voluntary bundled payment program and the creation of accountable care organizations). We cannot assure you that adequate reimbursement levels will continue to be available for the services provided by our tenants and borrowers. Although moderate reimbursement rate reductions may not affect our tenants’ or borrowers’ ability to meet their financial obligations to us, significant limits on reimbursement rates or on the services reimbursed or delays in reimbursement could have a material adverse effect on their business, financial position or results of operations, which could materially adversely affect their ability to meet their financial obligations to us.

As of December 31, 2024,2025, we had outstanding indebtedness of $2.4$2.6 billion, which consisted of $1.8$1.3 billion of Senior Notes (as defined below), $534.4an millionaggregate in$1.0 billion outstanding under the Term Loans (as defined below), $106.6and Term Loan Credit Agreement, $217.6 million outstanding under our Revolving Credit Facility and aggregate secured indebtedness to third parties of $46.1$44.0 million on certain of our properties, and we had $893.4$782.4 million available for borrowing under our Revolving Credit Facility. Our high level of indebtedness may have the following important consequences to us:

Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our future financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the international banking and capital markets. Our business may fail to generate sufficient cash flow from operations or future borrowings may be unavailable to us under our Revolving Credit Facility or from other sources in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs. If we are unable to meet our debt obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt. We may be unable to refinance any of our debt, including our Term Loans (asand definedTerm below)Loan Credit Agreement and any amounts outstanding under our Revolving Credit Facility, on commercially reasonable terms or at all. If we were unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, such as asset sales, equity issuances and/or negotiations with our lenders to restructure the applicable debt. Our Credit Agreement and the Senior Notes Indentures restrict, and market or business conditions may limit, our ability to take some or all of these actions. Any restructuring or refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.

Our debt agreements, including the agreement governing our 2027 Notes (as defined below), the Credit Agreement and the Term Loan Credit Agreement, contain various covenants that limit our ability and the ability of our subsidiaries to engage in various transactions including:

The agreement governing our 2027 Notes also restricts us from making certain investments. The indentures governing our 2026 Notes, our 2029 Notes and our 2031 Notes (each as defined below) contain certain of the above restrictions as well. These covenants limit our operational flexibility and could prevent us from taking advantage of business opportunities as they arise, growing our business or competing effectively. In addition, the Credit Agreement requires us to comply with specified financial covenants, which include a maximum total leverage ratio, a maximum secured debt leverage ratio, a minimum fixed charge coverage ratio, a maximum unsecured leverage ratio, a minimum tangible net worth requirement and a minimum unsecured interest coverage ratio. The indentures governing our 2026 Notes, our 2029 Notes and our 2031 Notes require us to comply with an unencumbered asset ratio, and the agreement governing our 2027 Notes requires us to comply with specified financial covenants, which include a maximum leverage ratio, a maximum secured debt leverage ratio, a maximum unsecured debt leverage ratio, a minimum fixed charge coverage ratio, a minimum net worth, a minimum unsecured interest coverage ratio and a minimum unencumbered debt yield ratio. Our ability to meet these requirements may be affected by events beyond our control, and we may not meet these requirements.

Concerns over economic recession, interest rate increases, policy priorities of the U.S. presidential administration, trade wars, labor shortages or inflation may contribute to increased volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability. For example, the conflicts between Russia and Ukraine and in the Middle East have led to disruption, instability and volatility in global markets and industries. Such conditions could impact real estate fundamentals and result in lower occupancy, lower rental rates, and declining values in our real estate portfolio and in the real estate collateral securing any indebtedness. As a result, the value of our property investments could decrease below the amounts paid for such investments, the value of real estate collateral securing any indebtedness could decrease below the outstanding principal amounts of such indebtedness, and revenues from our properties could decrease due to fewer and/or delinquent tenants or lower rental rates. This could materially adversely affect our revenues, results of operations and financial condition.

We are required under the Internal Revenue Code of 1986, as amended (the “Code”), to distribute at least 90% of our taxable income, determined without regard to the dividends-paid deduction and excluding any net capital gain, and the Operating Partnership (as defined below) is required to make distributions to us to allow us to satisfy the REIT distribution requirement. However, distributions may limit our ability to rely upon rental payments from our properties or subsequently acquired properties to finance investments, acquisitions or new developments.

The maximum income tax rate applicable to “qualified dividends” payable by non-REIT corporations to domestic stockholders taxed at individual rates is currently 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates.rates, unless they are attributable to dividends received by the REIT from other corporations that would otherwise be eligible for the reduced rate. Certain non-corporate domestic stockholders may deduct 20% of their dividends from REITs (excluding qualified dividend income and capital gains dividends). For such domestic stockholders in the top marginal tax bracket of 37%, the deduction for REIT dividends yields an effective income tax rate of 29.6% on REIT dividends, which is higher than the 20% tax rate on qualified dividend income paid by non-REIT “C” corporations. Although not adversely affecting the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends treated as qualified dividend income, which could adversely affect the value of the stock of REITs, including our common stock.

A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”). A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation (other than a REIT) of which a TRS directly or indirectly owns securities possessing more than 35% of the total voting power or total value of the outstanding securities of such corporation will automatically be treated as a TRS. Overall, no more than 20% (25%, commencing in 2026) of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. A domestic TRS will pay U.S. federal, state and local income tax at regular corporate rates on any income that it earns. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s length basis.

Our operations have been and are expected to continue to be impacted by economic and market conditions. Increases in interestoperating rates, labor shortages,expenses, inflation and increased volatility in public equity and fixed income markets have led to increased costs and limited the availability of capital.

InTo somethe cases,extent wethat our tenants, borrowers and Senior Housing - Managed portfolio have faced or will face the negative impacts of such conditions, they may havebe unable to restructuremeet or temporarily defer tenants’ long-term renttheir obligations and may not be able to do so on terms that are as favorable to us asor thoseexperience currentlya deterioration in place.operating Reducedresults. orIf modifiedour rentaltenants and debtborrowers servicedefault amountson these obligations, such defaults could result in the determination that the full amounts of our investments are not recoverable, which could result in an impairment charge. If our tenants and borrowers default on these obligations, such defaults could materially and adversely affect our results of operations and liquidity, in addition to resulting in potential impairment charges. Further, prolonged deterioration in the operating results for our investments in our Senior Housing - Managed portfolio could result in the determination that the full amounts of our investments are not recoverable, which could result in an impairment charge.

We regularly monitor the effects of economic and market conditionsconditions, as well as actions by national, state and local government administrations and regulatory agencies that affect healthcare policy and general market conditions, on our operations and financial position, as well as on the operations and financial position of our tenants and borrowers, in order to respond and adapt to the ongoing changes in our operating environment. See Part I, Item 1A, “Risk Factors” for additional discussion of these risks, as well as the uncertainties we and our tenants and borrowers may face as a result.

During the year ended December 31, 2024,2025, we acquired 11 Senior Housing - Managed communities, three of which were acquired through a consolidated joint venture in which we have a 95% equity interest, and acquired 24 units on the campus of one of our Senior Housing - Leased communities for aggregate consideration of $434.5 million, including acquisition costs. Additionally, during the year ended December 31, 2025, we purchased the operations of four Senior Housing - Managed communities andpreviously oneleased Seniorto Housingthe -tenant Leasedunder communitytriple-net operating leases for aggregate$19.7 consideration of $136.4 million, including acquisition costs.million. See Note 3, “Recent Real Estate Acquisitions (Consolidated),” in the Notes to Consolidated Financial Statements for additional information regarding these acquisitions.investments.

During the year ended December 31, 2024,2025, we completed the sale of 1714 skilled nursing/transitional care facilities and one behavioral health facility for aggregate consideration, net of closing costs, of $96.0$88.5 million. The net carrying value of the assets and liabilities of these facilities was $93.9$92.0 million, which resulted in an aggregate $2.1$3.5 million net gainloss on sale. We continue to evaluate additional assets for sale as part of our initiative to recycle capital and further improve our portfolio quality.

Revenue from resident fees and services is recorded monthly as services are provided and includes resident room and care charges, ancillary services charges and other resident charges. These charges are combined and accounted for as a single lease component.

We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. Under this method of accounting, our share of the investee’s earnings or losses is included in our consolidated statements of income (loss).income. The initial carrying value of the investment is based on the amount paid to purchase the joint venture interest. Differences between our cost basis and the basis reflected at the joint venture level are generally amortized over the lives of the related assets and liabilities, and such amortization is included in our share of earnings of the joint venture. In addition, distributions received from unconsolidated entities are classified based on the nature of the activity or activities that generated the distribution.

On a quarterly basis, we evaluate the collectability of our interest income receivable and establish a reserve for amounts not expected to be collected. Our evaluation includes reviewing credit quality indicators such as payment status, changes affecting the operations of the facilities securing the loans, and national and regional economic factors. The reserve is a valuation allowance that reflects management’s estimate of losses inherent in the interest income receivable balance as of the balance sheet date. The reserve is adjusted through provision for loan losses and other reserves on our consolidated statements of income (loss) and is decreased by charge-offs to specific receivables.

On a quarterly basis, we evaluate the collectability of our loan portfolio, including the portion of unfunded loan commitments expected to be funded, and establish an allowance for credit losses. The allowance for credit losses is calculated using the related amortization schedules, payment histories and loan-to-value ratios. The following rates are applied to determine the aggregate expected losses, which is recorded as the allowance for credit losses: (i) a default rate, (ii) a liquidation cost rate and (iii) a distressed property reduction rate. If no loan-to-value ratio is available, a loss severity rate is applied in place of the liquidation cost rate and the distressed property reduction rate. The default rate is based on average charge-off and delinquency rates from the Federal Reserve, and the other rates are based on industry research and historical performance of a similar portfolio of financial assets. The allowance for credit losses is a valuation allowance that reflects management’s estimate of losses inherent in the loan portfolio as of the balance sheet date. The reserve is adjusted through provision for loan losses and other reserves on our consolidated statements of income (loss) and is decreased by charge-offs to specific loans.

As of December 31, 2024,2025, our investment portfolio consisted of 364360 real estate properties held for investment, 1413 investments in loans receivable, fivefour preferred equity investments and two investments in unconsolidated joint ventures. As of December 31, 2023,2024, our investment portfolio consisted of 378364 real estate properties held for investment, 14 investments in loans receivable, five preferred equity investments and two investments in unconsolidated joint ventures. In general, we expect that income and expenses related to our portfolio will fluctuate in future periods in comparison to the corresponding prior periods as a result of investment and disposition activity and anticipated future changes in our portfolio. The results of operations presented are not directly comparable due to ongoing acquisition and disposition activity, including our capital recycling initiative.

During the year ended December 31, 2024,2025, we recognized $284.6$356.9 million of resident fees and services compared to $236.2$284.6 million for the year ended December 31, 2023.2024. The $48.4$72.3 million net increase is due to (i) a $21.8$42.8 million increase related to seven14 Senior Housing - Managed communities acquired after January 1, 2024, a $17.7 million increase related to nine facilities that were transitioned to Senior Housing - Managed communities after January 1, 2023, (ii)2024, a $15.1$2.3 million increase related to one Senior Housing - Managed community that was closed due to a fire in 2022 and did not fully reopen until November 2024, and the remaining increase is primarily related to increased occupancy and an increase in rates and (iii) an $11.9 million increase from four Senior Housing - Managed communities acquired after January 1, 2023. These increases are partially offset by a $0.4 million decrease related to one Senior Housing - Managed community disposed of after January 1, 2023.rates.

Interest and other income primarily consists of income earned on our loans receivable investments and preferred returns earned on our preferred equity investments. During the year ended December 31, 2024,2025, we recognized $37.2$43.6 million of interest and other income compared to $35.1$37.2 million for the year ended December 31, 2023.2024. The net increase of $2.1$6.5 million is due to (i) a $1.5$3.1 million increase in late fee income, (ii) a $2.5 million increase in lease termination income, and (iii) a $1.1 million increase from investments made after January 1, 2023, (ii) a $0.7 million increase due to increased fundings for existing investments, (iii) a $0.4 million increase in bank interest income and (iv) a $0.2 million lease termination payment primarily related to one skilled nursing/transitional care facility that was sold during 2024, partially offset by a $0.7 million decrease in income from investments repaid after January 1, 2023.2024.

During the year ended December 31, 2024,2025, we incurred $169.6$187.0 million of depreciation and amortization expense compared to $183.1$169.6 million for the year ended December 31, 2023.2024. The net decreaseincrease of $13.5$17.4 million is due to (i) ana $8.1$16.5 million decreaseincrease from properties acquired after January 1, 2024 and the acquisition of the operations of four Senior Housing - Managed communities previously leased to the tenant under triple-net operating leases, (ii) a $4.4 million increase from additions to real estate and (iii) a $1.5 million increase due to accelerating the remaining useful lifeamortization of alease facilityintangibles related to facilities that waswere demolishedtransitioned into 2023,Senior (ii)Housing - Managed communities after January 1, 2024. These increases are partially offset by a $6.3$3.6 million decrease from properties disposed of after January 1, 2024 and a $1.4 million decrease due to assets that have been fully depreciated and (iii) a $5.9 million decrease from properties disposed of after January 1, 2023. These decreases are partially offset by a $4.9 million increase from properties acquired after January 1, 2023 and a $1.9 million increase from additions to real estate.depreciated.

Interest Expense

We incur interest expense comprised of costs of borrowings plus the amortization of deferred financing costs related to our indebtedness. During the year ended December 31, 2024,2025, we incurred $115.3$112.5 million of interest expense compared to $113.0$115.3 million for the year ended December 31, 2023.2024. The $2.3$2.8 million net increasedecrease is primarily related to a $4.1 million increase in interest expense related to borrowings under the Credit Agreement, partially offset by a $1.8$3.5 million decrease in non-cash interest expense related to our interest rate hedges.hedges, partially offset by a $0.7 million increase in interest expense related to the Credit Agreement primarily due to an increase in the effective interest rates.

During the year ended December 31, 2024,2025, we recognized $17.1$14.5 million of triple-net portfolio operating expenses compared to $17.9$17.1 million for the year ended December 31, 2023.2024. The $0.9$2.6 million net decrease is primarily due to a $1.3$1.9 million decrease duerelated to facilities that have sincewere transitioned to new operators who are now paying the property taxes directly and a $0.4$0.6 million decrease from properties disposed of after January 1, 2023. The decreases are partially offset by an $0.8 million increase due to adjustments to our estimates related to property taxes.2024.

During the year ended December 31, 2024,2025, we recognized $210.0$256.6 million of Senior Housing - Managed portfolio operating expenses compared to $177.3$210.0 million for the year ended December 31, 2023.2024. The $32.7$46.6 million net increase is primarily due to (i) a $19.1$27.0 million increase related to seven14 Senior Housing - Managed communities acquired after January 1, 2024, (ii) a $12.3 million increase related to nine facilities that were transitioned to Senior Housing - Managed communities after January 1, 2023, (ii) a $6.9 million increase related to four Senior Housing - Managed communities acquired after January 1, 2023,2024, (iii) a $3.1$3.3 million increase in employee compensation primarily due to increased labor rates and staffing, (iv) a $2.1$1.7 million increase in management fees, dining expenses and housekeeping costs due to increased occupancy, (v) a $1.4$1.2 million increase in marketing, administrative and corporate overhead expenses and (vi) a $0.4 million increase in taxes primarily due to changes in estimates. These increases are partially offset by a $0.4 million decrease related to one Senior Housing - Managed community disposedthat ofwas afterclosed Januarydue 1,to 2023.a fire in 2022 and did not fully reopen until November 2024, (vi) a $1.1 million increase in utilities primarily due to increased rates and usage and (vii) a $0.4 million increase in property taxes, partially offset by a $0.8 million decrease in repairs and maintenance expense.

General and Administrative Expenses

General and administrative expenses include compensation-related expenses as well as professional services, office costs, other costs associated with asset management, and acquisition costs. During the year ended December 31, 2024,2025, general and administrative expenses were $50.1$53.7 million compared to $47.5$50.1 million during the year ended December 31, 2023.2024. The $2.6$3.6 million net increase is primarily related to a $3.2$3.1 million net increase in compensation,compensation includingdriven a $1.0 million increase in stock-based compensation, for our teammates as a result ofby changes in performance-based payout assumptions on incentive compensation and annual salary adjustments,adjustments and a $1.0 million increase in legal and professional fees due to increased transaction activity. These increases are partially offset by a $0.5$0.7 million decrease in insurance expense.expense due to lower rates.

(Recovery of) Provision for Loan Losses

During the years ended December 31, 20242025 and 2023,2024, we recognized a $1.0 million and a $0.6 million recovery of and a $0.2 million provision for loan losses, respectively, associated with our loans receivable investments.

Net Gain (Loss) Gain on Sales of Real Estate

Income (Loss) from Unconsolidated Joint Ventures

During the year ended December 31, 2024,2025, we recognized $0.4$3.9 million of lossincome from our unconsolidated joint ventures compared to $2.9$0.4 million of loss for the year ended December 31, 2023.2024. The $2.5$4.3 million net improvement is primarily related to (i) a $2.7$2.5 million increase in revenues net of operating expenses primarily due to increased occupancy,occupancy whichand includesrates, (ii) a $1.3 million decrease in depreciation expense due to assets that have been fully depreciated and (iii) a $0.2 million relateddecrease in interest expense primarily due to onedecreased seniorinterest housing community acquired by one of our joint ventures after January 1, 2023.rates.

During the yearyears ended December 31, 2025 and 2024, we recognized $1.8 million and $1.0 million of income tax expenseexpense, comparedrespectively. toThe $2.0$0.8 million for the year ended December 31, 2023. The $1.0 million decreasechange is primarily due to lowerhigher taxable income during the year ended December 31, 2024.income.

We believe that net income as defined by GAAP is the most appropriate earnings measure. We also believe that funds from operations (“FFO”), as defined in accordance with the definition used by the National Association of Real Estate Investment Trusts (“Nareit”), and adjusted funds from operations (“AFFO”) (and related per share amounts) are important non-GAAP supplemental measures of our operating performance. Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. Thus, Nareit created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from real estate dispositions and our share of gains or losses from real estate dispositions related to our unconsolidated joint ventures, plus real estate depreciation and amortization, net of amounts related to noncontrolling interests, plus our share of depreciation and amortization related to our unconsolidated joint ventures, and real estate impairment charges of both consolidated and unconsolidated entities when the impairment is directly attributable to decreases in the value of the depreciable real estate held by the entity. AFFO is defined as FFO excluding stock-based compensation expense, non-cash rental and related revenues, non-cash interest income, non-cash interest expense, non-cash portion of loss on extinguishment of debt, provision for (recovery of) loan losses and other reserves, non-cash lease termination income and deferred income taxes, as well as other non-cash revenue and expense items (including noncapitalizable acquisition costs, transaction costs related to operator transitions and organizational or other restructuring activities, ineffectiveness gain/loss on derivative instruments, and non-cash revenue and expense amounts related to noncontrolling interests) and our share of non-cash adjustments related to our unconsolidated joint ventures. We believe that the use of FFO and AFFO (and the related per share amounts), combined with the required GAAP presentations, improves the understanding of our operating results among investors and makes comparisons of operating results among REITs more meaningful. We consider FFO and AFFO to be useful measures for reviewing comparative operating and financial performance because, by excluding the applicable items listed above, FFO and AFFO can help investors compare our operating performance between periods or as compared to other companies. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance. FFO and AFFO also do not consider the costs associated with capital expenditures related to our real estate assets nor do they purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current Nareit definition or that interpret the current Nareit definition or define AFFO differently than we do.

The following table reconciles our calculations of FFO and AFFO for the years ended December 31, 2024,2025, 20232024 and 2022,2023, to net income (loss),income, the most directly comparable GAAP financial measure, for the same periods (in thousands, except share and per share amounts):

The following table sets forth additional information related to certain other items included in net income (loss) above, and the portions of each that are included in FFO and AFFO, which may be helpful in assessing our operating results. Please refer to “—Results of Operations” above for additional information regarding these items (in millions):

As of December 31, 2024,2025, we had approximately $980.0$1.2 millionbillion in liquidity, consisting of unrestricted cash and cash equivalents of $60.5$71.5 million, available borrowings under our Revolving Credit Facility of $893.4$782.4 million and $26.1an aggregate $322.7 million related to shares outstanding under forward sale agreements under our Prior ATM Program and ATM Program. The Credit Agreement alsoand containsTerm Loan Credit Agreement each contain an accordion feature that can increase the total available borrowings to $2.75 billion (from U.S. $1.4 billion plus CAD $150.0 million) and to $1.0 billion (from $500.0 million), respectively, subject to terms and conditions.

We have filed a shelf registration statement with the SEC that expires in NovemberAugust 2025,2028, which allows us to offer and sell shares of common stock, preferred stock, warrants, rights, units, and certain of our subsidiaries to offer and sell debt securities, through underwriters, dealers or agents or directly to purchasers, on a continuous or delayed basis, in amounts, at prices and on terms we determine at the time of the offering, subject to market conditions.

On February 23, 2023, we established an at-the-market equity offering program (the “Prior ATM Program”) pursuant to which shares of our common stock having an aggregate gross sales price of up to $500.0 million may be sold from time to time (i) by us through a consortium of banks acting as sales agents or directly to the banks acting as principals or (ii) by a consortium of banks acting as forward sellers on behalf of any forward purchasers pursuant to a forward sale agreement. On August 5, 2025, we terminated the Prior ATM Program pursuant to our termination rights.

During the year ended December 31, 2024,2025, we utilized the forward feature of the Prior ATM Program to allow for the sale of up to 7.515.3 million shares of our common stock at an initial weighted average price of $15.47$17.69 per share, net of commissions, and we settledissued 6.013.6 million shares in settlement of certain outstanding forward sale agreements, at a weighted average net price of $14.90$17.26 per share, after commissions and fees, resulting in net proceeds of $89.2$234.8 million.

As of December 31, 2024,2025, 1.53.2 million shares remained outstanding under the Prior ATM Program’s forward sale agreements, with an initial weighted average price of $17.33$18.10 per share, net of commissions.

No other shares were sold under the Prior ATM Program during the year ended December 31, 2024.2025.

Our short-term liquidity requirements consist primarily of operating expenses, including our planned capital expenditures and funding commitments, interest expense, scheduled debt service payments under our loan agreements, dividend requirements, general and administrative expenses and other requirements described under “Material Cash Requirements” below. Based on our current assessment, we believe that our available cash, operating cash flows and borrowings available to us under our Revolving Credit Facility provide sufficient funds for such requirements for the next twelve months. In addition, we do not believe that the restrictions under our Senior Notes Indentures (as defined below) or Credit Agreement significantly limit our ability to use our available liquidity for these purposes.

Net cash provided by operating activities was $310.5$348.6 million for the year ended December 31, 2024.2025. Operating cash inflows were derived primarily from the rental payments received under our lease agreements, resident fees and services net of the corresponding operating expenses, and interest payments from borrowers under our loan and preferred equity investments.investments and distributions from our unconsolidated joint ventures. Operating cash outflows consisted primarily of interest payments on borrowings and payment of general and administrative expenses, including corporate overhead. Increases to operating cash flows primarily relate to completed investment activity,activity and decreases to operating cash flows primarily relate to disposition activityactivity. Interest payment outflows are impacted by increases or decreases in borrowings and interestchanges expense from increased borrowing activity and higherin interest rates. In addition, the change in operating cash flows was impacted by the timing of collections from our tenants and borrowers and fluctuations in the operating results of our Senior Housing - Managed communities. We expect our annualized cash flows provided by operating activities to fluctuate as a result of such activity.

During the year ended December 31, 2024,2025, net cash used in investing activities was $109.0$378.0 million and included $136.4$452.9 million used for the acquisition of four11 facilities, $54.7additional units on the campus of one of our facilities and the operations of four Senior Housing - Managed communities previously leased under triple-net operating leases, $41.5 million used for additions to real estate, $21.6$6.9 million used to provide funding for loans receivable, $2.8 million used to provide funding for a preferred equity investmentreceivable and $1.3$1.2 million used for the investment in an unconsolidated joint venture, partially offset by $96.0$88.6 million of net proceeds from the sales of real estate, $5.9$20.7 million in repayments of loans receivable, $6.8 million of distributions in excess of earnings from unconsolidated joint ventures, $4.5 million of proceeds from net investment hedges, $2.5 million in repayments of preferred equity investments, $3.6 million in repayments of loans receivableinvestments and $2.4$1.6 million in insurance proceeds.

During the year ended December 31, 2024,2025, net cash usedprovided inby financing activities was $181.6$40.8 million and included $280.2$500.0 million of dividendsproceeds paid to stockholders, $2.0 million of principal repayments on secured debt and $0.1 million of payments of deferred financing costs related tofrom the Term Loan Credit Agreement, partially offset by $86.1$227.8 million of proceeds from shares sold through our Prior ATM Program, net of costs related costs andto payroll coststax payments related to the issuance of common stock pursuant to equity compensation arrangements, and $14.6$109.8 million of net proceeds from our Revolving Credit Facility.Facility and $2.0 million of contributions from noncontrolling interests, partially offset by $500.0 million of principal payments to redeem the 2026 Notes (as defined below), $289.5 million of dividends paid to stockholders, $4.4 million of payments of deferred financing costs primarily related to the Term Loan Credit Agreement, $2.9 million of payments to noteholders for the early redemption of the 2026 Notes and $2.1 million of principal repayments on secured debt.

During the threesix months ended MarchJune 31,30, 2026, we acquired threeseven Senior Housing - Managed communitiescommunities, two skilled nursing/transitional care facilities and exercised our option to acquire one skilled nursing/transitional care facility for aggregate consideration of $96.1$287.6 million, including acquisition costs. Additionally, during the six months ended June 30, 2026, we invested $8.2 million in the purchase of bed rights and land related to the development of one skilled nursing/transitional care facility and purchased the operations of one Senior Housing - Managed community previously leased to the tenant under a triple-net operating lease for $16.3 million. See Note 3, “Recent Real Estate Acquisitions (Consolidated),” in the Notes to Consolidated Financial Statements for additional information regarding these investments.

Our consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and in conjunction with the rules and regulations of the Securities and Exchange Commission (the “SEC”). The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results is included in Part II, Item 7 of our 2025 Annual Report on Form 10-K filed with the SEC. There have been no significant changes to our critical accounting policies during the threesix months ended MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, our investment portfolio consisted of 361364 real estate properties held for investment, three assets held for sale, 1311 investments in loans receivable, fivefour preferred equity investments and two investments in unconsolidated joint ventures. As of MarchJune 31,30, 2025, our investment portfolio consisted of 364359 real estate properties held for investment, 1513 investments in loans receivable, four preferred equity investments and two investments in unconsolidated joint ventures. In general, we expect that income and expenses related to our portfolio will fluctuate in future periods in comparison to the corresponding prior periods as a result of investment and disposition activity and anticipated future changes in our portfolio. The results of operations presented are not directly comparable due to ongoing acquisition and disposition activity, including our capital recycling initiative.activity.

Comparison of results of operations for the three months ended MarchJune 31,30, 2026 versus the three months ended MarchJune 31,30, 2025 (dollars in thousands):

(1) Represents the dollar amount increase (decrease) for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 as a result of investments/dispositions made after JanuaryApril 1, 2025.

(2) Represents the dollar amount increase (decrease) for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 that is not a direct result of investments/dispositions made after JanuaryApril 1, 2025.

Our reported rental and related revenues may be subject to increased variability in the future as a result of lease accounting standards. If at any time we cannot determine that it is probable that substantially all rents over the life of a lease are collectible, rental revenue will be recognized only to the extent of payments received and all receivables associated with the lease will be written off, irrespective of amounts expected to be collectible. However, there can be no assurances regarding the timing and amount of these revenues. Amounts due under the terms of all of our lease agreements are subject to contractual increases, and contingent rental income may be earned from certain lease agreements. No material contingent rental income was derived during the three months ended MarchJune 31,30, 2026 and 2025.

During the three months ended MarchJune 31,30, 2026, we recognized $116.7$128.8 million of resident fees and services compared to $77.4$79.0 million for the three months ended MarchJune 31,30, 2025. The $39.2$49.8 million net increase is due to (i) a $26.1$34.9 million increase related to 1418 Senior Housing - Managed communities acquired after JanuaryApril 1, 2025, (ii) a $10.0$10.6 million increase related to sevenfive facilities that were transitioned to Senior Housing - Managed communities after JanuaryApril 1, 2025 and (iii) a $3.8$5.4 million increase primarily related to increased occupancy and an increase in rates. These increases are partially offset by a $0.7 million decrease due to one Senior Housing - Managed community that was closed in August 2025 and a $0.4 million decrease due to one Senior Housing - Managed community that was sold after April 1, 2025.

Interest and other income primarily consists of income earned on our loans receivable investments and preferred returns earned on our preferred equity investments. During the three months ended MarchJune 31,30, 2026, we recognized $10.0$5.8 million of interest and other income compared to $10.1$10.3 million for the three months ended MarchJune 31,30, 2025. The net decrease of $41,000$4.6 million is primarily due to a $0.4$4.1 million decrease from investments that were repaid after JanuaryApril 1, 2025,2025 partially offset byand a $0.4$0.5 million increasedecrease in late fee income.

During the three months ended MarchJune 31,30, 2026, we incurred $53.1$56.4 million of depreciation and amortization expense compared to $43.5$43.6 million for the three months ended MarchJune 31,30, 2025. The net increase of $9.6$12.8 million is due to ana $11.6$15.0 million increase from properties acquired after JanuaryApril 1, 2025 and the 2025 acquisition of the operations of fourfive Senior Housing - Managed communities previously leased to the tenant under triple-net operating leases and ana $0.8$0.6 million increase from additions to real estate. These increases are partially offset by a $1.9$1.3 million decrease due to assets that have been fully depreciated and a $0.9$1.3 million decrease from properties disposed of after JanuaryApril 1, 2025.

We incur interest expense comprised of costs of borrowings plus the amortization of deferred financing costs related to our indebtedness. During the three months ended MarchJune 31,30, 2026, we incurred $28.4$29.8 million of interest expense compared to $27.1$27.5 million for the three months ended MarchJune 31,30, 2025. The $1.3$2.2 million net increase is primarily related to a $1.4 millionan increase in interest expense related to borrowings under the Credit Agreement (as defined below).

During the threesix months ended MarchJune 31,30, 2026, we recognized $3.8$7.4 million of triple-net portfolio operating expenses compared to $3.5$7.2 million for the threesix months ended MarchJune 31,30, 2025. The $0.3 million net increase is primarily due to adjustments in our estimates related to property taxes.

During the threesix months ended MarchJune 31,30, 2026, we recognized $81.9$170.5 million of Senior Housing - Managed portfolio operating expenses compared to $56.5$113.9 million for the threesix months ended MarchJune 31,30, 2025. The $25.4$56.6 million net increase is primarily due to (i) a $16.9$39.3 million increase related to 1418 Senior Housing - Managed communities acquired after January 1, 2025, (ii) a $7.0$13.6 million increase related to seveneight facilities that were transitioned to Senior Housing - Managed communities after January 1, 2025, (iii) a $1.1$2.5 million increase in employee compensation primarily due to increased labor rates and staffing, (iv) a $0.5$1.4 million increase in management fees and housekeeping costs due to increased occupancy and in dining expenses primarily due to outsourcing the service to a third party at certain communities, (v) a $0.3$0.8 million increase in advertising and marketing, (vi) a $0.2$0.4 million increase in utilities due to increased rates and usage and (vii) a $0.1$0.3 million increase in insurancerepairs dueand to increased coverage,maintenance, partially offset by a $0.7$1.4 million decrease related to one Senior Housing - Managed community that was closed in August 2025 and a $0.6 million decrease related to one Senior Housing – Managed community that was disposed of after January 1, 2025.

General and administrative expenses include compensation-related expenses as well as professional services, office costs, other costs associated with asset management, and acquisition costs. During the threesix months ended MarchJune 31,30, 2026, general and administrative expenses were $14.9$31.7 million compared to $12.7$25.2 million for the threesix months ended MarchJune 31,30, 2025. The $2.1$6.4 million net increase is primarily related to a $1.6$5.5 million increase in compensation for our team membersteammates as a result of increased staffing, changes in performance-based payout assumptions on incentive compensation and annual salary adjustments and a $0.4 million increase related to hosting our 2026 Operator Conference during the threesix months ended MarchJune 31,30, 2026.

Provision for (Recovery of) Loan Losses and Other Reserves

During the threesix months ended MarchJune 31,30, 2026, we recognized a $0.4 million impairment of real estate related to twoone closed facilities.facility Noand one sold facility. During the six months ended June 30, 2025, we recognized a $4.1 million impairment of real estate wasrelated recognizedto duringone thesold three months ended March 31, 2025.facility.

During the threesix months ended MarchJune 31,30, 2026 and 2025, we recognized $1.9$4.1 million and $0.2$1.1 million of income from our unconsolidated joint ventures, respectively. The $1.7$3.1 million net increase is primarily related to a $1.1$1.9 million increase in revenues net of operating expenses primarily due to increased occupancy and rates and a $0.6$1.2 million decrease in depreciation expense primarily due to assets that have been fully depreciated.