Brookdale Senior Living Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Brookdale Senior Living Inc. together with its consolidated subsidiaries ("Brookdale" or the "Company") is an operator of 541 senior living communities throughout the United States. The Company is committed to its mission of enriching the lives of the people it serves with compassion, respect, excellence, and integrity. The Company operates and manages independent living, assisted living, memory care, and continuing care retirement communities ("CCRCs"). The Company's senior living communities and its comprehensive network help to provide seniors with care, connection, and services in an environment that feels like home. As of June 30, 2026, the Company owned 359 communities, leased 176 communities, and managed 6 communities.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position, results of operations, and cash flows of the Company for all periods presented. Certain information and footnote disclosures included in annual financial statements have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of the financial position or operating results for an entire year. These interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 19, 2026.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Brookdale and its consolidated subsidiaries. The ownership interest of consolidated entities not wholly-owned by the Company are presented as noncontrolling interests in the accompanying unaudited condensed consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation, and net income (loss) is reduced by the portion of net income (loss) attributable to noncontrolling interests.

Use of Estimates

The preparation of the condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, revenue, asset impairments, self-insurance reserves, performance-based compensation, allowance for credit losses, depreciation and amortization, leasing transactions, income taxes, and other contingencies. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from the original estimates.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the Company's condensed consolidated financial position or results of operations.

3. Revenue

Resident fee revenue by payor source is as follows.

Refer to Note 13 for disaggregation of revenue by reportable segment.

The payment terms and conditions within the Company's revenue-generating contracts vary by contract type and payor source, although terms generally include payment to be made within 30 days. Resident fee revenue for recurring and routine monthly services is generally billed monthly in advance under the Company's independent living, assisted living, and memory care residency agreements. Resident fee revenue for standalone or certain healthcare services is generally billed monthly in arrears. Additionally, certain of the Company's revenue-generating contracts include non-refundable fees that are generally billed and collected in advance or upon move-in of a resident under the Company's independent living, assisted living, and memory care residency agreements. Amounts of revenue that are collected from residents in advance are recognized as deferred revenue until the performance obligations are satisfied.

The Company had total deferred revenue (included within refundable fees and deferred revenue within the condensed consolidated balance sheets) of $51.6 million and $51.3 million, including $29.2 million and $29.1 million of monthly resident fees billed and received in advance, as of June 30, 2026 and December 31, 2025, respectively. For the six months ended June 30, 2026 and 2025, the Company recognized $46.3 million and $48.4 million, respectively, of revenue that was included in the deferred revenue balance as of January 1, 2026 and 2025, respectively.

4. Property, Plant and Equipment and Leasehold Intangibles, Net

As of June 30, 2026 and December 31, 2025, net property, plant and equipment and leasehold intangibles consisted of the following.

Long-lived assets with definite useful lives are depreciated or amortized on a straight-line basis over their estimated useful lives (or, in certain cases, the shorter of their estimated useful lives or the lease term) and are tested for impairment whenever indicators of impairment arise. The Company recognized depreciation and amortization expense on its property, plant and equipment and leasehold intangibles of $71.1 million and $92.9 million for the three months ended June 30, 2026 and 2025, respectively, and $144.6 million and $183.8 million for the six months ended June 30, 2026, and 2025, respectively.

The Company recognized $3.9 million and $0.6 million for the three months ended June 30, 2026 and 2025, respectively, and $10.0 million and $2.4 million for the six months ended June 30, 2026 and 2025, respectively, of non-cash impairment charges in its operating results for its property, plant and equipment and leasehold intangibles assets.

As of June 30, 2026,10 communities in the Assisted Living and Memory Care segment were classified as held for sale, resulting in $24.1 million of net property, plant and equipment and leasehold intangibles assets being recognized as assets held for sale within the condensed consolidated balance sheet. Subsequent to June 30, 2026, the Company completed the sale ofthree owned communities for proceeds of $2.5 million, net of transaction costs. The closings of the sales of the additional communities are subject to the satisfaction of various closing conditions, including (where applicable) the receipt of regulatory approvals. There can be no assurance that the additional transactions will close or, if they do, when the actual closings will occur.

5. Debt

Long-term debt consists of the following.

The $23.0 million of borrowings outstanding on the revolving credit facility as of June 30, 2026 are excluded from the table above and are further described below.

As of June 30, 2026,88.9%, or $3.9 billion, of the Company's total debt obligations represented non-recourse property-level mortgage financings.

Credit Facilities

In June 2026, the Company amended its revolving credit agreement with Capital One, National Association acting as administrative agent, lead arranger, and lender and the other lenders from time to time parties thereto. The amended agreement provides an expanded commitment of up to $200.0 million, which can be drawn in cash or as letters of credit. The credit facility matures in April 2029, and the Company has options to extend the facility fortwo additionalone-year terms, subject to the satisfaction of certain conditions. Amounts drawn under the facility bear interest at the Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from 2.25% to 2.50% based upon the percentage of the total commitment drawn. Additionally, a quarterly commitment fee of 0.25% to 0.35% per annum is applicable based upon the percentage of the total commitment drawn. The revolving credit facility is currently secured by first priority mortgages and negative pledges on certain of the Company’s communities. Available capacity under the facility will vary from time to time based upon certain calculations related to the appraised value and performance of the communities securing the credit facility and the variable interest rate of the credit facility.

As of June 30, 2026, $23.0 million of borrowings and $1.4 million of letters of credit were outstanding under the Company's $200.0 million secured credit facility. The Company also had separate letter of credit facilities providing up to $68.0 million of letters of credit as of June 30, 2026 under which $54.1 million had been issued as of that date.

2026 Mortgage Financings

In July 2026, the Company obtained $248.9 million of debt secured by non-recourse first mortgages on 45 communities, which also continue to secure $518.5 million of additional outstanding mortgages with maturities in 2031 and 2032. The $248.9 million loan bears interest at a fixed rate of 6.16% and matures in 2031. At the closing, the Company repaid $244.1 million of debt under the mortgage facility, which was scheduled to mature in 2027, using proceeds from the loan.

In June 2026, the Company obtained an aggregate of $188.0 million of debt and repaid $199.9 million of outstanding mortgage debt secured by 22 communities previously scheduled to mature in 2027. The principal amounts of the new loans are secured by non-recourse first mortgages on 13 communities, bear interest at a fixed rate of 5.97%, are interest only for the first five years, and mature in July 2036.

In March 2026, the Company obtained an aggregate $184.9 million of debt and repaid $190.6 million of outstanding mortgage debt secured by 11 communities previously scheduled to mature in 2027. The principal amounts of the new loans are secured by non-recourse first mortgages on 7 communities, bear interest at a fixed rate of 5.38%, are interest only for the firsttwo years, and mature in April 2033.

Financial Covenants

Certain of the Company's debt documents contain restrictions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity, and net worth levels and debt service ratios, and requiring the Company not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community, and/or entity basis. In addition, the Company's debt documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

The Company's failure to comply with applicable covenants, subject to cure provisions in certain instances, could constitute an event of default under the applicable debt documents. Many of the Company's debt documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Furthermore, the Company's mortgage debt is secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries.

As of June 30, 2026, the Company is in compliance with the financial covenants of its debt agreements.

6. Leases

As of June 30, 2026, the Company operated 176 communities under long-term leases (167 operating leases and 9 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. In certain cases, the Company guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. An event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio.

The leases relating to substantially all of the Company's leased communities are fixed-rate leases with annual escalators that are fixed. The Company is responsible for all operating costs, including repairs and maintenance, property taxes, and insurance. The leases generally provide for renewal or extension options, or in certain cases, purchase options.

The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum liquidity and net worth levels and lease coverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company's lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements and maintain insurance coverage.

The Company's failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company's lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other lease and debt documents (including documents with other lessors and lenders). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company's leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries.

As of June 30, 2026, the Company is in compliance with the financial covenants of its long-term lease agreements.

Subsequent to June 30, 2026, the Company entered into an agreement to acquire 17 communities that are currently leased by the Company for a purchase price of approximately $157.0 million plus transaction costs. The Company expects to complete the acquisition transaction in the fourth quarter of 2026, subject to the satisfaction of customary closing conditions for real estate transactions. The Company expects to fund the acquisition of the 17 communities through proceeds from non-recourse mortgage financing and cash on hand.

7. Litigation

The Company has been and is currently involved in litigation and claims incidental to the conduct of its business, which it believes are generally comparable to other companies in the senior living and healthcare industries. In addition, the Company has been and currently is involved in putative class action litigation, including litigation regarding staffing at the Company's communities and compliance with consumer protection laws and the Americans with Disabilities Act (and similar state laws). Certain claims and lawsuits allege large damage amounts, seek injunctive relief, and may require (and have required) significant costs to defend and resolve. As a result, the Company maintains general liability, professional liability, excess liability, and other insurance policies in amounts and with coverage and deductibles the Company believes are appropriate, based on the nature and risks of its business, historical experience, availability, and industry standards. The Company's current policies provide for deductibles for each claim and contain various exclusions from coverage. The Company uses its wholly-owned captive insurance company for the purpose of insuring certain portions of its risk retention under its general and professional liability insurance programs. Accordingly, the Company is, in effect, self-insured for claims that are less than the deductible amounts, for claims that exceed the funding level of the Company's wholly-owned captive insurance company, and for claims or portions of claims that are not covered by such policies and/or exceed the policy limits.

The senior living and healthcare industries are continuously subject to scrutiny by governmental regulators, which could result in reviews, audits, investigations, enforcement actions, or litigation related to regulatory compliance matters. In addition, the Company is subject to various government reviews, audits, and investigations to verify compliance with Medicare and Medicaid programs and other applicable laws and regulations. The Centers for Medicare & Medicaid Services ("CMS") has engaged third-party firms to review claims data to evaluate appropriateness of billings. In addition to identifying overpayments, audit contractors can refer suspected violations to government authorities. In addition, states' Attorneys General vigorously enforce consumer protection laws as those laws relate to the senior living industry. An adverse outcome of government scrutiny may result in citations, sanctions, other criminal or civil fines and penalties, the refund of overpayments, payment suspensions, termination of participation in Medicare and Medicaid programs, and damage to the Company's business reputation. The Company's costs to respond to and defend any such audits, reviews, and investigations may be significant.

8. Stock-Based Compensation

Grants of restricted stock units and stock awards under the Company's 2024 Omnibus Incentive Plan were as follows.

9. Earnings Per Share

Potentially dilutive common stock equivalents for the Company include convertible senior notes, unvested restricted stock, and restricted stock units. Prior to June 30, 2025, the potentially dilutive common stock equivalents for the Company also included warrants and prepaid stock purchase contracts.

As of June 30, 2026, $23.3 million in aggregate principal amount of the Company's 2.00% convertible senior notes due 2026 (the "2026 Notes") remain outstanding and the maximum number of shares issuable upon settlement of the 2026 Notes is 3.9 million (after giving effect to 1.0 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events). As of June 30, 2026, $369.4 million in aggregate principal amount of the Company’s 3.50% convertible senior notes due 2029 (the “2029 Notes”) remain outstanding and the maximum number of shares issuable upon settlement of the 2029 Notes is 55.0 million (after giving effect to 13.9 million additional shares that would be issuable upon conversion in connection with the occurrence of certain corporate or other events).

Basic earnings per share ("EPS") is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding, after giving effect to the weighted average minimum number of shares issuable upon settlement of the Company's previously outstanding prepaid stock purchase contracts. The weighted average number of shares outstanding for the basic earnings per share calculation for the six months ended June 30, 2025 includes 14.7 million weighted average shares pursuant to the previously outstanding prepaid stock purchase contracts. Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. Diluted EPS reflects the potential dilution that could occur if securities or other instruments that are convertible into common stock were exercised or could result in the issuance of common stock. As a result of the net loss for the three and six months ended June 30, 2025, all potentially outstanding shares of common stock were antidilutive for the period and were not included in the computation of diluted weighted average shares outstanding. The following table reconciles the computations of basic and diluted earnings per share amounts presented in the condensed consolidated statements of operations.

For the purposes of computing diluted EPS, weighted average shares outstanding do not include potentially dilutive securities that are anti-dilutive under the treasury stock method or if-converted method, and performance-based equity awards are included based on the attainment of the applicable performance metrics as of the end of the reporting period. Shares issuable upon settlement of the 2029 Notes were not included in the computation of diluted EPS as the shares were not dilutive under the if-converted method. The additional shares that would be issuable upon conversion of the 2026 Notes or 2029 Notes in connection with the occurrence of certain corporate or other events were also not included in the computation of diluted EPS. Additionally, as of June 30, 2026, the Company had 0.6 million potentially outstanding shares of common stock pursuant to performance-based equity awards that were not included in the computation of diluted EPS.

10. Income Taxes

The difference between the Company's effective tax rate for the three and six months ended June 30, 2026 and 2025 was primarily attributable to an increase in tax expense recorded on operating income, partially offset by the impact of a reduction in the valuation allowance recorded during the three and six months ended June 30, 2026.

The Company recorded an aggregate deferred federal, state, and local tax expense of $23.5 million for the three months ended June 30, 2026, which was partially offset by a decrease to the valuation allowance of $18.7 million. The Company recorded an aggregate deferred federal, state, and local tax expense of $15.4 million for the six months ended June 30, 2026, which was partially offset by a decrease to the valuation allowance of $11.6 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $9.1 million for the three months ended June 30, 2025, which was partially offset by an increase to the valuation allowance of $8.3 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $24.9 million for the six months ended June 30, 2025, which was partially offset by an increase to the valuation allowance of $23.0 million.

The Company evaluates its deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized. The Company's valuation allowance as of June 30, 2026 and December 31, 2025 was $566.6 million and $578.2 million, respectively.

The decrease to the valuation allowance for the six months ended June 30, 2026 is the result of current operating income during the six months ended June 30, 2026 and the anticipated reversal of future tax liabilities offset by future tax deductions.

The increase in the valuation allowance for the six months ended June 30, 2025 is the result of current operating losses during the six months ended June 30, 2025 and the anticipated reversal of future tax liabilities offset by future tax deductions.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and six months ended June 30, 2026 and 2025 which are included in income tax expense or benefit for the period. As of June 30, 2026, tax returns for years 2021 through 2024 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination.

11. Supplemental Disclosure of Cash Flow Information

Restricted cash consists principally of escrow deposits for interest rate caps, real estate taxes, property insurance, capital expenditures, and debt service reserves required by certain lenders under mortgage debt agreements, deposits as security for self-insured retention risk under general and professional liability programs, property insurance programs, and workers' compensation programs, and regulatory reserves for certain CCRCs. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sums to the total of the same such amounts shown in the condensed consolidated statements of cash flows.

12. Fair Value Measurements

Long-term debt

The Company estimates the fair value of its debt primarily using a discounted cash flow analysis based upon the Company's current borrowing rate for debt with similar maturities and collateral securing the indebtedness. The Company estimates the fair value of its convertible senior notes based on valuations provided by third-party pricing services. The Company had outstanding mortgage notes payable with a carrying amount of approximately $3.9 billion as of both June 30, 2026 and December 31, 2025. Fair value of the mortgage notes payable approximates the carrying amount as of both June 30, 2026 and December 31, 2025. The Company's fair value of the mortgage notes payable disclosure is classified within Level 2 of the valuation hierarchy.

The carrying amount for the $23.3 million principal amount of outstanding 2026 Notes was $23.3 million and $23.2 million, net of deferred financing costs, as of June 30, 2026 and December 31, 2025, respectively. The estimated fair value of the 2026 Notes was approximately $46.0 million and $32.0 million as of June 30, 2026 and December 31, 2025, respectively (Level 2).

The carrying amount for the $369.4 million principal amount of outstanding 2029 Notes was $359.8 million and $358.3 million, net of deferred financing costs, as of June 30, 2026 and December 31, 2025, respectively. The estimated fair value of the 2029 Notes was approximately $705.0 million and $516.0 million as of June 30, 2026 and December 31, 2025, respectively (Level 2).

13. Segment Information

The Company hasthree reportable segments: Independent Living; Assisted Living and Memory Care; and CCRCs. Operating segments are defined as components of an enterprise that engage in business activities from which it may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the Chief Operating Decision Maker ("CODM") to assess the performance of the individual segment and make decisions about resources to be allocated to the segment.

Independent Living. The Company's Independent Living segment includes owned or leased communities that are primarily designed for middle to upper income seniors who desire to live in a residential setting that feels like home, without the efforts of ownership. The majority of the Company's independent living communities consist of both independent and assisted living units in a single community, which allows residents to age-in-place by providing them with a broad continuum of senior independent and assisted living services to accommodate their changing needs.

Assisted Living and Memory Care. The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily living for the Company's residents. The Company's assisted living and memory care communities include both freestanding, multi-story communities, as well as smaller, freestanding, single story communities. The Company also provides memory care services at freestanding memory care communities that are specially designed for residents with Alzheimer's disease and other dementias.

CCRCs. The Company's CCRCs segment includes large owned or leased communities that offer a variety of living arrangements and services to accommodate a broad spectrum of physical ability and healthcare needs. Most of the Company's CCRCs have independent living, assisted living, memory care, and skilled nursing available on one campus.

All Other. All Other includes communities operated by the Company pursuant to management agreements. Under the management agreements for these communities, the Company receives management fees as well as reimbursement of expenses it incurs on behalf of the owners.

The following tables set forth selected segment financial data.

(1)All revenue is earned from external third parties in the United States.

(2)Other facility operating expenses is primarily comprised of costs for food, utilities, maintenance, real estate taxes, insurance, marketing, paid referral fees, and other costs of operating the Company's communities.

(3)Segment operating income is defined as segment revenues less segment facility operating expenses (excluding facility depreciation and amortization) and costs incurred on behalf of managed communities.

The Company does not report total assets by segment because this is not a metric used by the CODM to allocate resources or evaluate segment performance. The Company's total carrying amount of goodwill is included on the Independent Living segment and was $27.3 million as of both June 30, 2026 and December 31, 2025.