American Healthcare REIT Inc

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to promote understanding of our results of operations and financial condition. Such discussion is provided as a supplement to, and should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2023 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or SEC, on March 22, 2024. Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of September 30, 2024 and December 31, 2023, together with our results of operations for the three and nine months ended September 30, 2024 and 2023 and cash flows for the nine months ended September 30, 2024 and 2023. Our results of operations and financial condition, as reflected in the accompanying condensed consolidated financial statements and related notes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors that could affect the ongoing viability of our tenants and residents. During the quarter ended December 31, 2023, we modified how we evaluate our business and make resource allocations, and therefore determined that we operate through four reportable business segments: integrated senior health campuses, outpatient medical, or OM, (which was formerly known as medical office buildings, or MOBs), triple-net leased properties and senior housing operating properties, or SHOP. All segment information included in this Quarterly Report on Form 10-Q has been recast for all periods presented to reflect four reportable business segments and the change in segment name from MOBs to OM. The segment name change from MOBs to OM did not result in any changes to the composition of such segment or information reviewed by management, and therefore, had no impact on the historical results of operations.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to promote understanding of our results of operations and financial condition. Such discussion is provided as a supplement to, and should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2024 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or SEC, on February 28, 2025. Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of March 31, 2025 and December 31, 2024, together with our results of operations and cash flows for the three months ended March 31, 2025 and 2024. Our results of operations and financial condition, as reflected in the accompanying condensed consolidated financial statements and related notes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors that could affect the ongoing operations and occupancy of our tenants and residents.

Previous wording

American Healthcare REIT, Inc., a Maryland corporation, is a self-managed REIT that acquires, owns and operates a diversified portfolio of clinical healthcare real estate properties, focusing primarily on outpatient medical buildings, senior housing, skilled nursing facilities, or SNFs, and other healthcare-related facilities. We have built a fully-integrated management platform, with approximately 114 employees, that operates clinical healthcare properties throughout the United States, the United Kingdom and the Isle of Man. We operate our integrated senior health campuses and SHOP utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure. We have also originated and acquired secured loans and may originate or acquire other real estate-related investments in the future on an infrequent and opportunistic basis. We generally seek investments that produce current income; however, we have selectively developed, and may continue to selectively develop, healthcare real estate properties. We have elected to be taxed as a REIT for U.S. federal income tax purposes. We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Code.

Current wording

American Healthcare REIT, Inc., a Maryland corporation, is a self-managed REIT that acquires, owns and operates a diversified portfolio of clinical healthcare real estate properties, focusing primarily on senior housing, skilled nursing facilities, or SNFs, outpatient medical, or OM, buildings, and other healthcare-related facilities. We have built a fully-integrated management platform that operates clinical healthcare properties throughout the United States, and in the United Kingdom and the Isle of Man. We own and operate our integrated senior health campuses and senior-housing operating properties, or SHOP, utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure. We have also originated and acquired secured loans and may acquire other real estate-related investments in the future on an infrequent and opportunistic basis. We generally seek investments that produce current income; however, we have selectively developed, and may continue to selectively develop, healthcare real estate properties. We have elected to be taxed as a REIT for U.S. federal income tax purposes. We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, or the Code.

Previous wording

We conduct substantially all of our operations through American Healthcare REIT Holdings, LP, or our operating partnership, and we are the sole general partner of our operating partnership. As of December 31, 2023, we owned 95.0% of the operating partnership units, or OP units, in our operating partnership, and the remaining 5.0% OP units were owned by the following limited partners: AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T. Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer, President and director, and Mathieu B. Streiff, one of our directors; Platform Healthcare Investor T-II, LLC; Flaherty Trust; and a wholly-owned subsidiary of Griffin Capital Company, LLC. On August 19, 2024, Platform Healthcare Investor T-II, LLC redeemed all of its OP units in exchange for 1,216,571 shares of our Common Stock on a one-for-one basis, and as a result, is no longer a limited partner of our operating partnership. As of September 30, 2024, we owned 98.5% of the OP units in our operating partnership, and the remaining 1.5% of the OP units were owned by the remaining limited partners. See Note 12, Redeemable Noncontrolling Interests, and Note 13, Equity — Noncontrolling Interests in Total Equity, to our accompanying condensed consolidated financial statements for a further discussion of the ownership in our operating partnership.

Current wording

We conduct substantially all of our operations through American Healthcare REIT Holdings, LP, or our operating partnership, and we are the sole general partner of our operating partnership. As of March 31, 2025 and December 31, 2024, we owned 98.8% and 98.7%, respectively, of the operating partnership units, or OP units, in our operating partnership, and the remaining 1.2% and 1.3% of the OP units, respectively, were owned by the following limited partners: (i) AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T. Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer, President and director, and Mathieu B. Streiff, one of our non-executive directors; and (ii) a wholly owned subsidiary of Griffin Capital Company, LLC. See Note 11, Redeemable Noncontrolling Interests, and Note 12, Equity — Noncontrolling Interests in Total Equity, to our accompanying condensed consolidated financial statements for a further discussion of the ownership in our operating partnership.

Previous wording

We currently operate through four reportable business segments: integrated senior health campuses, OM, SHOP and triple-net leased properties. As of September 30, 2024, we owned and/or operated 324 buildings and integrated senior health campuses, representing approximately 19,676,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,666,399,000. In addition, as of September 30, 2024, we also owned a real estate-related debt investment purchased for $60,429,000.

Current wording

We currently operate through four reportable business segments: integrated senior health campuses, OM, SHOP and triple-net leased properties. As of March 31, 2025, we owned and/or operated 312 buildings and integrated senior health campuses, representing approximately 19,031,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,523,782,000. In addition, as of March 31, 2025, we also owned a real estate-related debt investment purchased for $60,429,000.

Previous wording

For a discussion of our acquisitions and dispositions of investments in 2024, see Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, Note 3, Real Estate Investments, Net, and Note 4, Business Combinations, to our accompanying condensed consolidated financial statements.

Current wording

For a discussion of our acquisitions and dispositions of investments in 2025, see Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements.

Previous wording

During the nine months ended September 30, 2024 and 2023, inflation has affected our operations. The annual rate of inflation in the United States was 2.4% in September 2024 and 3.7% in September 2023, as measured by the Consumer Price Index. We believe inflation has impacted our operations such that we have experienced, and continue to experience, increases in the cost of labor, services, energy and supplies, and therefore continued inflationary pressures on our integrated senior health campuses and SHOP could continue to impact our profitability in future periods. To offset the impact of inflation on the cost of labor and services, we had our RIDEA managers bill higher than average annual rent and care fee increases for existing residents in 2023 and 2024, as compared to prior years, while adjusting market rates as frequently as needed based on competitor pricing and market conditions. We believe this practice will improve operating performance in our integrated senior health campuses and SHOP, as well as increase rent coverage and the stability of our real estate revenue in our triple-net leased properties over time.

Current wording

During the three months ended March 31, 2025 and 2024, inflation has affected our operations. The annual rate of inflation in the United States was 2.4% in March 2025 and 3.5% in March 2024, as measured by the Consumer Price Index. We believe inflation has impacted our operations such that we have experienced, and continue to experience, increases in the cost of labor, services, energy and supplies, and therefore continued inflationary pressures on our integrated senior health campuses and SHOP could continue to impact our profitability in future periods. To offset the impact of inflation on the cost of labor and services, we had our RIDEA managers bill higher than average annual rent and care fee increases for existing residents in 2024 and 2025, as compared to prior years, while adjusting market rates as frequently as needed based on competitor pricing and market conditions. We believe this practice will improve operating performance in our integrated senior health campuses and SHOP, as well as increase rent coverage and the stability of our real estate revenue in our triple-net leased properties over time.

Previous wording

In addition, inflation has also caused an increase in the cost of our variable-rate debt due to historically rising interest rates. See Item 3, Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk, of this Quarterly Report on Form 10-Q for further discussion.

Current wording

In addition, inflation has also caused an increase in the cost of our variable-rate debt due to historically rising interest rates. See Item 3, Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk, of this Quarterly Report on Form 10-Q for a further discussion.

Previous wording

Excluding our SHOP and integrated senior health campuses, as of September 30, 2024, our properties were 91.0% leased, and, during the remainder of 2024, 2.8% of the leased GLA is scheduled to expire. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next twelve months. In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. As of September 30, 2024, our remaining weighted average lease term was 6.5 years, excluding our SHOP and integrated senior health campuses.

Current wording

Excluding our SHOP and integrated senior health campuses, as of March 31, 2025, our properties were 89.9% leased, and, during the remainder of 2025, 10.0% of the leased GLA is scheduled to expire. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next 12 months. In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. As of March 31, 2025, our remaining weighted average lease term was 6.7 years, excluding our SHOP and integrated senior health campuses.

Previous wording

Our combined SHOP and integrated senior health campuses were 87.8% leased as of September 30, 2024. Substantially all of our leases with residents at such properties are for a term of one year or less.

Current wording

Our combined SHOP and integrated senior health campuses were 87.6% leased as of March 31, 2025. Substantially all of our leases with residents at such properties are for a term of one year or less.

Previous wording

Comparison of Three and Nine Months Ended September 30, 2024 and 2023

Current wording

Comparison of Three Months Ended March 31, 2025 and 2024

Previous wording

The most significant drivers behind changes in our consolidated results of operations for the three and nine months ended September 30, 2024 compared to the corresponding periods in 2023 were primarily due to: the increase in resident occupancies and billing rates, partially offset by the adverse effect of inflation, which resulted in increases in the cost of labor, services, energy and supplies; our acquisitions and dispositions of investments subsequent to September 30, 2023; and the transition of the operations of certain leased senior housing and skilled nursing facilities from triple-net leased properties to a managed portfolio utilizing a RIDEA structure. Additional information behind the changes in our consolidated results of operations is discussed in more detail below. See Note 2, Summary of Significant Accounting Policies — Properties Held for Sale, Note 3, Real Estate Investments, Net, and Note 4, Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions during 2024. As of September 30, 2024 and 2023, we owned and/or operated the following types of properties (dollars in thousands):

Current wording

The most significant drivers behind changes in our consolidated results of operations for the three months ended March 31, 2025 compared to the corresponding period in 2024 were primarily due to: the increase in resident occupancies and billing rates; the adverse impact of inflation, which resulted in increases in the cost of labor, services, energy and supplies; and our acquisitions and dispositions of investments. Additional information behind the changes in our consolidated results of operations is discussed in more detail below. See Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions during 2025. As of March 31, 2025 and 2024, we owned and/or operated the following types of properties (dollars in thousands):

Previous wording

Our primary sources of revenue include resident fees and services revenue generated by our RIDEA properties and rent from our leased, non-RIDEA properties. For the three and nine months ended September 30, 2024 and 2023, resident fees and services revenue primarily consisted of rental fees related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries. The amount of revenues generated by our RIDEA properties depends principally on our ability to maintain resident occupancy rates. The amount of revenues generated by our non-RIDEA properties is dependent on our ability to maintain tenant occupancy rates of currently leased space and to lease available space at the then existing rental rates. We also received grant income during the three and nine months ended September 30, 2023. Revenues and grant income by reportable segment consisted of the following for the periods then ended (in thousands):

Current wording

Our primary sources of revenue include resident fees and services revenue generated by our RIDEA properties and rent from our leased, non-RIDEA properties. For the three months ended March 31, 2025 and 2024, resident fees and services revenue primarily consisted of rental fees related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries. The amount of revenues generated by our RIDEA properties depends principally on our ability to maintain resident occupancy rates. The amount of revenues generated by our non-RIDEA properties is dependent on our ability to maintain tenant occupancy rates of currently leased space and to lease available space at the then existing rental rates. Revenues by reportable segment consisted of the following for the periods presented below (in thousands):

Previous wording

For our integrated senior health campuses segment, we increased resident fees and services revenue by $37,335,000 and $99,605,000, respectively, for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to: (i) increased resident occupancy and higher resident fees as a result of an increase in billing rates and levels of service; and (ii) an increase of $8,320,000 and $18,357,000, respectively, due to the expansion of our customer base, expansion of services offered and increases in billing rates for such services at ancillary business units within Trilogy Investors, LLC, or Trilogy.

Current wording

For our integrated senior health campuses segment, we increased resident fees and services revenue by $30,242,000 for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to increased resident occupancy and higher resident fees as a result of an increase in billing rates and levels of service.

Previous wording

For our SHOP segment, resident fees and services revenue increased $23,293,000 and $51,902,000, respectively, for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to: (i) an increase of $11,893,000 and $31,418,000, respectively, due to the acquisition of 14 senior housing properties in February 2024; (ii) an increase of $4,028,000 and $12,367,000, respectively, due to the transitioning of leased senior housing facilities in our Michigan ALF Portfolio to a managed portfolio utilizing a RIDEA structure in November 2023; and (iii) an increase of $1,581,000 due to the acquisition of five senior housing properties in Washington in September 2024. Additionally, $5,102,000 of the increase in resident fees and services revenue for our SHOP segment for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to transitioning SNFs in our Central Wisconsin Senior Care Portfolio from triple-net leased properties to a managed portfolio utilizing a RIDEA structure in March 2023. The remaining increase in resident fees and services revenue for our SHOP segment was primarily attributable to increased resident occupancy and higher resident fees as a result of an increase in billing rates and levels of service. Such increases were partially offset by real estate dispositions within our SHOP segment in 2023 and 2024.

Current wording

For our SHOP segment, resident fees and services revenue increased $14,816,000 for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to: (i) an increase of $4,771,000 due to the acquisition of five senior housing properties in Washington in September 2024; (ii) an increase of $4,348,000 due to the acquisition of 14 senior housing properties in Oregon in February 2024; and (iii) an increase of $1,043,000 due to the acquisition of one senior housing property in Georgia in October 2024. The remaining increase in resident fees and services revenue for our SHOP segment was primarily attributable to increased resident occupancy and higher resident fees as a result of an increase in billing rates.

Previous wording

Real estate revenue for our OM segment decreased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to dispositions of OM buildings during 2023 and 2024 and a slight decrease in occupancy.

Current wording

Real estate revenue for our OM segment decreased $873,000 for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to dispositions of OM buildings in 2024.

Previous wording

Integrated senior health campuses and SHOP typically have a higher percentage of direct operating expenses to revenue and grant income than OM buildings and triple-net leased properties due to the nature of RIDEA-type facilities where we conduct day-to-day operations. Property operating expenses and property operating expenses as a percentage of resident fees and services revenue and grant income, as well as rental expenses and rental expenses as a percentage of real estate revenue, by reportable segment consisted of the following for the periods then ended (dollars in thousands):

Current wording

Integrated senior health campuses and SHOP typically have a higher percentage of direct operating expenses to revenue than OM buildings and triple-net leased properties due to the nature of RIDEA-type facilities where we conduct day-to-day operations. Property operating expenses and property operating expenses as a percentage of resident fees and services revenue, as well as rental expenses and rental expenses as a percentage of real estate revenue, by reportable segment consisted of the following for the periods presented below (dollars in thousands):

Previous wording

For the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, the increase in total property operating expenses for our integrated senior health campuses segment was predominately due to: (i) increased resident occupancy at the facilities within such segment; and (ii) an increase of $6,574,000 and $22,789,000, respectively, within Trilogy’s ancillary business unit due to higher labor costs associated with the expansion of services offered and inflation’s impact on labor costs and other operating expenses.

Current wording

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, the increase in total property operating expenses for our integrated senior health campuses segment was predominately due to: (i) increased resident occupancy at the facilities within such segment; and (ii) an increase of $2,511,000 within Trilogy’s ancillary business unit due to higher labor costs associated with the expansion of services offered and inflation’s impact on labor costs and other operating expenses.

Previous wording

For the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, total property operating expenses for our SHOP segment increased primarily due to: (i) an increase of $10,666,000 and $27,588,000, respectively, due to the acquisition of 14 senior housing properties in February 2024; (ii) an increase of $4,442,000 and $13,350,000, respectively, due to the transitioning of the senior housing facilities in our Michigan ALF Portfolio from triple-net leased properties to a managed portfolio utilizing a RIDEA structure in November 2023; (iii) an increase of $975,000 due to the acquisition of five senior housing properties in Washington in September 2024; and (iv) increased resident occupancy at the facilities within such segment. Additionally, $3,900,000 of the increase in total property operating expenses for our SHOP segment for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to transitioning the SNFs in our Central Wisconsin Senior Care Portfolio from triple-net leased properties to a managed portfolio utilizing a RIDEA structure in March 2023. Such increases in total property operating expenses for our SHOP segment were partially offset by a decrease of $1,134,000 and $14,155,000, respectively, in total property operating expenses for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to real estate dispositions within our SHOP segment in 2023 and 2024.

Current wording

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, total property operating expenses for our SHOP segment increased primarily due to: (i) an increase of $3,795,000 due to the acquisition of 14 senior housing properties in Oregon in February 2024; (ii) an increase of $3,688,000 due to the acquisition of five senior housing properties in Washington in September 2024; and (iii) an increase of $905,000 due to the acquisition of one senior housing property in Georgia in October 2024.

Previous wording

Rental expenses for our OM segment decreased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to the dispositions of OM buildings since September 30, 2023.

Current wording

Rental expenses for our OM segment decreased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to the dispositions of OM buildings in 2024.

Previous wording

Interest expense, including gain or loss in fair value of derivative financial instruments, consisted of the following for the periods then ended (in thousands):

Current wording

Interest expense, including gain or loss in fair value of derivative financial instruments, consisted of the following for the periods presented below (in thousands):

Previous wording

The decrease in total interest expense for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to a decrease in debt balances predominately related to: (i) the payoff of $176,145,000 of variable-rate mortgage loans payable and paydown of $545,010,000 on our variable-rate lines of credit in February 2024 from the net proceeds received from the February 2024 Offering; and (ii) the paydown of $194,000,000 on our variable-rate lines of credit in September 2024 from the net proceeds received from the September 2024 Offering. Such decrease in total interest expense for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was partially offset by the $10,362,000 change from gain to loss in fair value of derivative financial instruments. See Note 7, Other Assets, Net, Note 8, Mortgage Loans Payable, Net, and Note 10, Derivative Financial Instruments, to our accompanying condensed consolidated financial statements for a further discussion of debt and derivative extinguishments.

Current wording

The decrease in total interest expense for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily due to an $11,352,000 decrease in interest expense related to a decrease in debt balances. Such decrease in debt balances was predominately a result of the payoff of our variable-rate mortgage loans payable and paydown of our variable-rate lines of credit using net proceeds raised from equity offerings during 2024. Such decrease in total interest expense for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was partially offset by the $7,167,000 change from gain to loss in fair value of derivative financial instruments.

Previous wording

For the three months ended September 30, 2024, we disposed of a land easement on one of our OM properties and recognized a net loss on sale of $(4,000). For the nine months ended September 30, 2024, we recognized an aggregate net gain on dispositions of our real estate investments of $2,257,000 primarily related to the sale of two OM buildings and one SHOP in 2024. See Note 2, Summary of Significant Accounting Policies — Properties Held for Sale and Note 3, Real Estate Investments, Net — Dispositions of Real Estate Investments, to our accompanying condensed consolidated financial statements for further discussion.

Current wording

For the three months ended March 31, 2025, we recognized an aggregate loss on sale of $359,000 primarily related to the sale of one SHOP and one integrated senior health campus. For the three months ended March 31, 2024, we recognized an aggregate net gain on dispositions of our real estate investments of $2,263,000 related to the sale of two OM buildings and one SHOP. See Note 3, Real Estate Investments, Net — Dispositions of Real Estate Investments, to our accompanying condensed consolidated financial statements for a further discussion.

Previous wording

For both the three and nine months ended September 30, 2024, we did not recognize impairment charges on real estate investments. For both the three and nine months ended September 30, 2023, we recognized an aggregate impairment charge of $12,510,000 for two of the SHOP within our Northern CA Senior Housing Portfolio. See Note 3, Real Estate Investments, Net— Impairment of Real Estate Investments, to our accompanying condensed consolidated financial statements for further discussion.

Current wording

As we continued to evaluate our properties based on their historical operating performance and our expected holding period, for the three months ended March 31, 2025, we determined that one of our OM buildings was impaired and recognized an impairment charge of $21,706,000. See Note 3, Real Estate Investments, Net — Impairment of Real Estate Investments, to our accompanying condensed consolidated financial statements for a further discussion. For the three months ended March 31, 2024, we did not recognize impairment charges on real estate investments.

Previous wording

Our principal sources of liquidity are cash flows from operations, borrowings under our lines of credit and proceeds from dispositions of real estate investments. For the next 12 months, our principal liquidity needs are to: (i) fund property operating expenses and general and administrative expenses; (ii) meet our debt service requirements (including principal and interest); (iii) fund development activities and capital expenditures; and (iv) make distributions to our stockholders, as required for us to continue to qualify as a REIT. We believe that the sources of liquidity described above will be sufficient to satisfy our cash requirements for the next 12 months and thereafter. We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Current wording

Our principal sources of liquidity are cash flows from operations, net proceeds from the issuances of equity securities, including through our ATM Offering (as defined and described at Note 12, Equity – Common Stock, to our accompanying condensed consolidated financial statements), borrowings under our line of credit and proceeds from the disposition of real estate investments. For the next 12 months, our principal liquidity needs are to: (i) fund property operating expenses and general and administrative expenses; (ii) meet our debt service requirements (including principal and interest); (iii) fund the acquisition of real estate investments, development activities and capital expenditures; and (iv) make distributions to our stockholders, as required for us to continue to qualify as a REIT. We believe that the sources of liquidity described above will be sufficient to satisfy our cash requirements for the next 12 months and thereafter. We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Previous wording

A capital plan for each investment is established upon acquisition that contemplates the estimated capital needs of that investment, including costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include operating cash generated by the investment, capital reserves, a line of credit or other loan established with respect to the investment, other borrowings or additional equity investments from us and joint venture partners. The capital plan for each investment is adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs. As of September 30, 2024, we had $16,297,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures. Based on the budget for the properties we owned as of September 30, 2024, we estimated that unspent discretionary expenditures for capital and tenant improvements as of such date are to be approximately $14,686,000 for the remaining three months of 2024, although actual expenditures are dependent on many factors which are not presently known.

Current wording

A capital plan for each investment is established upon acquisition that contemplates the estimated capital needs of that investment, including costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include operating cash generated by the investment, capital reserves, a line of credit or other loan established with respect to the investment, other borrowings or additional equity investments from us and joint venture partners. The capital plan for each investment is adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs. As of March 31, 2025, we had $13,654,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures. Based on the budget for the properties we owned as of March 31, 2025, we estimate that expenditures for capital and tenant improvements as of such date are approximately $61,066,000 for the remaining nine months of 2025, although actual expenditures are predominantly discretionary and are dependent on many factors which are not presently known.

Previous wording

The following table provides information with respect to: (i) the maturity and scheduled principal repayment of our secured mortgage loans payable and lines of credit and term loan; (ii) interest payments on our mortgage loans payable and lines of credit and term loan, excluding the effect of our interest rate swaps; (iii) ground and other lease obligations; and (iv) financing and other obligations as of September 30, 2024 (in thousands):

Current wording

The following table provides information with respect to: (i) the maturity and scheduled principal repayment of our secured mortgage loans payable and line of credit and term loan; (ii) interest payments on our mortgage loans payable and line of credit and term loan, excluding the effect of our interest rate swaps; (iii) operating lease obligations; and (iv) financing and other obligations as of March 31, 2025 (in thousands):

Previous wording

We are party to a credit agreement, as amended, with an aggregate maximum principal amount up to $1,150,000,000, or the 2024 Credit Facility. In addition, we are party to an agreement, as amended, regarding a senior secured revolving credit facility with an aggregate maximum principal amount of $400,000,000, or the Trilogy Credit Facility. See Note 9, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for a further discussion.

Current wording

We are party to a credit agreement, as amended, with an aggregate maximum principal amount up to $1,150,000,000, or the 2024 Credit Facility. See Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for a further discussion.

Previous wording

As of September 30, 2024, our aggregate borrowing capacity under the 2024 Credit Facility and the Trilogy Credit Facility was $1,550,000,000. As of September 30, 2024, our aggregate borrowings outstanding under our credit facilities was $596,532,000, and we had an aggregate of $953,468,000 available on such facilities. We believe that the resources described above will be sufficient to satisfy our cash requirements for the next 12 months and thereafter.

Current wording

As of March 31, 2025, our borrowing capacity under the 2024 Credit Facility was $1,150,000,000. As of March 31, 2025, our borrowings outstanding under such credit facility was $643,000,000, and we had $507,000,000 available on such facility. We believe that such resource will be sufficient to satisfy our cash requirements for the next 12 months and the longer term thereafter.

Previous wording

For the nine months ended September 30, 2024 and 2023, cash flows from operating activities were primarily related to property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness. In general, cash flows from operating activities are affected by the timing of cash receipts and payments. In addition, the increase in net cash provided by operating activities for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily driven by the increase in operating performance of our real estate investments in our integrated senior health campuses and SHOP segments, as well as a decrease in interest paid on our outstanding indebtedness as a result of mortgage payoffs and paydowns on our lines of credit using net proceeds from the February 2024 Offering and September 2024 Offering. See the “Results of Operations” section above for further discussion.

Current wording

For the three months ended March 31, 2025 and 2024, cash flows from operating activities were primarily related to property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness. In general, cash flows from operating activities are affected by the timing of cash receipts and payments, and have increased since 2024 primarily due to improved resident occupancy and expense management at our properties operated under a RIDEA structure. The change from net cash used in operating activities to net cash provided by operating activities for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily driven by the increase in operating performance of our real estate investments in our integrated senior health campuses and SHOP segments, as well as a decrease in interest paid on our outstanding indebtedness as a result of mortgage payoffs and paydowns on our lines of credit using net proceeds from our equity offerings in 2024 and 2025. See the “Results of Operations” section above for a further discussion.

Previous wording

For the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, the change from net cash provided by investing activities to net cash used in investing activities was primarily due to a $153,332,000 decrease in proceeds from dispositions of real estate investments, partially offset by a $12,000,000 decrease in investments in unconsolidated entities, a $12,130,000 decrease in developments and capital expenditures and a $17,508,000 change from issuance of real estate notes receivable to net principal repayments on real estate notes receivable.

Current wording

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, the increase in net cash used in investing activities was primarily due to a $16,090,000 increase in cash paid to acquire real estate investments, a $4,947,000 decrease in proceeds from dispositions of real estate investments and $3,355,000 in deposits paid in pursuit of future real estate investments.

Previous wording

For the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, the change from net cash used in financing activities to net cash provided by financing activities was primarily due to the closing of the February 2024 Offering and September 2024 Offering that resulted in an aggregate $1,244,036,000 in gross offering proceeds from the issuance of Common Stock as well as a decrease of $15,042,000 in net payments on financing and other obligations. Such amounts were partially offset by a $761,587,000 increase in net payments on our lines of credit and mortgage loans payable, primarily using the net proceeds from the February 2024 Offering and September 2024 Offering for such paydowns, $258,001,000 in cash paid to purchase the noncontrolling interest in Trilogy REIT Holdings LLC held by a joint venture partner, a $69,023,000 increase in payment of offering costs, a $22,906,000 increase in distributions paid to common stockholders and a $20,129,000 increase in cash paid to redeem certain equity interests owned in Trilogy Investors, LLC.

Current wording

For the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, the change from net cash provided by financing activities to net cash used in financing activities was primarily due to a $725,134,000 decrease in gross equity offering proceeds and a $22,952,000 increase in distributions paid. Such amounts were partially offset by a $602,862,000 decrease in net payments on our lines of credit and mortgage loans payable primarily using the net proceeds from equity offerings, a $46,943,000 decrease in the payment of offering costs, a $5,579,000 decrease in deferred financing costs paid, as well as a $25,312,000 decrease in cash paid to redeem certain equity interests owned in Trilogy Investors, LLC.

Previous wording

Our board shall authorize distributions, if any, on a quarterly basis, in such amounts as our board shall determine, and each quarterly record date for the purposes of such distributions shall be determined and authorized by our board in the last month of each calendar quarter until such time as our board changes our distribution policy. On November 14, 2022, our board suspended our DRIP offering beginning with distributions declared, if any, for the quarter ending December 31, 2022. As a result of the suspension of our DRIP, unless and until our board reinstates our DRIP offering, stockholders who are current participants in our DRIP were or will be paid distributions in cash.

Current wording

Our board shall authorize distributions, if any, on a quarterly basis, in such amounts as our board shall determine, and each quarterly record date for the purposes of such distributions shall be determined and authorized by our board in the last month of each calendar quarter until such time as our board changes our distribution policy.

Previous wording

Since the first quarter of 2023, our board has authorized a quarterly distribution equal to $0.25 per share to holders of our common stock, which we expect will continue to be paid in the future, though we cannot guarantee that our distributions will continue at the current value. Such quarterly distributions were equal to an annualized distribution rate of $1.00 per share and paid in cash, only from legally available funds. The amount of the quarterly distributions paid to our common stockholders was determined by our board and was dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our qualification as a REIT under the Code.

Current wording

Our board has authorized a quarterly distribution equal to $0.25 per share to holders of our common stock, which we expect will continue to be paid in the future, though we cannot guarantee that our distributions will continue at the current value or at all. Such quarterly distributions were equal to an annualized distribution rate of $1.00 per share and paid in cash, only from legally available funds. The amount of the quarterly distributions paid to our common stockholders was determined by our board and was dependent on a number of factors, including funds available for payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our qualification as a REIT under the Code.

Previous wording

The following tables reflect distributions we paid for the nine months ended September 30, 2024 and 2023, and the sources of distributions as compared to cash flows from operations or funds from operations attributable to controlling interest, or FFO, a non-GAAP financial measure (dollars in thousands):

Current wording

The following tables reflect distributions we paid for the three months ended March 31, 2025 and 2024, and the sources of distributions as compared to cash flows from operations or funds from operations attributable to controlling interest, or FFO, a non-GAAP financial measure (dollars in thousands):

Previous wording

In order to maintain our qualification as a REIT for U.S. federal income tax purposes, we are required to distribute to our stockholders a minimum of 90.0% of our REIT taxable income. Existing Internal Revenue Service, or IRS, guidance includes a safe harbor pursuant to which publicly offered REITs can satisfy the distribution requirement by distributing a combination of cash and stock to stockholders. In general, to qualify under the safe harbor, each stockholder must elect to receive either cash or stock, and the aggregate cash component of the distribution to stockholders must represent at least 20.0% of the total distribution. In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collection of receivables, we may seek to obtain capital to make distributions by means of secured and unsecured debt financing through one or more unaffiliated third parties. We may also make distributions with cash from capital transactions including, without limitation, the sale of one or more of our properties.

Current wording

In order to maintain our qualification as a REIT for U.S. federal income tax purposes, we are required to distribute to our stockholders a minimum of 90.0% of our REIT taxable income. Existing Internal Revenue Service, or IRS, guidance includes a safe harbor pursuant to which publicly offered REITs can satisfy the distribution requirement by distributing a combination of cash and stock to stockholders. In general, to qualify under the safe harbor, each stockholder must elect to receive either cash or stock, and the aggregate cash component of the distribution to stockholders must represent at least 20.0%of the total distribution. In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collection of receivables, we may seek to obtain capital to make distributions by means of unsecured and secured debt financing through one or more unaffiliated third parties. We may also make distributions with cash from capital transactions including, without limitation, the sale of one or more of our properties.

Previous wording

A significant liquidity need is the payment of principal and interest on our outstanding indebtedness. As of September 30, 2024, we had $1,307,702,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties. As of September 30, 2024, we had $596,532,000 outstanding, and $953,468,000 remained available under our lines of credit. The weighted average effective interest rate on our outstanding debt, factoring in our interest rate swaps, was 4.72% per annum as of September 30, 2024. See Note 8, Mortgage Loans Payable, Net, and Note 9, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

Current wording

A significant liquidity need is the payment of principal and interest on our outstanding indebtedness. As of March 31, 2025, we had $1,023,241,000 of fixed-rate mortgage loans payable outstanding secured by our properties. As of March 31, 2025, we had $643,000,000 outstanding, and $507,000,000 remained available under our line of credit. The weighted average effective interest rate on our outstanding debt, factoring in our interest rate swaps, was 4.39% per annum as of March 31, 2025. See Note 7, Mortgage Loans Payable, Net, and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

Previous wording

We are required by the terms of certain loan documents to meet various financial and non-financial covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ratios. As of September 30, 2024, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loan. If any future covenants are violated, we anticipate seeking a waiver or amending the debt covenants with the lenders when and if such event should occur. However, there can be no assurances that management will be able to effectively achieve such plans.

Current wording

We are required by the terms of certain loan documents to meet various financial and non-financial covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ratios. As of March 31, 2025, we were in compliance with all such covenants and requirements on our mortgage loans payable and our line of credit and term loan. If any future covenants are violated, we anticipate seeking a waiver or amending the debt covenants with the lenders when and if such event should occur. However, there can be no assurances that management will be able to effectively achieve such plans.

Previous wording

We believe that NOI is an appropriate supplemental performance measure to reflect the performance of our operating assets because NOI excludes certain items that are not associated with the operations of the properties. We believe that NOI is a widely accepted measure of comparative operating performance in the real estate community and is useful to investors in understanding the profitability and operating performance of our property portfolio. However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

Current wording

We believe that NOI is an appropriate supplemental performance measure to reflect the performance of our operating assets because NOI excludes certain items that are not associated with the operations of our properties. We believe that NOI is a widely accepted measure of comparative operating performance in the real estate community and is useful to investors in understanding the profitability and operating performance of our property portfolio. However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.