DIVERSIFIED HEALTHCARE TRUST

Previous wording

We are a REIT organized under Maryland law that primarily owns medical office and life science properties, senior living communities and other healthcare related properties throughout the United States. As of March 31, 2024, we owned 371 properties located in 36 states and Washington, D.C., including four properties classified as held for sale and two closed senior living communities. At March 31, 2024, the gross book value of our real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, was $7.2 billion.

Current wording

We are a REIT organized under Maryland law that primarily owns medical office and life science properties, senior living communities and other healthcare related properties throughout the United States. As of June 30, 2024, we owned 370 properties located in 36 states and Washington, D.C., including five properties classified as held for sale and two closed senior living communities. At June 30, 2024, the gross book value of our real estate assets at cost plus certain acquisition costs, before depreciation and purchase price allocations and less impairment write downs, was $7.2 billion.

Previous wording

We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, geopolitical risks, economic downturns or a possible recession and changes in real estate utilization. We expect to experience continued volatility in labor, insurance and food costs in our SHOP segment.

Current wording

We are closely monitoring the impacts of the current economic and market conditions on all aspects of our business, including, but not limited to, high interest rates, prolonged high inflation, labor market challenges, volatility in the public equity and debt markets, geopolitical risks, economic downturns or a possible recession and changes in real estate utilization. We expect to experience continued variability in labor, insurance and food costs in our SHOP segment.

Previous wording

(5)Medical office and life science property occupancy data is as of March 31, 2024 and 2023 and includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.

Current wording

(5)Medical office and life science property occupancy data includes (i) out of service assets undergoing redevelopment, (ii) space which is leased but is not occupied or is being offered for sublease by tenants and (iii) space being fitted out for occupancy.

Previous wording

During the three months ended March 31, 2024, we entered into new and renewal leases in our Medical Office and Life Science Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):

Current wording

During the three and six months ended June 30, 2024, we entered into new and renewal leases in our Medical Office and Life Science Portfolio segment as summarized in the following table (dollars and square feet in thousands, except per square foot amounts):

Previous wording

During the three months ended March 31, 2024, we entered into renewal leases at three of our wellness centers totaling 129,600 square feet at rates that were 7.5% higher than prior rents for the same space at a weighted average lease term of five years. We did not incur any leasing costs or concessions commitments for these renewals.

Current wording

During the six months ended June 30, 2024, we entered into renewal leases at three of our wellness centers totaling 129,600 square feet at rates that were 7.5% higher than prior rents for the same space at a weighted average lease term of five years. We did not incur any leasing costs or concessions commitments for these renewals.

Previous wording

The following table summarizes the results of operations of each of our segments for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes the results of operations of each of our segments for the three and six months ended June 30, 2024 and 2023:

Previous wording

Rental income. Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by increased parking revenue at one of our properties. Rental income also decreased at our non-comparable properties primarily due to a tenant default at one of our properties, partially offset by an increase in rental income at one of our recently redeveloped properties.

Current wording

Rental income. Rental income decreased at our comparable properties primarily due to vacancies at certain of our properties, partially offset by increased parking revenue at one of our properties. Rental income increased at our non-comparable properties primarily due to a tenant default at one of our properties in the 2023 period and an increase in rental income at one of our recently redeveloped properties, partially offset by dispositions since April 1, 2023.

Previous wording

Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, management fees, salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense and other direct costs of operating these properties. The increase in property operating expenses at our comparable properties is primarily due to an increase in repairs and maintenance expense, real estate taxes and other direct costs. Property operating expenses decreased at our non-comparable properties primarily due to dispositions since January 1, 2023.

Current wording

Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, management fees, salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense and other direct costs of operating these properties. The increase in property operating expenses at our comparable properties is primarily due to increased insurance costs recorded in the 2024 period, partially offset by a decrease in real estate taxes due to refunds realized and a reduction in assessed values as a result of successful appeals in the 2024 period. Property operating expenses decreased at our non-comparable properties primarily due to dispositions since April 1, 2023.

Previous wording

Residents fees and services. Residents fees and services are the revenues earned at our managed senior living communities. We recognize these revenues as services are provided and related fees are accrued. Residents fees and services increased at our comparable properties primarily due to increases in occupancy and average monthly rate at our communities.

Current wording

Residents fees and services. Residents fees and services are the revenues earned at our managed senior living communities. We recognize these revenues as services are provided and related fees are accrued. Residents fees and services increased at our comparable properties primarily due to increases in occupancy and average monthly rate at our communities. The activity for our non-comparable properties reflects the 13 communities transitioned to an existing third party manager during the 2024 period.

Previous wording

Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, wages and benefit costs of community level personnel, repairs and maintenance expense, management fees, cleaning expense and other direct costs of operating these communities. Property operating expenses increased at our comparable properties primarily due to increases in labor costs, dietary expenses, insurance costs and other direct costs, partially offset by reduced contract labor.

Current wording

Property operating expenses. Property operating expenses consist of real estate taxes, utility expenses, insurance, wages and benefit costs of community level personnel, repairs and maintenance expense, management fees, cleaning expense and other direct costs of operating these communities. Property operating expenses increased at our comparable properties primarily due to increases in labor costs, insurance costs, repairs and maintenance, dietary expenses and other direct costs, partially offset by reduced contract labor. The activity for our non-comparable properties reflects the 13 communities transitioned to an existing third party manager during the 2024 period.

Previous wording

Property operating expenses. Property operating expenses consist of real estate taxes, insurance and other expenses that are not paid directly by our tenants. There was not a significant change in property operating expenses.

Current wording

Property operating expenses. Property operating expenses consist of real estate taxes, insurance and other expenses that are not paid directly by our tenants.

Previous wording

General and administrative expense. General and administrative expense consists of fees paid to RMR under our business management agreement, legal and accounting fees, fees and expenses of our Trustees, equity compensation expense and other costs relating to our status as a publicly traded company. General and administrative expense increased primarily due to $849 of estimated business management incentive fees that we recognized for the three months ended March 31, 2024 as a result of our total shareholder return exceeding the returns for the MSCI U.S. REIT/Health Care REIT Index over the applicable measurement period and an increase in our business management fees of $759.

Current wording

General and administrative expense. General and administrative expense consists of fees paid to RMR under our business management agreement, legal and accounting fees, fees and expenses of our Trustees, equity compensation expense and other costs relating to our status as a publicly traded company. General and administrative expense decreased primarily due to the reversal of $849 of estimated business management incentive fees as of June 30, 2024 as a result of our total shareholder return no longer exceeding the returns for the MSCI U.S. REIT/Health Care REIT Index over the applicable measurement period and a decrease in legal and other professional fees, partially offset by an increase in our business management fees of $656.

Previous wording

Acquisition and certain other transaction related costs. Acquisition and certain other transaction related costs primarily represent costs incurred with acquisitions and non-recurring transactions that we expensed under GAAP.

Current wording

Acquisition and certain other transaction related costs. Acquisition and certain other transaction related costs primarily represent costs incurred with acquisitions and non-recurring transactions that we expensed under GAAP. We incurred transition costs, including termination and other fees, during the 2024 period as a result of our transition of 13 communities to an existing third party manager. For more information about such transition of communities, see Note 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Interest expense. Interest expense increased primarily due to the issuance of $940,534 of our senior secured notes due 2026 in December 2023, resulting in discount accretion of $20,659 in the 2024 period. This increase was partially offset by the repayment and termination of our former credit facility and the redemption of $250,000 of our senior notes that were scheduled to mature in May 2024. The net proceeds from our $940,534 senior secured notes due 2026 were used to make these repayments aggregating $700,000.

Current wording

Interest expense. Interest expense increased primarily due to the issuance of $940,534 of our senior secured notes due 2026 in December 2023, resulting in discount accretion of $21,440 in the 2024 period. Additionally, we executed a $120,000 mortgage loan in May 2024 at a fixed interest rate of 6.864% per annum. The increase was partially offset by the repayment and termination of our former credit facility and the redemption of $250,000 of our senior notes that were scheduled to mature in May 2024. The net proceeds from our $940,534 senior secured notes due 2026 were used to make these repayments aggregating $700,000 in December 2023.

Previous wording

Income tax (expense) benefit. Income tax (expense) benefit is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.

Current wording

Income tax expense. Income tax expense is the result of operating income we earned in certain jurisdictions where we are subject to state income taxes.

Previous wording

Equity in net earnings (losses) of investees. Equity in net earnings (losses) of investees is the change in the fair value of our investments in our joint ventures and also represents our proportionate share of the earnings of our equity method investment in AlerisLife. For further information regarding our investment in AlerisLife, see Notes 3 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Equity in net (losses) earnings of investees. Equity in net (losses) earnings of investees is the change in the fair value of our investments in our joint ventures and also represents our proportionate share of the earnings of our equity method investment in AlerisLife. For further information regarding our investment in AlerisLife, see Notes 3 and 11 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

Rental income. Rental income decreased at our comparable properties primarily due to a cash settlement and higher cash rents received during the three months ended March 31, 2023 from a tenant previously in default under leases for six of our wellness centers. In January 2023, we agreed to amend the lease for three of these wellness centers and repossess the remaining three wellness centers. The three wellness centers we repossessed were subsequently re-leased to other tenants.

Current wording

Rental income. Rental income decreased at our comparable properties primarily due to a cash settlement and higher cash rents received during the 2023 period from a tenant previously in default under leases for six of our wellness centers. In January 2023, we agreed to amend the lease for three of these wellness centers and repossess the remaining three wellness centers. The three wellness centers we repossessed were subsequently re-leased to other tenants.

Previous wording

Interest and other income. The decrease in interest and other income is primarily due to lower average invested cash balances, partially offset by increased interest rates on invested cash balances during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Interest and other income. The decrease in interest and other income is primarily due to lower average invested cash balances during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 and $1,466 of funds we received from certain programs under the CARES Act, ARPA and various state programs in the 2023 period.

Previous wording

We present certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or the SEC, including funds from operations, or FFO, normalized funds from operations, or Normalized FFO, and NOI for the three months ended March 31, 2024 and 2023. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

Current wording

We present certain "non-GAAP financial measures" within the meaning of applicable rules of the Securities and Exchange Commission, or the SEC, including funds from operations, or FFO, normalized funds from operations, or Normalized FFO, and NOI for the three and six months ended June 30, 2024 and 2023. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

Previous wording

Our calculations of FFO and Normalized FFO for the three months ended March 31, 2024 and 2023 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO and Normalized FFO appear in the following table. This table also provides a comparison of distributions to shareholders, FFO and Normalized FFO and net income (loss) per share for these periods.

Current wording

Our calculations of FFO and Normalized FFO for the three and six months ended June 30, 2024 and 2023 and reconciliations of net income (loss), the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to FFO and Normalized FFO appear in the following table. This table also provides a comparison of distributions to shareholders, FFO and Normalized FFO and net income (loss) per share for these periods.

Previous wording

The calculation of NOI by reportable segment is included above in this Item 2. The following table includes the reconciliation of net loss to NOI for the three months ended March 31, 2024 and 2023.

Current wording

The calculation of NOI by reportable segment is included above in this Item 2. The following table includes the reconciliation of net loss to NOI for the three and six months ended June 30, 2024 and 2023.

Previous wording

Although the senior living industry has been adversely affected by a slow recovery from the COVID-19 pandemic, as well as economic and market conditions, there have been signs of recovery. While we are encouraged by positive trends, including increases in rates and occupancy in our SHOP segment and favorable supply and demand dynamics in the senior living industry, generally, we cannot be sure that these trends will continue to benefit us and any benefits we do realize may be uneven. While we continue to experience volatility in labor, insurance and food costs in our SHOP segment, we expect increases in these costs to moderate and we continue to work with our senior living operators to manage these costs and to increase rates and occupancy at our communities, which we believe will enable our managers to generate better returns to us.

Current wording

Although the senior living industry has been adversely affected by a slow recovery from the COVID-19 pandemic, as well as economic and market conditions, there have been signs of recovery. While we are encouraged by positive trends, including increases in rates and occupancy in our SHOP segment and favorable supply and demand dynamics in the senior living industry, generally, we cannot be sure that these trends will continue to benefit us and any benefits we do realize may be uneven. While we continue to experience variability in labor, insurance and food costs in our SHOP segment, we expect increases in these costs to moderate and we continue to work with our senior living operators to manage these costs and to increase rates and occupancy at our communities, which we believe will enable our managers to generate better returns to us.

Previous wording

On December 21, 2023, we completed a private offering of $940.5 million in aggregate principal amount at maturity of senior secured notes due January 2026, with a one-year extension option. The net proceeds from the offering were approximately $730.4 million after deducting initial purchaser discounts and estimated offering costs. We used a portion of the net proceeds to repay in full the $450.0 million outstanding under our then secured credit facility and to redeem $250.0 million of our senior notes that were scheduled to mature in May 2024. As a result of these transactions, we have no significant debt maturities until June 2025 when $500.0 million of our senior notes will become due, and as of March 31, 2024, we had $207.1 million of cash and cash equivalents. Additionally, as of March 31, 2024, our ratio of consolidated income available for debt service to debt service is above the 1.5x incurrence requirement under our senior notes, on a pro forma basis. We are able to refinance existing or maturing debt and issue new debt as long as this ratio is at or above 1.5x on a pro forma basis at the time of such refinancing or issuance.

Current wording

On May 30, 2024, we executed a $120.0 million fixed rate, interest only mortgage loan secured by eight medical office and life science properties. This mortgage loan matures in June 2034 and requires that interest be paid at an annual rate of 6.864%. The net proceeds from this mortgage loan were approximately $117.1 million after deducting estimated closing costs, and we used $60.0 million of the net proceeds to partially redeem our then outstanding $500.0 million senior notes due 2025. As a result of these transactions, we have no significant debt maturities until June 2025 when $440.0 million of our senior notes will become due, and as of June 30, 2024, we had $265.6 million of cash and cash equivalents. Additionally, as of June 30, 2024, our ratio of consolidated income available for debt service to debt service is above the 1.5x incurrence requirement under our senior notes, on a pro forma basis. We are able to refinance existing or maturing debt and issue new debt as long as this ratio is at or above 1.5x on a pro forma basis at the time of such refinancing or issuance.

Previous wording

During the three months ended March 31, 2024, we sold one property for a sales price of $3.6 million, excluding closing costs. As of May 2, 2024, we had two properties under agreements to sell for an aggregate sales price of approximately $10.4 million, excluding closing costs. We may not complete the sales of any or all of the properties we currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result.

Current wording

During the six months ended June 30, 2024, we sold two properties for an aggregate sales price of $7.8 million, excluding closing costs. Subsequent to June 30, 2024, we sold two properties for an aggregate sales price of $21.3 million, excluding closing costs, and as of July 31, 2024, we had an additional property under agreement to sell for a sales price of $5.5 million, excluding closing costs. We may not complete the sales of any or all of the properties we currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result. For further information regarding our dispositions, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

The change in cash provided by operating activities for the three months ended March 31, 2024 compared to the prior period was primarily due to increased NOI as a result of increased rates and occupancy at the senior living communities in our SHOP segment. Additionally, cash interest payments decreased in the 2024 period compared to the 2023 period primarily due to the repayment and termination of our former credit facility and the redemption of $250.0 million of senior notes that were scheduled to mature in May 2024.

Current wording

The increase in cash provided by operating activities for the six months ended June 30, 2024 compared to the prior period was primarily due to increased NOI as a result of increased rates and occupancy at the senior living communities in our SHOP segment. Additionally, cash interest payments decreased in the 2024 period compared to the 2023 period primarily due to the repayment and termination of our former credit facility and the redemption of $250.0 million of our senior notes in December 2023.

Previous wording

The change in cash used in investing activities for the three months ended March 31, 2024 compared to the prior period was primarily due to our purchase on February 16, 2024 of approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price of $1.31 per share for a total purchase price, including transaction related costs, of $15.5 million, partially offset by a decrease in real estate improvements in the 2024 period compared to the 2023 period.

Current wording

The increase in cash used in investing activities for the six months ended June 30, 2024 compared to the prior period was primarily due to our purchase on February 16, 2024 of approximately 34.0% of the then outstanding AlerisLife common shares from ABP Trust at the tender offer price of $1.31 per share for a total purchase price, including transaction related costs, of $15.5 million. In the 2023 period, we tendered all of our AlerisLife common shares at $1.31 per share. The increase was partially offset by a decrease in real estate improvements and an increase in proceeds from the sale of properties in the 2024 period compared to the 2023 period.

Previous wording

We generally plan to continue investing capital in our properties, including redevelopment projects, to better position these properties in their respective markets in order to increase our returns in future years. However, we have deferred, and may continue to defer, our capital expenditures to preserve liquidity.

Current wording

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

Previous wording

As of March 31, 2024, we had estimated unspent leasing related obligations at our triple net leased wellness centers and our medical office and life science properties of approximately $43.2 million, of which we expect to spend approximately $33.1 million during the next 12 months. We expect to fund these obligations using operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities, cash on hand, proceeds from the disposition of certain properties and future financing activities with unencumbered properties.

Current wording

As of June 30, 2024, we had estimated unspent leasing related obligations at our triple net leased wellness centers and our medical office and life science properties of approximately $37.9 million, of which we expect to spend approximately $26.7 million during the next 12 months. We expect to fund these obligations using operating cash flows we generate as rental income from our leased properties, residents fees and services revenues from our managed communities, cash on hand, proceeds from the disposition of certain properties and future financing activities.

Previous wording

We are currently in the process of redeveloping certain properties in our Medical Office and Life Science Portfolio and a number of our managed senior living communities, which projects are expected to be completed at various times between 2024 and 2025. We continue to assess opportunities to redevelop other properties in our Medical Office and Life Science Portfolio and SHOP segment. These redevelopment projects may require significant capital expenditures and time to complete, and we have deferred, and may in the future defer, certain redevelopment projects to preserve liquidity.

Current wording

We are currently in the process of redeveloping certain properties, primarily our managed senior living communities, which projects are expected to be completed at various times between 2024 and 2025. We continue to assess opportunities to redevelop other properties in our Medical Office and Life Science Portfolio and SHOP segment. These redevelopment projects may require significant capital expenditures and time to complete, and we may defer certain redevelopment projects to preserve liquidity. Due to labor availability constraints and wage and commodity price inflation, the capital investments we plan to make may be delayed or cost more than we expect.

Previous wording

As of March 31, 2024, we had $207.1 million of cash and cash equivalents. We typically use cash balances, net proceeds from offerings of securities, debt issuances or dispositions of assets and cash flows from our operations to fund our operations, debt repayments, distributions, acquisitions, investments, capital expenditures and other general business purposes.

Current wording

As of June 30, 2024, we had $265.6 million of cash and cash equivalents. We typically use cash balances, net proceeds from offerings of securities, debt issuances or dispositions of assets and cash flows from our operations to fund our operations, debt repayments, distributions, acquisitions, investments, capital expenditures and other general business purposes.

Previous wording

During the three months ended March 31, 2024, we paid quarterly cash distributions to our shareholders totaling approximately $2.4 million using existing cash balances. On April 11, 2024, we declared a quarterly distribution payable to common shareholders of record on April 22, 2024 in the amount of $0.01 per share, or approximately $2.4 million. We expect to pay this distribution on or about May 16, 2024 using cash on hand. For further information regarding the distribution we paid during 2023, see Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

During the six months ended June 30, 2024, we paid quarterly cash distributions to our shareholders totaling approximately $4.8 million using existing cash balances. On July 11, 2024, we declared a quarterly distribution payable to common shareholders of record on July 22, 2024 in the amount of $0.01 per share, or approximately $2.4 million. We expect to pay this distribution on or about August 15, 2024 using cash on hand. For further information regarding the distribution we paid during 2023, see Note 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

We believe we may have access to certain types of financings, including debt or equity offerings, to fund our operations and repay our debts and other obligations as they become due. Our ability to complete, and the costs associated with, future debt or equity transactions depends primarily upon credit market conditions and our then creditworthiness and our ability to be in compliance with our debt covenants as discussed below. We have no control over market conditions. Our credit and debt ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out that intention. A protracted negative impact on the economy or the industries in which our properties and businesses operate, wage and commodity price inflation, high interest rates, increased insurance costs, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, economic downturns and a possible recession, may have various negative consequences including a decline in financing availability and increased costs for financing. Further, those conditions could also disrupt capital markets and limit our access to financing from public sources, particularly if the global financial markets experience significant disruptions.

Current wording

We believe we may have access to certain types of financings, including debt or equity offerings, to fund our operations and repay our debts and other obligations as they become due. Our ability to complete, and the costs associated with, future debt or equity transactions depends primarily upon credit market conditions and our then creditworthiness and our ability to be in compliance with our debt covenants as discussed below. We have no control over market conditions. Our credit and debt ratings depend upon evaluations by credit rating agencies of our business practices and plans, including our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out that intention. A protracted negative impact on the economy or the industries in which our properties and businesses operate resulting from wage and commodity price inflation, high interest rates, geopolitical risks or other economic, market or industry conditions, including the delayed recovery of the senior housing industry, economic downturns and a possible recession, may have various negative consequences including a decline in financing availability and increased costs for financing. Further, those conditions could also disrupt capital markets and limit our access to financing from public sources, particularly if the global financial markets experience significant disruptions.

Previous wording

Until its repayment in full and termination on December 21, 2023, we had a $450.0 million credit facility that was fully drawn. At December 21, 2023, our former credit facility required interest to be paid on borrowings at an annual rate of 8.4%, plus a facility fee of $0.3 million per quarter.

Current wording

In January 2023, we repaid $113.6 million in outstanding borrowings under our former credit facility and the commitments were reduced to $586.4 million. In February 2023, we reduced the commitments from $586.4 million to $450.0 million following our repayment of $136.4 million in outstanding borrowings under our former credit facility. Until its repayment in full and termination on December 21, 2023, we had a $450.0 million credit facility that was fully drawn. At December 21, 2023, our former credit facility required interest to be paid on borrowings at an annual rate of 8.4%, plus a facility fee of $0.3 million per quarter.

Previous wording

In December 2023, we issued $940.5 million in aggregate principal amount at maturity of our senior secured notes due 2026 in a private offering, raising net proceeds of $730.4 million, after deducting initial purchaser discounts and estimated offering costs. These notes are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries. These notes and the guarantees provided by the Collateral Guarantors are secured by a first priority lien and security interest in each of the collateral properties and 100% of the equity interests in each of the Collateral Guarantors. No cash interest will accrue on these notes prior to maturity. The accreted value of these notes will increase at a rate of 11.25% per annum compounded semiannually on January 15 and July 15 of each year. We used the net proceeds from this offering to repay in full and terminate our then $450.0 million secured credit facility and to redeem $250.0 million of our senior notes which were scheduled to mature in May 2024.

Current wording

Our $940.5 million in outstanding senior secured notes due 2026 are fully and unconditionally guaranteed, on a joint, several and senior secured basis, by the Collateral Guarantors, and on a joint, several and unsecured basis, by all our subsidiaries other than the Collateral Guarantors and certain excluded subsidiaries. These notes and the guarantees provided by the Collateral Guarantors are secured by a first priority lien and security interest in each of the collateral properties and 100% of the equity interests in each of the Collateral Guarantors. No cash interest will accrue on these notes prior to maturity. The accreted value of these notes will increase at a rate of 11.25% per annum compounded semiannually on January 15 and July 15 of each year.

Previous wording

Our principal debt obligations at March 31, 2024 were: (1) $2.1 billion outstanding principal amount of senior unsecured notes; (2) $940.5 million outstanding principal amount of senior secured notes; and (3) $8.7 million aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by one property. For further information regarding our indebtedness, see Note 5 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Our principal debt obligations at June 30, 2024 were: (1) $2.0 billion outstanding principal amount of senior unsecured notes; (2) $940.5 million outstanding principal amount of senior secured notes; and (3) $128.3 million aggregate principal amount of mortgage notes (excluding discounts, premiums and net debt issuance costs) secured by nine properties. For further information regarding our indebtedness, see Note 5 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

On May 28, 2020, we issued $1.0 billion of our 9.75% senior notes due 2025. We subsequently redeemed $500.0 million of this debt in June 2022, with $500.0 million remaining outstanding. On February 3, 2021, we issued $500.0 million of our 4.375% senior notes due 2031. As of March 31, 2024, all $500.0 million of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint, several and unsecured basis, by all of our subsidiaries, except for certain excluded subsidiaries. The notes and related guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the collateral securing such secured indebtedness, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $1.1 billion of senior unsecured notes do not have the benefit of any guarantees.

Current wording

On May 28, 2020, we issued $1.0 billion of our 9.75% senior notes due 2025. We subsequently redeemed $500.0 million and $60.0 million of this debt in June 2022 and June 2024, respectively, with $440.0 million remaining outstanding. On February 3, 2021, we issued $500.0 million of our 4.375% senior notes due 2031. As of June 30, 2024, all $440.0 million of our 9.75% senior notes due 2025 and all $500.0 million of our 4.375% senior notes due 2031 were fully and unconditionally guaranteed, on a joint, several and unsecured basis, by all of our subsidiaries except certain excluded subsidiaries. The notes and related guarantees are effectively subordinated to all of our and the subsidiary guarantors' secured indebtedness, respectively, to the extent of the value of the applicable collateral, and are structurally subordinated to all indebtedness and other liabilities and any preferred equity of any of our subsidiaries that do not guarantee the notes. Our remaining $1.1 billion of senior unsecured notes do not have the benefit of any guarantees.

Previous wording

For the three months ended March 31, 2024, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments. Nonetheless, we own, and our tenants, managers and operators operate, facilities in many states that participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid programs and other federal and state healthcare payment programs. Also, some of our medical office and life science property tenants participate in federal Medicare and state Medicaid programs and other government healthcare payment programs.

Current wording

For the six months ended June 30, 2024, substantially all of our NOI was generated from properties where a majority of the revenues are derived from our tenants' and residents' private resources, and a small amount of our NOI was generated from properties where a majority of the revenues are derived from Medicare and Medicaid payments. Nonetheless, we own, and our tenants, managers and operators operate, facilities in many states that participate in federal and state healthcare payment programs, including the federal Medicare and state Medicaid programs and other federal and state healthcare payment programs. Also, some of our medical office and life science property tenants participate in federal Medicare and state Medicaid programs and other government healthcare payment programs.