Financial Performance - Net loss attributable to common stockholders was $(0.92) per basic and diluted share for Q4 2025, with Nareit defined Funds From Operations (FFO) of $0.07 per diluted share, a 49.1% decrease year-over-year [7]. - Net loss attributable to common stockholders for the full year was $(2.51) per basic and diluted share, with FFO of $0.64 per diluted share, a 116.7% increase year-over-year [7]. - The net loss attributable to common stockholders for Q4 2025 was $25,978 million, an increase from a net loss of $20,437 million in Q4 2024, with a total net loss of $71,067 million for 2025 compared to $203,495 million in 2024 [39]. - The net loss per share attributable to common stockholders was $0.92 for Q4 2025, compared to $0.72 for Q4 2024, with a total net loss per share of $2.51 for 2025 versus $7.19 for 2024 [35]. - The company reported a comprehensive loss attributable to common stockholders of $27,934 million in Q4 2025, compared to $18,098 million in Q4 2024, with a total comprehensive loss of $82,103 million for 2025 versus $210,319 million for 2024 [34]. Revenue and Income - Revenue from tenants decreased to $84,478 million in Q4 2025 from $87,738 million in Q4 2024, and total revenue for 2025 was $342,279 million compared to $353,794 million in 2024, reflecting a decline of approximately 3.5% year-over-year [34]. - The company reported a normalized FFO of $5,849 million for Q4 2025, down from $6,692 million in Q4 2024, while the total normalized FFO for 2025 was $23,795 million compared to $9,048 million in 2024 [39]. - The company’s NOI for Q4 2025 was $31,460 million, a decrease from $32,843 million in Q4 2024, with total NOI for 2025 at $123,381 million compared to $132,342 million in 2024 [37]. Expenses and Costs - Total operating expenses for Q4 2025 were $90,592 million, down from $96,746 million in Q4 2024, while total expenses for 2025 were $366,779 million compared to $486,642 million in 2024, indicating a significant reduction in costs [34]. - Interest expense for Q4 2025 was $15,856 million, down from $17,305 million in Q4 2024, with total interest expense for 2025 at $61,281 million compared to $69,447 million in 2024 [39]. Debt and Financing - As of December 31, 2025, total debt outstanding was approximately $1.0 billion, with a weighted average economic interest rate of 5.75% and an average remaining term of 3.9 years [5]. - The Company entered into a $400 million senior unsecured revolving credit facility and a $150 million senior unsecured term loan, both maturing in December 2028 [6]. - The company’s net debt to annualized adjusted EBITDA ratio improved to 9.2x as of December 31, 2025, from 10.3x as of December 31, 2024 [8]. - Net leverage ratio increased to 9.2x in Q4 2025 from 8.8x in Q3 2025, indicating a rise in debt relative to adjusted EBITDA [43]. Property and Operations - Full year 2025 portfolio Same Store Cash Net Operating Income (NOI) growth was 9.0% year-over-year, with the Senior Housing Operating Property (SHOP) segment experiencing a 21.8% increase [7]. - Fourth quarter portfolio Same Store Cash NOI growth was 9.8% year-over-year, with the OMF segment showing a 1.9% increase [7]. - Full year 2025 dispositions totaled $202.5 million, representing the sale of seven Non-Core SHOPs and 18 Non-Core OMFs [7]. - Total properties as of December 31, 2025, decreased to 168 from 174 as of September 30, 2025, due to dispositions [45]. Segment Performance - OMF segment revenue from tenants decreased to $28.149 million in Q4 2025 from $33.744 million in Q4 2024, reflecting a decline of 16.5% [45]. - SHOP segment revenue from tenants increased to $56.328 million in Q4 2025, up from $53.994 million in Q4 2024, representing a growth of 4.9% [45]. - OMF segment NOI for Q4 2025 was $20.109 million, down from $24.322 million in Q4 2024, a decrease of 17.8% [45]. - SHOP segment NOI improved to $11.351 million in Q4 2025, compared to $8.521 million in Q4 2024, marking a growth of 33.5% [45]. Stock and Dividends - The Company completed the repurchase of previously outstanding preferred stock with an aggregate liquidation preference of approximately $8.6 million at a weighted average yield of 11.5% [9]. - The Company declared dividends of $0.4609375 per share on its 7.375% Series A Preferred Stock and $0.4453125 per share on its 7.125% Series B Preferred Stock, both payable on January 15, 2026 [14].

Company Overview - As of December 31, 2025, the company owned 167 properties across 29 states, including 37 senior housing communities with 3,615 units and 130 outpatient medical facilities totaling approximately 3.7 million square feet of gross leasable area[17]. - The company focuses primarily on investments in senior housing operating properties (SHOPs) and aims to diversify its portfolio without geographic or asset percentage limits[20]. - The SHOP segment includes 37 properties, primarily consisting of 1,895 assisted living units, 838 memory care units, and 882 independent living units[21]. - The outpatient medical facilities segment consists of 130 properties leased to healthcare service providers, enhancing tenant retention through proximity to hospital systems[22]. Financial Structure - The company utilizes a combination of debt and equity for funding, with a Revolving Facility providing up to $400 million in variable-rate financing[24]. - The company must distribute at least 90% of its REIT taxable income to maintain its tax status, which commenced in 2013[27]. - As of December 31, 2025, the company had total outstanding indebtedness of $1.0 billion, which may increase business risks and limit access to capital markets[171]. - 17.8% of the total gross debt bore interest at variable rates as of December 31, 2025, increasing exposure to rising borrowing costs[181]. - The company has incurred, and may continue to incur, variable-rate debt, which has been affected by elevated federal funds rates, potentially increasing debt payments[178]. - The company may face challenges in refinancing indebtedness secured by properties if interest rates remain high, which could limit cash flow available for operations and distributions[179]. Regulatory Compliance - The healthcare industry is highly regulated, and compliance with federal, state, and local laws is critical for the company's tenants and operators[30]. - The company is subject to various federal and state laws, including the Anti-Kickback Statute and Stark Law, which impose significant penalties for violations, including fines exceeding $100,000 and civil penalties over $25,000 per violation[39][40]. - The Federal False Claims Act (FCA) allows for penalties between $14,308 and $28,619 per claim for false submissions, with the potential for significant financial repercussions for violations[43]. - The Centers for Medicare and Medicaid Services (CMS) has implemented alternative sanction enforcement options, including payment suspensions and civil monetary penalties for non-compliance with Medicare and Medicaid requirements[47]. - The company is subject to various risks, including economic downturns, regulatory changes, and competition from other real estate investors, which could affect its operations[79]. - The company is subject to environmental regulations that could increase operational costs and expose it to significant fines or penalties[128]. Tenant and Market Risks - The company faces competition from various entities, including other REITs and private investment funds, which may have greater resources and risk tolerance[29]. - The company has experienced net losses in recent years, attributed to property operating costs, impairment charges, and general administrative expenses[108]. - The company incurred bad debt expenses of $0.7 million, $1.5 million, and $1.2 million for the years ended December 31, 2025, 2024, and 2023, respectively, due to tenant defaults[82]. - The company’s real estate investments are concentrated in healthcare-related facilities, making it vulnerable to downturns in the healthcare industry, which could negatively affect lessees' ability to pay rent[136]. - The company may struggle to renew leases or re-lease space as leases expire, potentially leading to vacancies and reduced cash flow[102]. - Financial challenges faced by tenants and operators may result in bankruptcy, adversely affecting income from properties[163]. Operational Challenges - The company has transitioned to an internally-managed REIT, which may expose it to additional operational risks and costs associated with managing its workforce[78]. - The company may not realize anticipated synergies from its internalization strategy within the expected timeframe, which could affect its operational efficiency[78]. - Rising operating expenses, including increased insurance premiums and labor costs, could negatively impact cash flow and tenant retention[88]. - The company is exposed to operational risks due to reliance on independent contractors for facility management, which may lead to increased operational deficits[97]. - The company may face challenges in acquiring properties on favorable terms, particularly in the senior housing segment, which could impact its growth strategy[77]. Environmental and Health Regulations - Environmental regulations impose potential liabilities for cleanup costs and fines, which could exceed property values and impact the company's financial obligations[66]. - The company may incur significant costs related to mold remediation at properties, which could affect overall financial performance[129]. - The transition of Medicare to a value-based payment model poses challenges for providers, shifting financial responsibility and potentially impacting the company's tenants[60]. - Compliance with stringent healthcare regulations and potential penalties for non-compliance could materially impact tenants' financial health and their ability to pay rent[144]. Shareholder and Market Considerations - The company has not paid any cash distributions on its common stock since 2020, and there is no assurance of future cash distributions[81]. - The company’s share repurchase program is suspended, limiting stockholders' ability to sell shares and potentially affecting liquidity[185]. - The trading price of Series A and Series B Preferred Stock may be significantly volatile, influenced by factors such as financial condition, tenant performance, and market conditions[190]. - The company has a restriction on share ownership, limiting any person to own no more than 9.8% of the outstanding shares, which may deter potential acquisitions[193]. Cybersecurity and Technology Risks - Cybersecurity risks are a concern, as system failures or breaches could disrupt operations and incur significant remediation costs[202]. - The company carries cyber liability insurance, but it may not cover all losses related to cybersecurity incidents[207]. - The company faces risks related to unauthorized access and loss of sensitive information, which could adversely affect its operations and reputation[211]. Taxation and REIT Compliance - The company’s qualification as a REIT is crucial for tax purposes, and failure to maintain this status could lead to significant tax liabilities[210]. - Future changes in U.S. federal income tax laws could jeopardize the company's REIT status[212]. - The company may incur tax liabilities even as a REIT, which could reduce cash available for distribution to stockholders[214]. - The company is subject to a 4% nondeductible excise tax on any amount by which distributions fall short of certain income thresholds[215].

Financial Performance - The Company reported a net loss of $(0.56) per basic and diluted share, with Nareit defined Funds from Operations (FFO) of $0.23 per diluted share, and Adjusted Funds from Operations (AFFO) of $0.36 per diluted share[5]. - The net loss attributable to common stockholders for Q3 2025 was $15,881,000, compared to a net loss of $24,189,000 in Q2 2025, indicating an improvement of 34.5%[29]. - The company reported a comprehensive loss attributable to common stockholders of $17,762,000 for Q3 2025, compared to $26,394,000 in Q2 2025, indicating a decrease of 32.9%[28]. - The company reported an operating income of $2,375,000 for Q3 2025, recovering from an operating loss of $5,518,000 in Q2 2025[28]. - Funds from Operations (FFO) attributable to common stockholders increased to $6,708,000 in Q3 2025, up 25.3% from $5,352,000 in Q2 2025[34]. - Adjusted Funds from Operations (AFFO) reached $10,364,000 in Q3 2025, representing a 14.0% increase compared to $9,091,000 in Q2 2025[34]. Revenue and Occupancy - Same Store revenue increased by 12.0% year-over-year[5]. - Same Store Cash Net Operating Income (NOI) growth was 12.2% year-over-year, with the Senior Housing Operating Property (SHOP) segment experiencing a 27.2% increase[5]. - Same Store average occupancy increased to 83.7%, up 4.0% year-over-year[5]. - Revenue from tenants for Q3 2025 was $86,026,000, a slight increase from $85,332,000 in Q2 2025[28]. - SHOP segment revenue from tenants increased to $57,004,000 in Q3 2025, up 1.6% from $56,081,000 in Q2 2025[40]. - OMF segment NOI for Q3 2025 was $20,631,000, a slight decrease of 1.3% from $20,910,000 in Q2 2025[40]. Expenses and Liabilities - Total expenses for Q3 2025 were $84,277,000, down from $93,502,000 in Q2 2025, representing a decrease of approximately 9.5%[28]. - The interest expense for Q3 2025 was $15,060,000, slightly lower than $15,836,000 in Q2 2025, showing a decrease of approximately 4.9%[28]. - The total liabilities stood at $1,106,409,000 as of the latest reporting period, consistent with the previous quarter[26]. - As of September 30, 2025, total debt outstanding was $1.0 billion with a weighted average interest rate of 5.1%[4]. - Year-to-date through September 2025, the Company paid down $83.1 million of debt using proceeds from dispositions[4]. Impairment and Equity - Impairment charges in Q3 2025 were $6,641,000, significantly lower than $15,212,000 in Q2 2025, showing a reduction of 56.3%[28]. - The total stockholders' equity increased to $627,219,000 from $647,033,000 in the prior quarter, reflecting a decrease of approximately 3.1%[26]. Dividends and Future Outlook - The Company declared dividends on its preferred stock, including $0.4609375 per share on its 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock[12]. - The Company has a solid foundation for public listing preparation, driven by strong performance across its segments[2]. Property and Segment Information - The total number of properties in the OMF segment remained stable at 133 as of September 30, 2025, while the SHOP segment decreased to 41 properties[41]. - The Company completed the disposition of one non-core SHOP for a contract sales price of $1.8 million during the quarter[3].

Property Ownership and Operations - As of September 30, 2025, the company owned 174 properties, comprising 7.3 million rentable square feet across 30 states[248]. - The total gross asset value of the company was $2.2 billion as of September 30, 2025[257]. - The average occupancy rate for the SHOP segment improved to 83.2% in 2025 from 77.5% in 2024[263]. - The company internalized its advisory and property management functions on September 27, 2024, transitioning to a dedicated workforce[249]. Financial Performance - For the three months ended September 30, 2025, net loss attributable to common stockholders was $15.9 million, a decrease of 64% from $44.1 million in the same period of 2024[260]. - Revenue from tenants for the OMF segment decreased by 15.4% to $29.0 million for the three months ended September 30, 2025, compared to $34.3 million in 2024[261]. - The SHOP segment reported a 4.3% increase in revenue from tenants, reaching $57.0 million for the three months ended September 30, 2025, up from $54.6 million in 2024[263]. - The OMF segment's net operating income (NOI) decreased by 12.8% to $20.6 million for the three months ended September 30, 2025, compared to $23.6 million in 2024[261]. - SHOP segment NOI increased due to occupancy gains and lower insurance expenses, partially offset by property dispositions[265]. - Net loss attributable to common stockholders was $45.1 million for the nine months ended September 30, 2025, down from $183.1 million in 2024[283]. - Revenue from tenants in the SHOP segment increased by 3.9% to $168.9 million for the nine months ended September 30, 2025[286]. Expenses and Charges - Total expenses for the three months ended September 30, 2025, were $84.3 million, down from $111.4 million in 2024, reflecting a decrease of $27.2 million[260]. - Impairment charges recorded were $6.6 million for Q3 2025, compared to $8.8 million for Q3 2024[266]. - Operating fees to related parties were eliminated in Q3 2025 due to Internalization, resulting in a decrease from $6.4 million in Q3 2024[269]. - Acquisition and transaction related expenses decreased by $5.1 million to $0.1 million in Q3 2025 from $5.2 million in Q3 2024[271]. - General and administrative expenses increased by $0.2 million to $5.7 million in Q3 2025, primarily due to stock-based compensation[272]. - Depreciation and amortization expenses decreased by $2.7 million to $18.0 million in Q3 2025, attributed to property dispositions[274]. - Interest expense decreased by $2.9 million to $15.1 million in Q3 2025, mainly due to lower average indebtedness[276]. - General and administrative expenses decreased by $1.3 million to $15.6 million for the nine months ended September 30, 2025, from $16.9 million in 2024[294]. - Depreciation and amortization expenses decreased by $3.1 million to $60.3 million for the nine months ended September 30, 2025, compared to $63.4 million in 2024[295]. - Interest expense decreased by $6.7 million to $45.4 million for the nine months ended September 30, 2025, from $52.1 million in 2024[298]. Cash Flows and Distributions - Cash flows provided by operating activities increased by $83.3 million during the nine months ended September 30, 2025, compared to the same period in 2024[306]. - Cash flows provided by investing activities increased by $14.6 million during the nine months ended September 30, 2025, primarily due to proceeds from the sale of 15 held-for-use OMFs and four held-for-use SHOPs[307]. - Total cash distributions for the three months ended September 30, 2025, were $3,374,000, with a total of $10,301,000 for the year-to-date[345]. - Cash flows used in operations for the nine months ended September 30, 2025, were $3.0 million, indicating insufficient cash generation to fund current dividend rates[347]. - The company funded distributions to holders of Series A and B Preferred Stock and Series A Preferred Units primarily with available cash on hand[347]. - The ability to pay distributions depends on increasing cash generated from property operations, which is subject to various risks[348]. Stock Repurchase and Dividends - The Board authorized a stock repurchase program for up to $50.0 million of Series A and Series B Preferred Stock, with no stated expiration date[330]. - In Q3 2025, the company repurchased 74,713 shares of Series A Preferred Stock at an average price of $16.10 and 97,670 shares of Series B Preferred Stock at an average price of $16.03[331]. - For the nine months ended September 30, 2025, the company repurchased 131,629 shares of Series A Preferred Stock at an average price of $15.39 and 163,883 shares of Series B Preferred Stock at an average price of $15.14[331]. - The company declared quarterly distributions of $1.84375 per share for Series A Preferred Stock and $1.78125 per share for Series B Preferred Stock, equivalent to 7.375% and 7.125% per annum, respectively[340]. - Since mid-2020, the company has not paid cash dividends on common stock but issued stock dividends until January 2024[341]. - The Board may reduce or suspend dividend payments based on various factors, including financial condition and capital expenditure requirements[342]. - No cash distributions were made to common stockholders or other units in Q3 2025[344]. Market and Economic Conditions - As of September 30, 2025, the 12-month Consumer Price Index increased by 3.0%, impacting lease agreements without indexed escalation provisions[350]. - Most leases in the OMF segment contain rent escalation provisions, but these rates are generally below current inflation rates[350]. - Increased operating costs under net leases could adversely affect tenants' ability to pay rent, impacting the company's revenue[351]. - Leases at SHOPs do not typically have rent escalations, but the company can renew leases at market rates due to their short-term nature[352]. - There has been no material change in the company's exposure to market risk during the nine months ended September 30, 2025[354].

Financial Performance - The Company reported a net loss of $(0.85) per basic and diluted share, with Nareit defined Funds from Operations (FFO) of $0.19 per diluted share, and Adjusted Funds from Operations (AFFO) of $0.32 per diluted share[6]. - The net loss attributable to common stockholders for Q2 2025 was $24,189,000, compared to a net loss of $5,019,000 in Q1 2025, indicating a significant increase in losses[33]. - The comprehensive loss attributable to common stockholders for Q2 2025 was $26,394,000, compared to $10,013,000 in Q1 2025, indicating a worsening of financial performance[31]. - The company reported a net loss per share attributable to common stockholders of $0.85 for Q2 2025, compared to $0.18 in Q1 2025[31]. - Net loss attributable to common stockholders for Q2 2025 was $(24,189) thousand, compared to $(5,019) thousand in Q1 2025, reflecting a significant increase in losses[35]. - The company reported an operating loss before gain on sale of real estate of $8,170,000 for Q2 2025, an improvement from a loss of $11,965,000 in Q1 2025[30]. - The company’s EBITDA for Q2 2025 was $13,541 thousand, a decrease from $36,714 thousand in Q1 2025[38]. Revenue and Income - Same Store revenue increased by 11.8% year-over-year, with Same Store Cash NOI Margin expanding by 0.9% to 19.5%[6]. - Revenue from tenants for Q2 2025 was $85,332,000, a decrease of 1.3% from Q1 2025's $86,443,000[30]. - Net Operating Income (NOI) for Q2 2025 was $31,484 thousand, up from $28,903 thousand in Q1 2025, representing an increase of 5.5%[38]. - Same Store Cash Net Operating Income (NOI) growth was 8.5% year-over-year, with the Senior Housing Operating Property (SHOP) segment showing a growth of 17.3%[6]. Expenses and Liabilities - Total expenses for Q2 2025 were $93,502,000, down from $98,408,000 in Q1 2025, reflecting a reduction of 5.8%[30]. - The total liabilities increased to $1,350,792,000 in Q2 2025 from $1,289,364,000 in Q1 2025, marking a rise of 4.8%[28]. - The company reported impairment charges for Q2 2025 of $15,212,000, up from $11,899,000 in Q1 2025, representing a 27.5% increase[33]. Equity and Debt - Total stockholders' equity rose to $756,745,000 in Q2 2025, up from $702,648,000 in Q1 2025, reflecting a growth of 7.7%[28]. - The total equity increased to $762,587,000 in Q2 2025 from $708,306,000 in Q1 2025, showing a growth of 7.7%[28]. - As of June 30, 2025, total debt outstanding was $1.0 billion with a weighted average interest rate of 5.1% and an average remaining term of 3.7 years[5]. - Year-to-date through June 2025, the Company paid down $83.1 million of debt using proceeds from dispositions[5]. Operational Highlights - Same Store average occupancy increased to 82.8%, up 5.0% year-over-year[6]. - FFO per share increased by 35.7% quarter-over-quarter, while AFFO per share increased by 3.2% quarter-over-quarter[6]. - The Company completed dispositions totaling $21.4 million during the quarter, resulting in a net gain of $2.7 million[4]. - The Company repurchased $1.8 million of preferred stock at a weighted average yield of 12.8%, reducing leverage by $1.3 million[7]. - The company recorded a gain on the sale of real estate of $(2,652) thousand in Q2 2025, compared to a loss of $(24,989) thousand in Q1 2025[38]. - OMF Segment Cash NOI for Q2 2025 was $20,440 thousand, a decrease from $20,780 thousand in Q1 2025, while SHOP Segment Cash NOI increased by 6.6% to $10,275 thousand[40]. - Total properties in the OMF segment decreased from 136 to 133, while SHOP segment properties decreased from 45 to 42 as of June 30, 2025[41]. Future Outlook - The Company is preparing for an eventual public listing, supported by strong operational performance across its portfolio[2].

Property and Asset Management - As of June 30, 2025, the company owned 175 properties across 30 states, comprising 7.3 million rentable square feet[244] - The gross asset value of the company's total real estate investments was $2.2 billion as of June 30, 2025[253] - The total number of properties in the SHOP segment decreased from 47 in 2024 to 42 in 2025, with occupancy increasing from 77.4% to 79.0%[280] - The company internalized its advisory and property management functions on September 27, 2024, transitioning to a dedicated workforce[245] Financial Performance - For the three months ended June 30, 2025, the net loss attributable to common stockholders was $24.2 million, a significant decrease from $119.9 million in the same period of 2024[256] - Revenue from tenants for the three months ended June 30, 2025, was $85.3 million, down from $88.8 million in 2024, reflecting a decrease of $3.5 million[256] - The total expenses for the three months ended June 30, 2025, were $93.5 million, a decrease of $95.5 million compared to $189.0 million in 2024[256] - The company reported a net loss attributable to common stockholders of $29.2 million for the six months ended June 30, 2025, compared to a loss of $138.9 million in 2024[277] - Funds from Operations (FFO) attributable to stockholders for the three months ended June 30, 2025, was $5.4 million, a significant improvement from a loss of $96.5 million in the prior year[332] - Adjusted Funds from Operations (AFFO) attributable to stockholders for the three months ended June 30, 2025, was $9.1 million, compared to $4.4 million in the same period of 2024[332] Revenue and Income - The company reported a net operating income (NOI) of $21.2 million for the OMF segment for the three months ended June 30, 2025, down 14.9% from $24.9 million in 2024[257] - Revenue from tenants in the SHOP segment increased to $56.1 million for the three months ended June 30, 2025, up 3.6% from $54.1 million in 2024[259] - NOI for the SHOP segment rose to $10.2 million for the three months ended June 30, 2025, reflecting a 15.5% increase from $8.9 million in 2024[259] - Revenue from tenants in the OMF segment decreased to $59.9 million for the six months ended June 30, 2025, down 13.5% from $69.3 million in 2024[278] - NOI for the OMF segment decreased to $40.7 million for the six months ended June 30, 2025, reflecting an 18.3% decline from $49.8 million in 2024[278] Expenses and Charges - The company recorded $15.2 million in impairment charges during the three months ended June 30, 2025, primarily related to a held-for-use SHOP[262] - Impairment charges for the six months ended June 30, 2025 totaled $27.1 million, significantly higher than $2.7 million in 2024[283] - General and administrative expenses increased by $0.7 million to $5.4 million for the three months ended June 30, 2025, due to stock-based compensation[266] - General and administrative expenses decreased by $0.8 million to $10.6 million for the six months ended June 30, 2025, compared to $11.4 million in 2024[289] Debt and Financing - As of June 30, 2025, total debt leverage ratio was approximately 44.9%, with net debt totaling $1.0 billion against a gross asset value of $2.2 billion[309] - As of June 30, 2025, the company had $706.2 million in mortgage notes payable at a weighted-average interest rate of 4.64%[313] - Interest expense decreased by $1.9 million to $15.8 million for the three months ended June 30, 2025, attributed to lower average indebtedness and interest rates[269] - Interest expense decreased by $3.8 million to $30.4 million for the six months ended June 30, 2025, primarily due to lower average indebtedness and interest rates[292] Cash Flow and Distributions - Cash flows provided by operating activities decreased by $22.1 million during the six months ended June 30, 2025, primarily due to the repayment of a $30.3 million promissory note[300] - Cash flows from investing activities increased by $91.7 million during the six months ended June 30, 2025, primarily due to proceeds from the sale of 15 held-for-use OMFs[301] - Total cash distributions for the three months ended June 30, 2025, amounted to $3.43 million, with 52.5% going to Series A and 46.2% to Series B Preferred Stockholders[339] - Cash flows used in operations for the six months ended June 30, 2025, were $13.2 million, indicating insufficient cash generation to fund current distribution rates[341] Market Risks and Economic Factors - The company faces inflation risks, with a 3.0% increase in the 12-month Consumer Price Index as of June 30, 2025, potentially impacting lease agreements without indexed escalation provisions[343] - The ability to pay distributions depends on increasing cash generated from property operations, which is subject to various risks and uncertainties[342] - OMF tenants are generally required to pay their pro rata share of property operating and maintenance expenses, which may impact their ability to pay rent if these costs exceed revenue increases[345] - Leases at SHOPs do not typically have rent escalations, but can be renewed at market rates, which is crucial as inflation increases labor costs[346] - There has been no material change in the company's exposure to market risk during the six months ended June 30, 2025[348] Stock and Shareholder Actions - The company declared and issued quarterly dividends entirely in shares of common stock from October 2020 through January 2024, with no further stock dividends planned[247] - A reverse stock split was effective on September 30, 2024, combining every four shares of common stock into one[249] - The company authorized a stock repurchase program for up to $50.0 million of Series A and Series B Preferred Stock, with no stated expiration date[323] - During the three months ended June 30, 2025, the company repurchased 56,916 shares of Series A Preferred Stock at an average price of $14.46 and 66,213 shares of Series B Preferred Stock at an average price of $13.83[324]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements.](index=3&type=section&id=Item%201.%20Financial%20Statements.) Unaudited consolidated financial statements for Q1 2025 and Q4 2024, including balance sheets, operations, equity, cash flows, and notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202025%20and%20December%2031%2C%202024%20%28Unaudited%29) Consolidated Balance Sheet Highlights (In thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Total real estate investments, net | $1,614,903 | $1,768,966 | | Cash and cash equivalents | $71,383 | $21,652 | | Total assets | $1,831,885 | $1,946,023 | | Mortgage notes payable, net | $711,065 | $779,160 | | Credit facilities | $360,774 | $362,216 | | Total liabilities | $1,151,765 | $1,255,898 | | Total equity | $680,120 | $690,125 | - Total assets decreased by approximately **$114.1 million** from December 31, 2024, to March 31, 2025, primarily driven by a reduction in real estate investments, net[8](index=8&type=chunk) - Cash and cash equivalents significantly increased from **$21.7 million** at December 31, 2024, to **$71.4 million** at March 31, 2025[8](index=8&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024%20%28Unaudited%29) Consolidated Statements of Operations Highlights (In thousands, except per share data) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Revenue from tenants | $86,443 | $88,299 | | Total expenses | $98,408 | $89,419 | | Operating income (loss) | $13,024 | $(1,120) | | Gain on sale of real estate investments | $24,989 | $— | | Impairment charges | $11,899 | $260 | | Operating fees to related parties | $— | $6,366 | | Net loss attributable to common stockholders | $(5,019) | $(19,000) | | Net loss per share attributable to common stockholders | $(0.18) | $(0.67) | - Net loss attributable to common stockholders significantly improved from **$(19.0) million** in Q1 2024 to **$(5.0) million** in Q1 2025[10](index=10&type=chunk) - The company recorded a **$25.0 million** gain on the sale of real estate investments in Q1 2025, compared to **$0** in Q1 2024[10](index=10&type=chunk) - Operating fees to related parties were eliminated in Q1 2025 due to the Internalization, down from **$6.4 million** in Q1 2024[10](index=10&type=chunk) [Consolidated Statements of Changes in Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024%20%28Unaudited%29) Consolidated Statements of Changes in Equity Highlights (In thousands) | Item | Balance, December 31, 2024 | Balance, March 31, 2025 | | :----------------------------------- | :------------------------- | :---------------------- | | Total Stockholders' Equity | $684,560 | $674,579 | | Total Equity | $690,125 | $680,120 | - Total stockholders' equity decreased by approximately **$10.0 million** from December 31, 2024, to March 31, 2025[14](index=14&type=chunk) - Key factors for the decrease include distributions declared on Series A and Series B Preferred Stock (**$1.8 million** and **$1.6 million**, respectively) and an unrealized loss on designated derivatives (**$5.0 million**)[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024%20%28Unaudited%29) Consolidated Statements of Cash Flows Highlights (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(21,229) | $2,543 | | Net cash provided by (used in) investing activities | $78,043 | $(12,216) | | Net cash used in financing activities | $(4,501) | $(5,229) | | Net change in cash, cash equivalents and restricted cash | $52,313 | $(14,902) | | Cash, cash equivalents and restricted cash, end of period | $126,408 | $76,414 | - Net cash used in operating activities was **$(21.2) million** in Q1 2025, a decrease from **$2.5 million** provided in Q1 2024, primarily due to the repayment of a **$30.3 million** promissory note[17](index=17&type=chunk)[263](index=263&type=chunk) - Net cash provided by investing activities significantly increased to **$78.0 million** in Q1 2025 from **$(12.2) million** used in Q1 2024, driven by proceeds from real estate sales[17](index=17&type=chunk)[264](index=264&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) [Note 1 — Organization](index=10&type=section&id=Note%201%20%E2%80%94%20Organization) - Company operates as a REIT, owning and managing **181** healthcare-related properties (OMFs and SHOPs) across **30** states, totaling **7.6 million** rentable square feet as of March 31, 2025[23](index=23&type=chunk)[24](index=24&type=chunk)[27](index=27&type=chunk)[228](index=228&type=chunk) - Completed internalization of management on September 27, 2024, terminating prior advisory arrangements and bringing property management in-house[25](index=25&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[229](index=229&type=chunk)[233](index=233&type=chunk) - Effected a one-for-four reverse stock split on September 30, 2024, and changed its name to 'National Healthcare Properties, Inc.' from 'Healthcare Trust, Inc.'[35](index=35&type=chunk)[37](index=37&type=chunk)[234](index=234&type=chunk) - Published a new Estimated Per-Share NAV of **$32.15** as of December 31, 2024, on March 26, 2025[29](index=29&type=chunk)[232](index=232&type=chunk) [Note 2 — Summary of Significant Accounting Policies](index=11&type=section&id=Note%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) - Adopted ASU 2023-07, Segment Reporting — Improvements to Reportable Segment Disclosures, retrospectively, requiring incremental disclosures for reportable segments[77](index=77&type=chunk) - Revenue from OMFs is recognized on a straight-line basis over the lease term, while SHOP revenue is recognized as earned, primarily month-to-month[43](index=43&type=chunk)[44](index=44&type=chunk) - Maintains a **100%** valuation allowance of **$11.1 million** on deferred tax assets as of March 31, 2025, due to historical operating losses of its TRS and adverse economic impacts on SHOP assets[76](index=76&type=chunk) [Note 3 — Real Estate Investments, Net](index=18&type=section&id=Note%203%20%E2%80%94%20Real%20Estate%20Investments%2C%20Net) - No properties acquired during the three months ended March 31, 2025; four properties acquired in the same period of 2024[82](index=82&type=chunk)[83](index=83&type=chunk) - Disposed of **12** held-for-use OMFs in Q1 2025 for **$168.4 million**, resulting in a **$25.0 million** gain on sale[89](index=89&type=chunk)[254](index=254&type=chunk) Impairment Charges by Segment (Three Months Ended March 31) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | OMF | $747 | $— | | SHOP | $11,152 | $260 | | **Total impairment charges** | **$11,899** | **$260** | - As of March 31, 2025, Florida (**22.1%**), Georgia (**11.1%**), and Pennsylvania (**10.7%**) represented significant concentrations of annualized rental income[86](index=86&type=chunk) [Note 4 — Mortgage Notes Payable, Net](index=21&type=section&id=Note%204%20%E2%80%94%20Mortgage%20Notes%20Payable%2C%20Net) Mortgage Notes Payable, Net (In thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Gross mortgage notes payable | $721,040 | $789,647 | | Deferred financing costs, net | $(8,812) | $(9,304) | | Mortgage premiums and discounts, net | $(1,163) | $(1,183) | | **Mortgage notes payable, net** | **$711,065** | **$779,160** | - Weighted-average effective interest rate for gross mortgage notes payable was **4.63%** as of March 31, 2025 (**4.56%** as of December 31, 2024)[98](index=98&type=chunk) - Debt paydowns related to dispositions totaled **$33.7 million** on Capital One OMF Loan, **$20.0 million** on Multi-Property CMBS Loan, and **$14.7 million** on Barclays OMF Loan[102](index=102&type=chunk) [Note 5 — Credit Facilities](index=22&type=section&id=Note%205%20%E2%80%94%20Credit%20Facilities) Credit Facilities Outstanding (In thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Fannie Mae Master Credit Facilities | $339,066 | $340,508 | | OMF Warehouse Facility | $21,708 | $21,708 | | **Total Credit Facilities** | **$360,774** | **$362,216** | - Weighted-average effective interest rate for credit facilities was **6.93%** as of March 31, 2025 (**7.23%** as of December 31, 2024)[104](index=104&type=chunk) - OMF Warehouse Facility, with **$21.7 million** outstanding, was repaid in full and terminated in April 2025[106](index=106&type=chunk)[113](index=113&type=chunk)[223](index=223&type=chunk) - Had **eight** non-designated interest rate cap agreements with an aggregate notional amount of **$369.2 million**, capping one-month SOFR at **3.50%** through January 2027[114](index=114&type=chunk)[140](index=140&type=chunk)[280](index=280&type=chunk) [Note 6 — Fair Value of Financial Instruments](index=24&type=section&id=Note%206%20%E2%80%94%20Fair%20Value%20of%20Financial%20Instruments) - Derivative assets are classified as Level 2 in the fair value hierarchy, as credit valuation adjustments are not significant to the overall valuation[119](index=119&type=chunk)[124](index=124&type=chunk) Derivative Assets at Fair Value (In thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Derivative assets, at fair value (non-designated) | $1,623 | $2,554 | | Derivative assets, at fair value (designated) | $11,658 | $16,652 | | **Total** | **$13,281** | **$19,206** | - Impairment charges were recorded for **three** held-for-use properties (**two** SHOPs, **one** OMF) to reduce carrying value to contractual sales price, as they are being marketed for sale[126](index=126&type=chunk) [Note 7 — Derivatives and Hedging Activities](index=26&type=section&id=Note%207%20%E2%80%94%20Derivatives%20and%20Hedging%20Activities) - **One** derivative with a notional value of **$330.2 million** (March 31, 2025) is designated as a cash flow hedge of interest rate risk, maturing December 2026[136](index=136&type=chunk) - Received **$1.5 million** in Q1 2025 from the partial unwind of a derivative, accelerating reclassification of gains from AOCI to earnings, reducing interest expense[138](index=138&type=chunk)[255](index=255&type=chunk) - **Eight** non-designated interest rate caps with an aggregate notional amount of **$369.2 million** limit one-month SOFR to **3.50%** through January 2027[140](index=140&type=chunk)[141](index=141&type=chunk)[280](index=280&type=chunk) Gain (Loss) on Interest Rate Derivatives Designated as Cash Flow Hedges (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Amount of (loss) gain recognized in accumulated other comprehensive income on interest rate derivatives | $(1,200) | $7,047 | | Amount of gain reclassified from accumulated other comprehensive income into income as interest expense | $3,794 | $4,767 | [Note 8 — Stockholders' Equity](index=28&type=section&id=Note%208%20%E2%80%94%20Stockholders%27%20Equity) - **28,296,439** shares of common stock outstanding as of March 31, 2025 and December 31, 2024[151](index=151&type=chunk) - Share repurchase program (SRP) remains suspended since August 2020[152](index=152&type=chunk) - Outstanding preferred stock: **3,977,144** Series A shares and **3,630,000** Series B shares as of March 31, 2025[157](index=157&type=chunk) - Company has not declared a quarterly stock dividend since January 2024 and does not intend to declare any further stock dividends[159](index=159&type=chunk)[231](index=231&type=chunk)[296](index=296&type=chunk) [Note 9 — Related Party Transactions and Arrangements](index=29&type=section&id=Note%209%20%E2%80%94%20Related%20Party%20Transactions%20and%20Arrangements) - Internalization on September 27, 2024, terminated advisory agreement, eliminating asset management and property management fees to former Advisor and affiliates[160](index=160&type=chunk)[166](index=166&type=chunk)[233](index=233&type=chunk)[249](index=249&type=chunk)[271](index=271&type=chunk) Related Party Operation Fees and Reimbursements (Incurred, In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Acquisition cost reimbursements | $— | $20 | | Asset management fees | $— | $5,458 | | Professional fees and other reimbursements | $— | $3,958 | | Property management fees | $— | $1,470 | | **Total related party operation fees and reimbursements** | **$—** | **$10,906** | - The **$30.3 million** Promissory Note issued to the Advisor Parent in connection with the Internalization was repaid in full in January 2025[34](index=34&type=chunk)[171](index=171&type=chunk)[263](index=263&type=chunk) [Note 10 — Economic Dependency](index=32&type=section&id=Note%2010%20%E2%80%94%20Economic%20Dependency) - Prior to the Internalization, the Company was dependent on its former Advisor and affiliates for essential services including asset management, property management, and administrative responsibilities[179](index=179&type=chunk) [Note 11 — Equity-Based Compensation](index=32&type=section&id=Note%2011%20%E2%80%94%20Equity-Based%20Compensation) - Restricted Share Plan (RSP) expired in February 2023; no unvested shares or unrecognized compensation cost as of March 31, 2025[180](index=180&type=chunk) - Compensation expense related to restricted shares was **$0.2 million** for the three months ended March 31, 2024, and **$0** for 2025[180](index=180&type=chunk) [Note 12 — Accumulated Other Comprehensive Income](index=32&type=section&id=Note%2012%20%E2%80%94%20Accumulated%20Other%20Comprehensive%20Income) Changes in Accumulated Other Comprehensive Income (In thousands) | Item | Unrealized Gain on Designated Derivative | | :-------------------------------------------------------------------------------- | :--------------------------------------- | | Balance, December 31, 2024 | $16,640 | | Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives | $(1,200) | | Amount of gain reclassified from accumulated other comprehensive income | $(3,794) | | **Balance, March 31, 2025** | **$11,646** | [Note 13 — Non-controlling Interests](index=33&type=section&id=Note%2013%20%E2%80%94%20Non-controlling%20Interests) Non-controlling Interests Breakdown (In thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Series A Preferred Units held by third parties | $2,578 | $2,578 | | Common OP Units held by third parties | $2,172 | $2,212 | | Non-controlling Interests in property owning subsidiaries | $791 | $775 | | **Total Non-controlling interests** | **$5,541** | **$5,565** | Net Loss Attributable to Non-controlling Interests (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss attributable to non-controlling interests | $(54) | $— | [Note 14 — Net Loss Per Share](index=34&type=section&id=Note%2014%20%E2%80%94%20Net%20Loss%20Per%20Share) Net Loss Per Share Attributable to Common Stockholders (In thousands, except per share data) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss attributable to common stockholders | $(5,019) | $(19,000) | | Basic and diluted weighted-average shares outstanding | 28,296,439 | 28,287,140 | | **Basic and diluted net loss per share** | **$(0.18)** | **$(0.67)** | Weighted Average Antidilutive Common Stock Equivalents | Item | 2025 | 2024 | | :------------------------------------------ | :--- | :--- | | Unvested restricted shares | — | 13,103 | | Common OP Units | 124,161 | 124,161 | | Class B Units | 109,865 | 109,865 | | **Total weighted average antidilutive common stock equivalents** | **234,026** | **247,129** | [Note 15 — Segment Reporting](index=35&type=section&id=Note%2015%20%E2%80%94%20Segment%20Reporting) - Company's Chief Executive Officer serves as the Chief Operating Decision Maker (CODM), evaluating performance and allocating resources based on OMF and SHOP segments[203](index=203&type=chunk)[204](index=204&type=chunk) Net Operating Income (NOI) by Segment (Three Months Ended March 31, In thousands) | Segment | 2025 | 2024 | | :----------------------------------- | :--- | :--- | | OMFs NOI | $19,466 | $24,899 | | SHOPs NOI | $9,437 | $8,255 | | **Total NOI** | **$28,903** | **$33,154** | - OMF NOI decreased by **21.8%** primarily due to the disposition of **24** OMFs subsequent to March 31, 2024[243](index=243&type=chunk) - SHOP NOI increased by **14.3%** due to positive trends in revenue from occupancy gains and continued expense management, partially offset by disposition of **two** SHOPs[246](index=246&type=chunk) [Note 16 — Commitments and Contingencies](index=38&type=section&id=Note%2016%20%E2%80%94%20Commitments%20and%20Contingencies) - As of March 31, 2025, the Company had **$6.9 million** in operating lease right-of-use (ROU) assets and **$7.8 million** in operating lease liabilities[216](index=216&type=chunk) - Ground operating leases have a weighted-average remaining lease term of **29.6 years** and a weighted-average discount rate of **7.35%** as of March 31, 2025[217](index=217&type=chunk) - No material legal or regulatory proceedings pending or known to be contemplated against the Company[218](index=218&type=chunk)[312](index=312&type=chunk) [Note 17 — Subsequent Events](index=39&type=section&id=Note%2017%20%E2%80%94%20Subsequent%20Events) - Disposed of **one** OMF and **three** SHOPs for an aggregate contract sales price of **$9.1 million** subsequent to March 31, 2025[222](index=222&type=chunk)[284](index=284&type=chunk) - Repaid in full and terminated the OMF Warehouse Facility (**$21.7 million**) and **two** related interest rate caps in April 2025[223](index=223&type=chunk)[279](index=279&type=chunk)[281](index=281&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Analyzes Q1 2025 financial condition and results, including segment performance, cash flow, liquidity, and non-GAAP measures [Overview](index=40&type=section&id=Overview) - Company is a REIT owning **181** healthcare-related properties (OMFs and SHOPs) across **30** states, totaling **7.6 million** rentable square feet as of March 31, 2025[228](index=228&type=chunk)[237](index=237&type=chunk) - Internalized advisory and property management functions on September 27, 2024, eliminating related party fees[229](index=229&type=chunk)[233](index=233&type=chunk) - Effected a one-for-four reverse stock split on September 30, 2024[234](index=234&type=chunk) - Published a new Estimated Per-Share NAV of **$32.15** as of December 31, 2024, on March 26, 2025[232](index=232&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Key Financial Results (Three Months Ended March 31, In thousands) | Item | 2025 | 2024 | Increase (Decrease) | | :----------------------------------- | :--- | :--- | :---------------- | | Revenue from tenants | $86,443 | $88,299 | $(1,856) | | Total expenses | $98,408 | $89,419 | $8,989 | | Operating income (loss) | $13,024 | $(1,120) | $14,144 | | Net loss attributable to common stockholders | $(5,019) | $(19,000) | $13,981 | - Net loss attributable to common stockholders decreased by **$13.98 million**, from **$(19.0) million** in Q1 2024 to **$(5.0) million** in Q1 2025[241](index=241&type=chunk) - Gain on sale of real estate investments was **$25.0 million** in Q1 2025, compared to **$0** in Q1 2024[241](index=241&type=chunk)[254](index=254&type=chunk) - Operating fees to related parties decreased by **$6.4 million** to **$0** in Q1 2025 due to the Internalization[241](index=241&type=chunk)[250](index=250&type=chunk) - Impairment charges increased to **$11.9 million** in Q1 2025 from **$0.3 million** in Q1 2024[241](index=241&type=chunk)[248](index=248&type=chunk) [Segment Results — Outpatient Medical Facilities](index=43&type=section&id=Segment%20Results%20%E2%80%94%20Outpatient%20Medical%20Facilities) OMF Segment Performance (Three Months Ended March 31, In thousands) | Item | 2025 | 2024 | Increase (Decrease) to NOI | | :----------------------------------- | :--- | :--- | :---------------- | | Revenue from tenants | $30,635 | $34,599 | $(3,964) | | Less: Property operating and maintenance | $11,169 | $9,700 | $1,469 | | **NOI** | **$19,466** | **$24,899** | **$(5,433)** | - OMF NOI decreased by **21.8%** (**$5.4 million**) primarily due to the disposition of **24** OMFs subsequent to March 31, 2024[243](index=243&type=chunk) [Segment Results — Seniors Housing Operating Properties](index=43&type=section&id=Segment%20Results%20%E2%80%94%20Seniors%20Housing%20Operating%20Properties) SHOP Segment Performance (Three Months Ended March 31, In thousands) | Item | 2025 | 2024 | Increase (Decrease) to NOI | | :----------------------------------- | :--- | :--- | :---------------- | | Revenue from tenants | $55,808 | $53,700 | $2,108 | | Less: Property operating and maintenance | $46,371 | $45,445 | $926 | | **NOI** | **$9,437** | **$8,255** | **$1,182** | - SHOP NOI increased by **14.3%** (**$1.2 million**) primarily due to positive trends in revenue from occupancy gains and continued expense management, partially offset by the disposition of **two** SHOPs[246](index=246&type=chunk) - Occupancy for the SHOP segment increased from **75.6%** in Q1 2024 to **78.8%** in Q1 2025[244](index=244&type=chunk) [Cash Flows](index=45&type=section&id=Cash%20Flows) Cash Flow Summary (Three Months Ended March 31, In thousands) | Item | 2025 | 2024 | Increase (Decrease) | | :------------------------------------------ | :--- | :--- | :---------------- | | Net cash (used in) provided by operating activities | $(21,229) | $2,543 | $(23,772) | | Net cash provided by (used in) investing activities | $78,043 | $(12,216) | $90,259 | | Net cash used in financing activities | $(4,501) | $(5,229) | $728 | | **Net change in cash, cash equivalents and restricted cash** | **$52,313** | **$(14,902)** | **$67,215** | - Operating cash flow decreased by **$23.8 million**, primarily due to the full repayment of a **$30.3 million** promissory note in January 2025[263](index=263&type=chunk) - Investing cash flow increased by **$90.3 million**, driven by proceeds from the sale of **12** OMFs in Q1 2025[264](index=264&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) - Believes it has sufficient current liquidity to meet financial obligations for at least the next twelve months[266](index=266&type=chunk) - Cash and cash equivalents were **$71.4 million** as of March 31, 2025[269](index=269&type=chunk) - Total debt leverage ratio was approximately **44.6%** as of March 31, 2025 (total debt of **$1.1 billion** divided by total gross asset value of **$2.3 billion**)[272](index=272&type=chunk) - Total gross borrowings were **$1.1 billion** at a weighted-average interest rate of **5.40%** (**5.1%** inclusive of non-designated interest rate caps) and a weighted-average remaining term of **3.9 years**[273](index=273&type=chunk) - Board authorized a **$50.0 million** stock repurchase program for Series A and Series B Preferred Stock on May 2, 2025[285](index=285&type=chunk) [Non-GAAP Financial Measures](index=47&type=section&id=Non-GAAP%20Financial%20Measures) - FFO and AFFO are used as supplemental non-GAAP measures to evaluate operating performance, excluding items like depreciation, impairment, and gains/losses from real estate sales[287](index=287&type=chunk)[289](index=289&type=chunk)[291](index=291&type=chunk) FFO and AFFO Attributable to Stockholders (Three Months Ended March 31, In thousands) | Item | 2025 | 2024 | | :----------------------------------- | :--- | :--- | | Net loss attributable to common stockholders (GAAP) | $(5,019) | $(19,000) | | FFO (as defined by NAREIT) attributable to stockholders | $4,116 | $907 | | **AFFO attributable to stockholders** | **$8,785** | **$1,505** | - AFFO attributable to stockholders increased significantly to **$8.8 million** in Q1 2025 from **$1.5 million** in Q1 2024[293](index=293&type=chunk) [Dividends and Other Distributions](index=49&type=section&id=Dividends%20and%20Other%20Distributions) - Quarterly distributions on Series A Preferred Stock are **$0.460938 per share** (**7.375% per annum**) and on Series B Preferred Stock are **$0.445313 per share** (**7.125% per annum**)[295](index=295&type=chunk) - No cash dividends paid on common stock since mid-2020; stock dividends were issued from October 2020 until January 2024, with no further stock dividends intended[296](index=296&type=chunk) Source of Distribution Coverage (Three Months Ended March 31, 2025, In thousands) | Item | Amounts | Percentage of Distributions | | :----------------------------------- | :--- | :--- | | Distributions to holders of Series A Preferred Stock | $1,834 | 52.4% | | Distributions to holders of Series B Preferred Stock | $1,616 | 46.2% | | Distributions paid to holders of Series A Preferred Units | $47 | 1.4% | | **Total cash distributions** | **$3,497** | **100.0%** | | Source of distribution coverage: | | | | Cash flows used in operations | $— | —% | | **Available cash on hand** | **$3,497** | **100.0%** | - Cash flows used in operations were **$(21.2) million** for Q1 2025; distributions to preferred stockholders and Series A Preferred Units were funded by available cash on hand[302](index=302&type=chunk) [Inflation](index=50&type=section&id=Inflation) - Inflation, driven by labor shortages, supply chain disruptions, higher property insurance, property tax, and interest rates, adversely impacts operations and liquidity[267](index=267&type=chunk)[304](index=304&type=chunk) - Most OMF leases contain rent escalation provisions, but these rates are generally below the current 12-month Consumer Price Index increase of **3.0%** as of March 31, 2025[304](index=304&type=chunk) - SHOP leases, being short-term, allow for market rate renewals, but increased operating costs, particularly labor, could affect results if not offset by higher rents[307](index=307&type=chunk) [Related-Party Transactions and Agreements](index=51&type=section&id=Related-Party%20Transactions%20and%20Agreements) - Refer to Note 9 for details on related party transactions and agreements, which were significantly impacted by the Internalization[308](index=308&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) No material change in market risk exposure during Q1 2025, with further details in the Annual Report on Form 10-K - No material change in exposure to market risk during the three months ended March 31, 2025[309](index=309&type=chunk) [Item 4. Controls and Procedures.](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures.) CEO and CFO affirmed effective disclosure controls as of March 31, 2025; no material changes in internal control over financial reporting - Disclosure controls and procedures were effective as of March 31, 2025, as concluded by the CEO and CFO[310](index=310&type=chunk) - No material changes in internal control over financial reporting during the three months ended March 31, 2025[311](index=311&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings.](index=49&type=section&id=Item%201.%20Legal%20Proceedings.) The company is not involved in any material pending legal proceedings, nor are its properties subject to such - Not a party to, and none of its properties are subject to, any material pending legal proceedings[312](index=312&type=chunk) [Item 1A. Risk Factors.](index=49&type=section&id=Item%201A.%20Risk%20Factors.) No material changes to risk factors disclosed in the Annual Report on Form 10-K for FY2024 are reported - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[313](index=313&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred - None reported for unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities[314](index=314&type=chunk) [Item 3. Defaults Upon Senior Securities.](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) No defaults upon senior securities were reported during the period - None reported for defaults upon senior securities[315](index=315&type=chunk) [Item 4. Mine Safety Disclosures.](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not applicable[316](index=316&type=chunk) [Item 5. Other Information.](index=49&type=section&id=Item%205.%20Other%20Information.) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[317](index=317&type=chunk) [Item 6. Exhibits.](index=50&type=section&id=Item%206.%20Exhibits.) The report includes various exhibits, such as certifications, written statements, and Inline XBRL documents - Includes certifications (31.1, 31.2), written statements (32), and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) as exhibits[319](index=319&type=chunk) [Signatures.](index=51&type=section&id=Signatures.) Report signed by Michael Anderson (CEO, President, Director) and Scott M. Lappetito (CFO, Treasurer) on May 8, 2025 - Report signed by Michael Anderson (CEO, President, Director) and Scott M. Lappetito (CFO, Treasurer) on May 8, 2025[322](index=322&type=chunk)

Portfolio Overview - As of December 31, 2024, the company owned 193 properties across 31 states, totaling 8.4 million rentable square feet, with an annualized rental income of $323.573 million[19]. - The portfolio includes 148 outpatient medical facilities (OMFs) with a gross asset value of $1.381 billion and 44 seniors housing operating properties (SHOPs) valued at $1.082 billion[22]. - The company has 3,939 rentable units in the SHOP segment, which includes assisted living, memory care, and independent living facilities[19]. - As of December 31, 2024, the company owned 44 seniors housing operating properties (SHOPs) which are leased to a taxable REIT subsidiary (TRS) for management[39]. - Approximately 10% or more of the company's consolidated annualized rental income for the fiscal year ended December 31, 2024, was generated from Florida, Pennsylvania, and Georgia, indicating a high concentration of properties in these states[76]. Market Trends - National health expenditures are projected to grow at an average rate of 5.6% per year from 2023 to 2032, exceeding the projected GDP growth of 4.3% during the same period[24]. - The U.S. population aged 65 and older is expected to increase to 88.8 million by 2060, representing 24.4% of the total population, up from 17.3% in 2022[26]. - The healthcare industry is projected to add approximately 2.3 million new jobs from 2023 to 2033, with a job growth rate of 10.0%, driven by an aging population and chronic conditions[24]. Operational Changes - The company has internalized its advisory and property management functions as of September 27, 2024, enhancing operational efficiency[17]. - A reverse stock split was executed on September 30, 2024, consolidating every four shares into one[18]. - The company is now internally managed and responsible for its own workforce, which may lead to unforeseen costs and challenges[80]. Financial Strategy - The investment strategy focuses on maintaining a diversified portfolio, pursuing opportunistic investments, and maintaining a strong capital structure[21]. - The company utilizes a combination of debt and equity for funding, with access to a $50 million OMF Warehouse Facility for expedited financing needs[36]. - The company has total outstanding indebtedness of $1.2 billion as of December 31, 2024[152]. - The company has incurred variable-rate debt, which may increase the cost of new debt or refinancing due to elevated federal funds rates[160]. - The company has a designated interest rate swap with a notional amount of $378.5 million, which fixes a portion of its variable-rate debt, and eight interest rate caps with a notional amount of $369.2 million to limit exposure to rising rates[160]. Regulatory Risks - The company faces regulatory risks as tenants must comply with extensive federal, state, and local laws, which could result in loss of licensure or reimbursement, adversely affecting rental payments[43]. - The Affordable Care Act (ACA) has led to reductions in Medicare reimbursement rates, impacting healthcare operations and financial planning for the company[55]. - Federal and state budget pressures may lead to further cuts in Medicare and Medicaid expenditures, affecting the financial health of tenants[57]. - The transition from fee-for-service to value-based and bundled payment models by CMS presents challenges for healthcare providers, potentially impacting the company’s revenue streams[59]. - Increased enforcement of fraud and abuse laws could result in significant penalties for tenants, adversely impacting their financial condition and ability to meet rental obligations[53]. Financial Performance - The company reported a per-share net asset value (NAV) of $13.00 as of December 31, 2023, which reflects a reverse stock split adjustment to $52.00[69]. - The company has not paid cash distributions on its common stock since 2020, raising concerns about future cash distributions[73]. - The company incurred bad debt expenses of $1.5 million, $1.2 million, and $3.2 million for the years ended December 31, 2024, 2023, and 2022, respectively, due to tenant defaults[85]. - Rising operating expenses, including increased insurance premiums and labor costs, have negatively impacted cash flow and may continue to do so[94]. - The company has experienced net losses in recent years and may not achieve profitability or growth in the future[122]. Competition and Market Challenges - The healthcare real estate market is highly competitive, with competition from other REITs, private investment funds, and institutional investors, which may have greater financial resources[40]. - The company may face challenges in collecting rent from tenants experiencing financial difficulties, which could adversely affect cash flow and dividend payments[87]. - The company may experience reduced rental income due to increased competition from newly built properties in proximity to its locations[107]. - The company competes with numerous entities for property acquisitions and creditworthy tenants, which may increase acquisition prices and reduce cash flow[106]. Environmental and Operational Risks - Catastrophic weather events and climate change could lead to significant damages and operational expenses, potentially exceeding insurance coverage[99]. - Legislative changes regarding greenhouse gas emissions could result in increased capital expenditures and compliance costs, adversely impacting tenant operations and their ability to pay rent[101]. - Environmental regulations may impose significant costs and liabilities on the company, potentially affecting its financial position and cash flows[108]. - The company relies on independent contractors for facility management, which increases operational risks and may affect performance[111]. Governance and Compliance - The independent directors of the Board oversee the valuation process, but the appraised value of properties may not reflect their potential realizable value[166]. - The classification of the Board may delay or prevent a change in control, impacting stockholder interests[174]. - Maryland law prohibits certain business combinations for five years after an interested stockholder becomes such, which may deter potential acquisitions[175]. - The stockholder rights plan has been extended to May 18, 2026, which may deter third-party acquisitions that could result in a premium price for stockholders[182]. Taxation and REIT Compliance - To qualify as a REIT, the company must distribute at least 90% of its REIT taxable income annually to stockholders, which may limit investment opportunities and require borrowing under unfavorable conditions[193]. - The company may incur tax liabilities even as a REIT, which could reduce cash available for distribution to stockholders[192]. - If the company fails to maintain its REIT status, it could face corporate tax rates on taxable income, reducing net earnings available for distribution[190]. - The company must ensure that leases with TRSs are respected as true leases for tax purposes; otherwise, it risks failing to qualify as a REIT[200]. Cybersecurity Risks - Cybersecurity risks are a concern, with potential significant costs associated with system failures or breaches impacting operations[183]. - The company may face significant remediation costs and lost revenues from cyber incidents, which could also lead to reputational harm[185].

Property Portfolio - As of September 30, 2024, the company owned 198 properties across 32 states, totaling 8.6 million rentable square feet[255]. - The gross asset value of the company's real estate investments was approximately $2.52 billion as of September 30, 2024[265]. - The outpatient medical facilities (OMFs) segment had a leased percentage of 90.3%, while the senior housing operating properties (SHOPs) segment had a leased percentage of 79.2%[264]. - The company acquired 4 properties and disposed of 10 properties from January 1, 2023, to September 30, 2024[268]. - Four single-tenant OMFs were acquired for a total purchase price of $12.6 million, funded by $7.5 million in new mortgage debt[365]. - Seven OMFs, two SHOPs, and one land parcel were disposed of for a total sales price of $82.6 million during the nine months ended September 30, 2024[367]. Financial Performance - For the three months ended September 30, 2024, revenue from tenants was $88.94 million, an increase of $3.25 million compared to $85.69 million in the same period of 2023[270]. - The net loss attributable to common stockholders for the three months ended September 30, 2024, was $44.14 million, compared to a net loss of $19.56 million for the same period in 2023[270]. - Revenue from tenants increased by $6.9 million to $266.1 million for the nine months ended September 30, 2024, compared to $259.1 million in 2023[305]. - Net loss attributable to common stockholders increased to $183.1 million for the nine months ended September 30, 2024, compared to $57.8 million for the same period in 2023, representing a decrease of $125.3 million[305]. - Funds from Operations (FFO) attributable to stockholders for the nine months ended September 30, 2024, was $(113.3) million, compared to $1.7 million in the same period of 2023[376]. - Adjusted Funds from Operations (AFFO) attributable to stockholders for the nine months ended September 30, 2024, was $7.7 million, down from $10.0 million in the same period of 2023[376]. Expenses and Charges - Total expenses for the three months ended September 30, 2024, were $111.45 million, an increase of $25.02 million from $86.43 million in the same period of 2023[270]. - Impairment charges for the three months ended September 30, 2024, amounted to $8.83 million, with no such charges reported in the same period of 2023[270]. - Property operating and maintenance expenses rose by $4.8 million to $166.6 million for the nine months ended September 30, 2024, compared to $161.8 million in 2023[305]. - General and administrative expenses rose by $0.7 million to $5.5 million in Q3 2024, including increased employee compensation expenses[293]. - Acquisition and transaction-related expenses increased significantly to $5.2 million in Q3 2024 from $0.2 million in Q3 2023, largely due to costs associated with the Internalization[292]. - Termination fees to related parties amounted to $8.4 million in Q3 2024 due to the transition to self-management[291]. Debt and Financing - As of September 30, 2024, the company's outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.61%[298]. - Total debt leverage ratio was approximately 46.1% as of September 30, 2024, with net debt totaling $1.2 billion against a gross asset value of $2.5 billion[349]. - As of September 30, 2024, total gross borrowings amounted to $1.2 billion, with a weighted-average interest rate of 5.61% and a remaining term of 4.4 years[350]. - Mortgage notes payable totaled $828.0 million at a weighted-average interest rate of 4.60% and a remaining term of 5.4 years[353]. - Interest expense increased by $2.3 million to $18.0 million in Q3 2024, attributed to higher average indebtedness[297]. - Interest expense increased by $1.9 million to $52.1 million for the nine months ended September 30, 2024, attributed to higher average outstanding debt balances[331]. Cash Flow and Distributions - Cash flows from operating activities resulted in a net cash used of $86.3 million for the nine months ended September 30, 2024, compared to net cash provided of $16.4 million in 2023[340]. - Cash provided by investing activities was $58.6 million for the nine months ended September 30, 2024, compared to net cash used of $49.0 million in 2023[341]. - Total cash distributions for the three months ended September 30, 2024, amounted to $3.497 million, with 52.5% allocated to Series A Preferred Stock and 46.3% to Series B Preferred Stock[385]. - The company has not paid cash dividends on common stock since mid-2020, instead issuing stock dividends at a rate of $3.40 per share per year until January 2024[381]. - The company funded distributions to preferred stockholders primarily through cash flows from operations, which accounted for 72.7% of total distributions in the three months ended September 30, 2024[385]. Management and Operational Changes - The company completed a reverse stock split on September 30, 2024, consolidating every four shares into one share[261]. - The company internalized its advisory and property management functions on September 27, 2024, eliminating previous management fees[260]. - The company recorded a 100% valuation allowance on net deferred tax assets through September 30, 2024, due to uncertainty in realizing future benefits[303]. - The ability to pay distributions depends on increasing cash generated from property operations, which is subject to various risks and uncertainties[388]. - The company has not historically generated sufficient cash flows from operations to fund current distribution rates prior to switching to stock dividends[387]. Economic Indicators - The increase in the 12-month Consumer Price Index (CPI) as of September 30, 2024, was 3.0%, impacting lease agreements without indexed escalation provisions[391]. - The company has cumulative distributions on Series A Preferred Stock at $1.84375 per share annually, equivalent to 7.375% of the $25.00 liquidation preference[379]. - Cumulative distributions on Series B Preferred Stock are set at $1.78125 per share annually, equivalent to 7.125% of the $25.00 liquidation preference[380]. - The company must distribute at least 90% of its REIT taxable income annually to maintain its REIT status under the Internal Revenue Code[390].

Property Portfolio and Management - As of June 30, 2024, the company owned 207 properties across 32 states, totaling 9.0 million rentable square feet[272]. - The company plans to internalize management functions by the fourth quarter of 2024 in anticipation of a potential stock listing[278]. - The company acquired 11 properties and disposed of 6 properties from January 1, 2023, to June 30, 2024[291]. - The MOB segment had a weighted average remaining lease term of 4.5 years as of June 30, 2024[289]. - The company disposed of one SHOP for $3.3 million during the six months ended June 30, 2024, and subsequently disposed of seven MOBs for $50.5 million[395][396]. - The company anticipates funding the Closing Payments primarily through net proceeds from strategic dispositions before the end of the fourth quarter of 2024[397]. Financial Performance - Net loss attributable to common stockholders increased to $119.9 million for the three months ended June 30, 2024, compared to $20.8 million for the same period in 2023[294]. - For the six months ended June 30, 2024, net loss attributable to common stockholders was $138.9 million, compared to $38.3 million for the same period in 2023, representing an increase of $100.6 million[331]. - Revenue from tenants rose to $88.8 million in Q2 2024, up from $86.1 million in Q2 2023, reflecting an increase of $2.7 million[294]. - Revenue from tenants for the six months ended June 30, 2024, was $177.1 million, an increase of $3.7 million from $173.5 million in 2023[331]. - Total expenses surged to $189.0 million in Q2 2024, compared to $85.0 million in Q2 2023, marking an increase of $104.0 million[294]. - General and administrative expenses rose to $4.7 million in Q2 2024, up from $4.3 million in Q2 2023, including $3.0 million in expense reimbursements[317]. - Interest expense decreased by $1.0 million to $17.8 million for the three months ended June 30, 2024, from $18.7 million in 2023[321]. - As of June 30, 2024, outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.61% per year, compared to the same amount at 5.49% in 2023[322]. Operational Metrics - Occupancy in the SHOP segment improved to 76.4% as of June 30, 2024, up from a low of 72.0% as of March 31, 2021[281]. - The SHOP segment's occupancy has not yet recovered to pre-pandemic levels, affecting overall operational results[285]. - Revenue from tenants in the SHOP segment increased by $2.0 million, primarily due to a $3.0 million increase from Same Store Properties, partially offset by a $1.0 million decrease from Disposed Properties[304]. - Property operating and maintenance expenses in the MOB segment increased by $0.3 million, driven primarily by Same Store Properties[301]. - Property operating and maintenance expenses increased by $1.0 million to $110.2 million for the six months ended June 30, 2024, compared to $109.2 million in 2023[335]. - Property operating and maintenance costs in the MOB segment increased by $1.0 million, driven by inflation impacts on utility and maintenance costs[336]. Impairment and Charges - Impairment charges recorded were $2.4 million in Q2 2024, aimed at reducing the carrying value of a held-for-use MOB[309]. - Impairment charges totaled $2.7 million for the six months ended June 30, 2024, with $2.4 million related to a held-for-use MOB and $0.3 million to a disposed SHOP[343]. - Termination fees to related parties amounted to $98.2 million due to the intent to terminate the Second A&R Advisory Agreement and transition to self-management[315]. - The company recorded a termination fee to related parties of $98.2 million in the three months ended June 30, 2024, impacting net loss[329]. Cash Flow and Dividends - Net cash provided by operating activities was $8.9 million for the six months ended June 30, 2024, compared to $10.7 million for the same period in 2023[366]. - Cash used in investing activities was $15.6 million for the six months ended June 30, 2024, down from $34.4 million in 2023, with property acquisitions totaling $5.6 million[367]. - Net cash used in financing activities was $3.7 million for the six months ended June 30, 2024, compared to a net cash provided of $52.7 million in 2023[368]. - The company has not paid cash dividends on common stock since mid-2020, opting instead for stock dividends until January 2024[411]. - Dividends on Series A Preferred Stock are declared quarterly at $1.84375 per share annually, equivalent to 7.375% of the $25.00 liquidation preference[409]. - Dividends on Series B Preferred Stock are declared quarterly at $1.78125 per share annually, equivalent to 7.125% of the $25.00 liquidation preference[410]. Market and Economic Conditions - As of June 30, 2024, the 12-month CPI increase was 3.0%, impacting leases without indexed escalation provisions[421]. - Leases at SHOPs do not typically have rent escalations, but can be renewed at market rates; increased labor costs due to inflation may affect operational results if new residents cannot be admitted or leases cannot be renewed[423]. - Tenants in MOB properties are generally required to pay their pro rata share of property operating and maintenance expenses, which may impact their ability to pay rent if these costs exceed revenue increases[422]. - There has been no material change in the company's exposure to market risk during the six months ended June 30, 2024[425].